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Ethiopia

Retail_Trading_Status

Banned Unknown
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Analysis ID
#91
Version
Archived
Created
2025-04-12 06:45
Workflow Stage
Live

Executive Summary

Ethiopia bans the use of cryptocurrencies for transactions, a stance enforced by the National Bank of Ethiopia (NBE). The NBE strictly prohibits crypto payments, emphasizing the Ethiopian Birr as the sole legal tender. Despite the ban, crypto mining is permitted and regulated, and there's growing adoption among Ethiopians, though transacting remains illegal, and owning crypto assets on international platforms carries risk. The country's parliament approved a legal framework for a potential CBDC in June 2024.

Key Pillars

The primary regulator is the National Bank of Ethiopia (NBE), which prohibits the use of cryptocurrencies for transactions. Key compliance requirements focus on enforcing the legal tender status of the Ethiopian Birr and preventing the use of cryptocurrencies for payments. There are no licensed crypto exchanges allowed to operate in the country; however, crypto mining is permitted and requires registration with the Information Network Security Agency (INSA).

Landmark Laws

  1. NBE Statement (June 2022): Declared cryptocurrency trading illegal and warned of legal measures against anyone using cryptocurrencies for transactions.
  2. INSA Directive (August 2022): Required individuals and entities involved in "crypto services including mining and transfer" to register with them.
  3. NBE Proclamation (around December 2024): Officially prohibited cryptocurrency transactions, with penalties for violations including simple imprisonment not exceeding three years and fines of up to 10,000 birr.
  4. NBE Amendment Proclamation (date unconfirmed): includes provisions allowing the NBE to potentially issue guidelines on digital assets in the future.
  5. CBDC Legal Framework (June 2024): Legal framework approved by the cabinet for a potential CBDC.

Considerations

Cryptocurrencies are not regarded as currency in Ethiopia; the national currency, Birr, is the only legal tender. The use of cryptocurrencies for transactions is illegal, with penalties for violations including imprisonment and fines. Although crypto mining is permitted and encouraged to generate foreign currency, the NBE does not allow crypto assets to serve as money within Ethiopia. The growing adoption of crypto among Ethiopians occurs despite the legal prohibition, often involving international platforms. A legal framework for a potential CBDC has been approved, but private cryptocurrencies are banned as payment instruments.

Notes

In June 2022, the NBE declared cryptocurrency trading illegal. Ethiopia permits and encourages regulated crypto mining to earn foreign currency. Crypto operators must register via INSA. There are over 1.8 million crypto users in the country. The NBE is monitoring global developments in digital finance, including Central Bank Digital Currencies (CBDCs). In December 2024 Ethio Negari reported that violators of the crypto ban will face penalties, including simple imprisonment not exceeding three years and fines of up to 10,000 birr. Addis Insight reported in December 2024 that Ethiopia will introduce guidelines for cryptocurrency transactions following NBE's new proclamation.

Detailed Explanation

The National Bank of Ethiopia (NBE), the central bank, has a strict ban on using cryptocurrencies for transactions by individuals and entities. This position was restated in June 2022 and was reinforced by a new proclamation approved by the Ethiopian Parliament around December 2024. The NBE mandates that the Ethiopian Birr (ETB) is the sole legal tender, requiring all financial transactions to use it; cryptocurrency use for payments is illegal unless specifically authorized by the NBE. This prohibition is rooted in concerns about financial instability, money laundering risks, consumer protection, and undermining the national currency and centralized financial control. Despite the transaction ban, the regulatory environment includes some nuances. Since 2022, Ethiopia has permitted and encouraged Bitcoin mining operations, driven by the need to generate foreign currency from selling cheap hydroelectric power, especially to Chinese firms. In August 2022, following the NBE ban, the Information Network Security Agency (INSA), a cybersecurity agency, directed those involved in "crypto services including mining and transfer" to register with them, suggesting a potential shift towards regulation. However, the current situation clarifies that using crypto for payments remains banned. Despite the legal prohibitions, cryptocurrency adoption is reportedly growing, with estimates of over 1.8 million users utilizing international platforms for trading and holding digital assets, potentially as a hedge against Birr depreciation. While the NBE enforces the crypto payment ban, the Governor has stated the bank is monitoring digital finance developments, including CBDCs. The recent NBE Amendment Proclamation includes provisions for potential guidelines on digital assets, though currently, no authorization exists for private cryptocurrencies as payment instruments. A legal framework for a potential CBDC was approved by the cabinet in June 2024. While crypto mining is permitted and crypto operators must register via INSA, using cryptocurrencies for buying, selling, and transacting is explicitly banned by the NBE. Owning or trading crypto assets on international platforms falls outside the legal framework for payments within Ethiopia and carries risks due to the official prohibition. Ethio Negari reported in December 2024 that the new proclamation prohibits the use of cryptocurrency and imposes penalties, including up to three years of simple imprisonment and fines of up to 10,000 birr for violators. Mr. Mamo [NBE Governor] emphasized that while crypto mining is permitted, the use of crypto assets, such as Bitcoin, for payments or transactions is strictly prohibited under the new law, stating "The National Bank does not allow crypto assets to serve as money within Ethiopia."

