Madagascar
Retail_Trading_Status
- Analysis ID
- #717
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- Created
- 2025-12-12 04:45
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Executive Summary
Retail cryptocurrency trading is legal but unregulated in Madagascar. The Central Bank (Banky Foiben'i Madagasikara - BFM) has issued public warnings regarding the risks of volatility and fraud but has not implemented a ban on trading, holding, or banking relationships for crypto assets. There is no specific licensing regime for Virtual Asset Service Providers (VASPs), and the government's primary digital asset focus is currently on the development of a Central Bank Digital Currency (CBDC), the 'e-Ariary'.
Key Pillars
Banky Foiben'i Madagasikara (BFM) - Primary monetary authority issuing warnings and overseeing the payment system.
No specific VASP licensing regime exists; crypto businesses operate without a dedicated license.
General AML/CFT laws apply to financial transactions, though specific crypto guidance is limited.
Ministry of Economy and Finance - Oversees general taxation which applies to crypto income under standard categories.
Landmark Laws
BFM Public Warning on Cryptocurrencies (Communiqué of 5 October 2021 / March 2022) - Enacted: 2021-10-05
- A public statement clarifying that cryptocurrencies are not regulated, are not legal tender, and carry significant risks for users. It explicitly stated that while not banned, users have no regulatory protection.
- Source
Law No. 2016-004 (Central Bank Statutes) (Law No. 2016-004) - Enacted: 2016-07-29
- Establishes the BFM's exclusive privilege to issue legal tender, forming the legal basis for the distinction between the official Ariary and unregulated private cryptocurrencies.
Considerations
No consumer protection: Users have no recourse in cases of fraud or exchange collapse.
CBDC Priority: The Central Bank is actively piloting a CBDC (e-Ariary), which may influence future regulatory attitudes toward private crypto.
Banking Access: While not explicitly banned, banks may be risk-averse due to AML concerns and BFM warnings.
Taxation: No specific crypto tax law exists; profits are likely subject to standard income tax or capital gains rules for business assets.
Notes
The 'Allowed-UnRegulated' status is stable for now, but the active development of the e-Ariary CBDC indicates the central bank is technically capable and attentive to digital developments. This could lead to stricter controls on private crypto to prevent competition with the sovereign digital currency once it launches.
Remaining Uncertainties
- Will the BFM introduce a specific VASP licensing regime in the near future?
- Are there any unpublicized directives to banks regarding the closure of crypto-related accounts?
- How will the launch of the e-Ariary CBDC impact the tolerance for private cryptocurrencies?
Detailed Explanation
Detailed Explanation
In Madagascar, retail cryptocurrency trading is legally allowed but operates in an unregulated environment. The primary monetary authority, the Banky Foiben'i Madagasikara (BFM), has clarified this position through public warnings, most notably in a communiqué issued on 5 October 2021 and reiterated in March 2022. This warning explicitly states that cryptocurrencies are not regulated, are not considered legal tender, and carry significant risks related to volatility and fraud for users. The legal distinction between private cryptocurrencies and official currency is grounded in Law No. 2016-004, enacted on 29 July 2016, which grants the BFM the exclusive privilege to issue legal tender. Consequently, while trading and holding crypto assets are not banned, participants operate without any formal regulatory oversight or consumer protection from the state. There is no specific licensing regime for Virtual Asset Service Providers (VASPs), meaning crypto businesses can operate without a dedicated financial license from the BFM. The general Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) laws that apply to financial transactions in the country would theoretically extend to crypto activities, though specific guidance for the sector remains limited. The Ministry of Economy and Finance oversees general taxation, and crypto-related profits are likely subject to standard income tax or capital gains rules applicable to business assets, as there is no bespoke cryptocurrency tax legislation. Banking access for crypto entities is not explicitly prohibited by regulation; however, commercial banks may exhibit risk aversion due to the BFM's public warnings and overarching AML concerns, potentially restricting practical access to financial services. The government's current digital asset priority is the development of a Central Bank Digital Currency (CBDC), known as the 'e-Ariary'. This project indicates the central bank's technical capability and focus on digital currency systems, which may influence future regulatory attitudes toward private cryptocurrencies, potentially leading to stricter controls to prevent competition with the sovereign digital currency once it is launched. For now, the 'Allowed-Unregulated' status remains stable, but the absence of consumer protection means users have no formal recourse in cases of fraud or exchange collapse.
Summary Points
Madagascar Cryptocurrency Regulatory Analysis
I. Regulatory Status
* Retail cryptocurrency trading is Allowed-Unregulated.
* Cryptocurrencies are not legal tender and are not formally regulated.
* Users have no regulatory protection.
II. Key Regulatory Bodies
* Banky Foiben'i Madagasikara (BFM): The central bank is the primary monetary authority; it issues public warnings on crypto risks and oversees the payment system.
* Ministry of Economy and Finance: Oversees general taxation, which applies to crypto income under standard tax categories.
III. Important Legislation
* BFM Public Warning on Cryptocurrencies (Communiqué of 5 October 2021 / March 2022)
* Enacted: 2021-10-05.
* A public statement clarifying that cryptocurrencies are not regulated, are not legal tender, and carry significant risks. It stated that while not banned, users have no regulatory protection.
* Law No. 2016-004 (Central Bank Statutes)
* Enacted: 2016-07-29.
* Establishes the BFM's exclusive privilege to issue legal tender, forming the legal basis for distinguishing the official Ariary from private cryptocurrencies.
IV. Compliance Requirements
* No specific VASP licensing regime exists.
