Rwandan banks banned from facilitating crypto transactions

In a letter, the governor of Rwanda’s central bank warned her fellow Rwandans against using cryptocurrency. Furthermore, Soraya Hakuziyaremye urged banks operating in the country not to facilitate crypto transactions. Nigeria had already taken similar initiatives in February 2021 without really succeeding in curbing the adoption of cryptocurrency.

Rwandan banks must stop facilitating crypto activities

Rwanda’s regulated financial services providers must refrain from facilitating crypto transactions until a regulatory framework is in place. This injunction is contained in a letter from the Rwandan Central Bank dated January 31, 2023.

National Bank of Rwanda.

Indeed, the National Bank of Rwanda notes that despite its warnings, cryptocurrencies are strongly attracting Rwandan citizens. This banking institution reveals that the volume of crypto trading has reached more than $3 million since January 2020, including the facilitation of legal financial service providers in the country.

The amount is certainly not significant. Nevertheless, when placed in the context of Rwanda, which is a small and poor country of barely 13 million people, one understands what $3 million represents.

It is important to note that in its letter, the Rwandan central bank does not formally ban cryptocurrency. It just prohibits legal financial service providers from facilitating access to this kind of unregulated asset in the country. The Rwandan central bank is also not hiding its interest in a central bank digital currency. Unlike crypto, this CBDC will be entirely under the control of the central bank.

The “unfounded” risks associated with cryptocurrency according to the Rwandan Central Bank

For the Rwandan central bank, cryptocurrency is a very risky asset that should be avoided. The blame for crypto denotes not only a flight from responsibility, but also a lack of knowledge of the crypto sector.

Indeed, the Rwandan central bank first blames the crypto industry for being unregulated in Rwanda. Thus, investors in this sector do not enjoy protection from the regulator, warns the Rwandan central bank. However, it is up to the country’s authorities to regulate a sector as is the case in Dubai. To this end, the Rwandan authorities’ regulatory reproaches against crypto constitute a flight from responsibility and a turpitude that they cannot claim.

The Rwandan central bank also blames some cryptos for being scams. The banking institution gives in particular the example of the OneCoin scam which had notably made its investors lose more than 4 billion and whose co-founder is on the run.

It is true that some cryptos are scams, but beware of generalization. Bitcoin, for example, is the legal tender of a country and boosts its economy. In addition, crypto is regularly used in charity work, including by the UN, of which Rwanda is a part.

Finally, the Rwandan central bank criticizes the crypto for being speculative with a risk of causing significant losses to investors. This banking institution notes, for example, that the crypto capitalization which was 3,000 billion dollars in November 2021 has dropped to less than 1,000 billion in 2022. Giving the example of the collapse of the UST, the Rwandan central bank notes that stablecoins are no exception.

It is true that the value of cryptocurrencies fluctuates greatly. This is not speculation, but volatility. In fact, this is a common characteristic of many assets. Tesla, for example, has lost 60% of its value in one year. That’s almost as much as Bitcoin, which has lost 64%. This does not make Tesla a speculative stock.

The attitude of the National Bank of Rwanda (NBR) is reminiscent of the Central Bank of Nigeria (CBN). In February 2021, the CBN had ordered all banks in the country to close bank accounts associated with the crypto business. It then launched its CBDC in October 2022 and put restrictions in place to enforce its use. More than a year later, Nigeria has failed to either eliminate crypto or impose its CBDC the eNaira. Less than 1% of Nigerians are adopting eNaira while 35% are using Bitcoin. Will Rwanda achieve the same result? In any case, the actions and motivations prove that Rwanda is following in Nigeria’s footsteps.