Ethiopia's Crypto Tightrope: Banned Yet Regulated

Ethiopia currently prohibits cryptocurrency transactions, with the Birr being the only recognized legal tender..The use of cryptocurrency for payments is not permitted by the National Bank of Ethiopia (NBE), and individuals who violate this regulation may face legal consequences, including fines and imprisonment. Unless otherwise agreed upon by the NBE, all digital and virtual currency transactions are prohibited.

Despite the current ban, virtual currencies are being actively monitored by Ethiopia's Financial Intelligence Service (FIS) to be controlled. The FIS is working with international organizations, including the United Nations and regional anti-money laundering bodies, to establish regulatory and investigative frameworks. Regional security concerns regarding the use of virtual currencies by terrorist groups to bypass traditional financial systems are contributing factors to this effort. Financial investigators are being trained to detect and tackle illegal crypto activities such as money laundering and tax evasion more effectively.

The decision reflects Ethiopia's departure from a total ban. Instead, it adopts fewer restrictions that recognize the potential of blockchain technology and digital assets while maintaining the security of the financial system. The government has already passed a framework legislation for implementing digital currency at central banks, which is further evidence of this. Even though crypto trading is still prohibited, Ethiopia's relatively favorable energy costs have enticed foreign investment in the form of crypto mining. However, only Bolivia has legalized this practice. In response to the evolving digital finance environment globally, the nation is poised to effectively manage or ban virtual currencies.