* General AML/CFT laws apply to financial transactions, though specific crypto guidance is limited.
* Taxation: No specific crypto tax law; profits are likely subject to standard income tax or capital gains rules for business assets.
V. Notable Restrictions or Limitations
* No consumer protection: Users have no recourse in cases of fraud or exchange collapse.
* Banking Access: While not explicitly banned, banks may be risk-averse due to AML concerns and BFM warnings.
VI. Recent Developments or Notes
* The Central Bank is actively piloting a CBDC, the 'e-Ariary'.
* This development indicates the central bank is technically capable and attentive to digital currency systems, which may influence future regulatory attitudes toward private crypto.
* The current 'Allowed-Unregulated' status is stable, but the CBDC project could lead to future controls to prevent competition with the sovereign digital currency.
Full Analysis Report
Full Analysis Report
In Madagascar, the regulatory environment for retail cryptocurrency trading is characterized by a 'hands-off' approach where the activity is permitted but operates outside of any specific legal framework. The Banky Foiben'i Madagasikara (BFM) has clarified through multiple communiqués, most notably in October 2021 and March 2022, that cryptocurrencies like Bitcoin are not legal tender and are not backed by the state. However, unlike some regional peers that have imposed strict banking bans, the BFM has not prohibited citizens from buying, selling, or holding digital assets, nor has it explicitly forbidden commercial banks from processing related transactions.
The absence of a licensing regime means there are no locally regulated exchanges. Residents typically access the market through international platforms or peer-to-peer (P2P) networks. While this freedom allows for retail participation, it comes with significant risks; the BFM has emphasized that users have no regulatory protection in the event of platform failure or fraud. The legal status is effectively 'Allowed-UnRegulated,' as the activity falls into a gap where it is neither expressly authorized nor criminalized.
The government's digital asset strategy is currently dominated by the development of a Central Bank Digital Currency (CBDC), known as the 'e-Ariary.' The BFM has partnered with technology providers to pilot this project, aiming to improve financial inclusion and reduce cash handling costs. This focus suggests that while private cryptocurrencies are tolerated, the state is prioritizing a sovereign digital currency over the integration of decentralized assets into the formal financial system.
From a compliance perspective, the lack of specific AML/CFT regulations for crypto assets presents a challenge. Madagascar is under enhanced follow-up by the FATF, and while it has made progress in its general AML framework, the specific regulation of Virtual Asset Service Providers (VASPs) remains a gap. Consequently, while retail trading is legal, institutional involvement remains low, and banks may exercise high caution or de-risk crypto-related accounts voluntarily to avoid potential AML complications.
In Madagascar, the regulatory environment for retail cryptocurrency trading is characterized by a 'hands-off' approach where the activity is permitted but operates outside of any specific legal framework. The Banky Foiben'i Madagasikara (BFM) has clarified through multiple communiqués, most notably in October 2021 and March 2022, that cryptocurrencies like Bitcoin are not legal tender and are not backed by the state. However, unlike some regional peers that have imposed strict banking bans, the BFM has not prohibited citizens from buying, selling, or holding digital assets, nor has it explicitly forbidden commercial banks from processing related transactions. The absence of a licensing regime means there are no locally regulated exchanges. Residents typically access the market through international platforms or peer-to-peer (P2P) networks. While this freedom allows for retail participation, it comes with significant risks; the BFM has emphasized that users have no regulatory protection in the event of platform failure or fraud. The legal status is effectively 'Allowed-UnRegulated,' as the activity falls into a gap where it is neither expressly authorized nor criminalized. The government's digital asset strategy is currently dominated by the development of a Central Bank Digital Currency (CBDC), known as the 'e-Ariary.' The BFM has partnered with technology providers to pilot this project, aiming to improve financial inclusion and reduce cash handling costs. This focus suggests that while private cryptocurrencies are tolerated, the state is prioritizing a sovereign digital currency over the integration of decentralized assets into the formal financial system. From a compliance perspective, the lack of specific AML/CFT regulations for crypto assets presents a challenge. Madagascar is under enhanced follow-up by the FATF, and while it has made progress in its general AML framework, the specific regulation of Virtual Asset Service Providers (VASPs) remains a gap. Consequently, while retail trading is legal, institutional involvement remains low, and banks may exercise high caution or de-risk crypto-related accounts voluntarily to avoid potential AML complications.
Source Evidence
Primary and secondary sources cited in this analysis
"BFM confirms that cryptocurrencies are not regulated in Madagascar... warns the public of risks... recommends the public to exercise caution."
"Madagascar has made significant overall progress... [but] remains in enhanced follow-up."
"Madagascar has still not adopted any laws or regulations on cryptocurrency... The last official communiqué... confirms that cryptocurrencies are not regulated... but not banned."
"BFM will preserve its exclusive authority as the sole issuer of the national currency... eAriary project marks a pivotal step."
Web Sources (4)
Sources discovered via web search grounding
Search queries used (7)
- Banky Foiben'i Madagasikara cryptocurrency regulation
- Madagascar central bank crypto warning
- Madagascar legal status of bitcoin retail trading
- FATF Mutual Evaluation Report Madagascar virtual assets
- Banky Foiben'i Madagasikara directive banks cryptocurrency
- Madagascar tax authority cryptocurrency capital gains
- Madagascar central bank circular crypto banks
https://blog.upay.best/crypto-adoption/madagascar/
https://www.jwflegal.com/news/why-crypto-hasnt-taken-off-in-francophone-africa-yet/
https://www.fiumauritius.org/fiu/?p=4780
https://freemanlaw.com/cryptocurrency/madagascar/