Summary Points

Okay, here's a bullet-point summary of the Retail_Trading_Status of cryptocurrencies in Ethiopia, based on the provided report:

Retail Cryptocurrency Trading Status in Ethiopia: Summary

I. Regulatory Status:

  • Banned: Retail cryptocurrency trading (buying, selling, and transacting with cryptocurrencies) is explicitly banned in Ethiopia.
  • Illegality: Using cryptocurrencies for payments or transactions is illegal unless specifically authorized by the National Bank of Ethiopia (NBE).
  • Penalties: Violators face penalties, including imprisonment (up to 3 years) and fines (up to 10,000 Birr).
  • Sole Legal Tender: The Ethiopian Birr (ETB) is the only legal tender recognized in Ethiopia. All financial transactions must be conducted using ETB.
  • Mining Exception: Cryptocurrency mining is permitted and even encouraged by the government, primarily to generate foreign currency.

II. Key Regulatory Bodies and Their Roles:

  • National Bank of Ethiopia (NBE):
    • Central bank responsible for monetary policy and financial regulation.
    • Enforces the ban on cryptocurrency transactions.
    • Sole authority to authorize digital currency usage.
    • Monitoring global developments in digital finance, including CBDCs.
    • Future potential to issue guidelines on digital assets.
  • Information Network Security Agency (INSA):
    • Cybersecurity agency.
    • Requires registration of individuals and entities involved in "crypto services including mining and transfer."
    • Regulates cryptographic products and transactions.

III. Important Legislation and Regulations:

  • NBE Proclamation (December 2024): Reinforces the ban on cryptocurrency transactions and outlines penalties for violations.
  • NBE Statement (June 2022): Declared cryptocurrency trading illegal and warned against using cryptocurrencies for transactions.
  • INSA Directive (August 2022): Requires registration of crypto service providers (including miners).
  • NBE Amendment Proclamation (Recent): Includes provisions allowing the NBE to potentially issue guidelines on digital assets in the future.

IV. Requirements for Compliance:

  • No Cryptocurrency Transactions: Individuals and businesses must not use cryptocurrencies for payments or transactions within Ethiopia.
  • ETB Usage: All financial transactions must be conducted using the Ethiopian Birr (ETB).
  • Registration (for Miners/Operators): Individuals and entities involved in crypto mining and transfer must register with INSA.

V. Notable Restrictions or Limitations:

  • Ban on Transactions: The primary restriction is the ban on using cryptocurrencies for buying, selling, or transacting.
  • No Licensed Exchanges: No licensed cryptocurrency exchanges are allowed to operate within Ethiopia.
  • Risk of Illegality: Owning or trading crypto assets on international platforms might occur but falls outside the legal framework for payments within Ethiopia and carries risks due to the official prohibition.

VI. Recent Developments or Changes:

  • December 2024 NBE Proclamation: Further solidified the ban on cryptocurrency transactions with defined penalties.
  • June 2024 CBDC Framework: Cabinet approved a legal framework for a potential Central Bank Digital Currency (CBDC).
  • Ongoing Crypto Mining: Ethiopia continues to permit and encourage Bitcoin mining operations to generate foreign currency.
  • Growing Adoption (Despite Ban): Despite the legal prohibition, interest and adoption of cryptocurrencies among Ethiopians are reportedly growing.
  • NBE Monitoring: The NBE is monitoring global developments in digital finance and may issue guidelines on digital assets in the future.

Full Analysis Report

Report: Retail Cryptocurrency Trading Status in Ethiopia

Topic: Retail_Trading_Status
Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status: Banned

2. Detailed Narrative Explanation:

The National Bank of Ethiopia (NBE), the country's central bank, maintains a strict prohibition on the use of cryptocurrencies for transactions by individuals and entities. This stance was formally reiterated in June 2022 and reinforced by a new proclamation approved by the Ethiopian Parliament around December 2024.

The NBE explicitly states that the Ethiopian Birr (ETB) is the sole legal tender in the country, and all financial transactions must be conducted using it. The use of cryptocurrencies like Bitcoin or any other digital/electronic currency for payments is illegal unless specifically authorized by the NBE. This prohibition stems from concerns regarding financial instability, potential for money laundering, lack of consumer protection, and the undermining of national currency and centralized financial control.

Despite the NBE's clear ban on using cryptocurrencies for payments and transactions, the overall regulatory landscape presents some complexity:

  • Crypto Mining: While using crypto as money is banned, Ethiopia has actively encouraged and permitted Bitcoin mining operations since 2022. This is primarily driven by the desire to generate foreign currency revenue from selling the country's abundant and cheap hydroelectric power to mining companies, many of which are from China. The Ethiopian Energy Authority has signed power deals with numerous mining firms.
  • Registration Requirement (INSA): In August 2022, shortly after the NBE's ban announcement, the Information Network Security Agency (INSA), Ethiopia's cybersecurity agency, issued a directive requiring individuals and entities involved in "crypto services including mining and transfer" to register with them. INSA's mandate includes regulating cryptographic products and transactions. This move created some ambiguity, suggesting a potential shift towards regulation rather than a complete crackdown on all crypto-related activities. However, subsequent statements and the latest NBE proclamation clarify that the ban on using crypto for payments remains firmly in place.
  • Growing Adoption: Despite the legal prohibition on transactions, interest and adoption of cryptocurrencies among Ethiopians are reportedly growing significantly. Estimates suggest over 1.8 million crypto users in the country, often utilizing international platforms for trading and holding digital assets, sometimes as a hedge against the depreciation of the Birr. This occurs in a legally grey or explicitly illegal area concerning transactions.
  • Future Considerations: The NBE Governor has indicated that while the ban on crypto payments is currently enforced, the bank is monitoring global developments in digital finance, including Central Bank Digital Currencies (CBDCs). The recent NBE Amendment Proclamation includes provisions allowing the NBE to potentially issue guidelines on digital assets in the future, but currently, no such authorization exists for private cryptocurrencies as payment instruments. A legal framework for a potential CBDC was approved by the cabinet in June 2024.

In summary, while Ethiopia permits and even encourages regulated crypto mining (to earn foreign currency) and requires registration of crypto operators via INSA, the use of cryptocurrencies by retail individuals for buying, selling (as payment), and transacting remains explicitly banned by the National Bank of Ethiopia. Owning or trading crypto assets on international platforms might occur but falls outside the legal framework for payments within Ethiopia and carries risks due to the official prohibition.

3. Specific Relevant Text Excerpts:

  • (Ethio Negari, Dec 2024): "The National Bank of Ethiopia (NBE) has officially prohibited cryptocurrency transactions in the country... According to the proclamation, the use of cryptocurrency or any other form of digital or electronic currency is explicitly prohibited unless explicitly authorized by the National Bank. Violators of this law will face penalties, including simple imprisonment not exceeding three years and fines of up to 10,000 birr."
  • (Ethio Negari, Dec 2024): "Mr. Mamo [NBE Governor] emphasized that while crypto mining is permitted, the use of crypto assets, such as Bitcoin, for payments or transactions is strictly prohibited under the new law. 'The National Bank does not allow crypto assets to serve as money within Ethiopia,' he asserted."
  • (EMURGO Africa, Apr 2024): "In June 2022, Ethiopia's central bank, the National Bank of Ethiopia (NBE) issued a statement declaring cryptocurrency trading illegal. The NBE said it would take “legal measures” against anyone found to be using cryptocurrencies for transactions in the country. 'Birr is the only legal currency in Ethiopia and all financial transactions shall be effected through it,' the central bank warned..."
  • (Bitcoin KE / Bitcoin Magazine, Mar 2024): "The NBE also made a statement regarding cryptocurrencies in 2022, which states that the use of Bitcoin and other digital currencies for transactions is illegal in Ethiopia, warning that violators will face strict action... 'Birr is the only legal currency in Ethiopia, and all financial transactions shall be effected through it'' said NBE."
  • (UPay Blog, Dec 2024): "Adoption Status: No, cryptocurrency is not legal in Ethiopia. The National Bank of Ethiopia has declared cryptocurrency transactions illegal and has warned that violators will face legal action."
  • (UPay Blog, Dec 2024): "Ethiopia only recognizes the Ethiopian Birr as a legal tender. The National Bank of Ethiopia (NBE) explicitly prohibits Bitcoin and other digital currencies for transactions and warns of strict penalties for violations. No licensed crypto exchanges are allowed to operate in the country."
  • (Central Banking, Jun 2024): "The National Bank of Ethiopia declared it illegal to use crypto for payments in June 2022... However, though using crypto is banned, mining is not."
  • (IMF Blog, Nov 2022): "...six countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo—have banned crypto." (Note: While dated 2022, the core ban remains consistent with recent sources).
  • (AAU-ETD, Jul 2021): "The national currency Birr is the only legal tender which has the power to settle of all public or private debts in Ethiopia. This means transactions effected by the help of cryptocurrency payments are not valid since cryptocurrencies are not regarded as currency in Ethiopia."

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