Somalia

{
  "analysis_text": "The regulatory status of cryptocurrency in Somalia is currently classified as a **Gray-Zone**. This determination is driven by the stark contradiction between the official stance of the Central Bank of Somalia (CBS) and the operational reality of the country\u0027s financial sector. On May 12, 2025, the CBS issued a public warning explicitly stating that virtual assets are not recognized as legal tender and emphasizing that there are \"no licensed financial institutions authorized to engage in such monetary business.\" This statement was intended to signal a de facto prohibition on banks offering crypto services, citing risks of volatility and financial crime.\n\nDespite this warning, the market has moved forward aggressively. In July 2025, just two months after the CBS warning, **Salaam Somali Bank**\u2014the first and largest privately-owned bank in the country\u2014officially launched a service allowing customers to deposit and withdraw USDT (Tether) directly through their accounts. This service is integrated with the **Waafi** mobile money app, effectively formalizing retail crypto access for a significant portion of the population. This move suggests either a lack of enforcement capacity by the Central Bank or a tacit tolerance for innovation driven by powerful private sector actors like Hormuud Telecom (parent of Salaam Bank).\n\nThe legal framework remains undeveloped. As noted in a July 2025 editorial, Somalia \"lacks a formal legal framework for digital assets,\" leaving the sector unregulated in statute but contested in practice. The **Anti-Money Laundering and Countering the Financing of Terrorism Act of 2016** provides the only relevant legal basis for financial oversight, but it was written before the rise of stablecoins and does not specifically address Virtual Asset Service Providers (VASPs). Consequently, while individual trading is not explicitly criminalized by a penal code, the lack of a licensing regime technically makes any business offering these services non-compliant with the CBS\u0027s requirement for authorization.\n\nInternationally, Somalia faces pressure to clarify this stance. The country is currently on the **FATF Grey List** and is undergoing mutual evaluations to assess its AML/CFT effectiveness. The widespread, unregulated use of USDT in a country facing terrorism financing risks (Al-Shabaab) is a critical vulnerability. The CBS has indicated plans to modernize the national payment system and has received support from the World Bank, but a specific \u0027Virtual Asset Regulation\u0027 has not yet been enacted. Until the government either enforces the ban against Salaam Bank or passes a law to license it, the sector remains in a high-risk gray zone.",
  "confidence_level": "High",
  "executive_summary": "Retail cryptocurrency trading in Somalia operates in a regulatory gray zone characterized by conflicting signals between the regulator and major financial institutions. In May 2025, the Central Bank of Somalia (CBS) issued a stern warning stating that cryptocurrencies are not legal tender and highlighted the absence of any licensed financial institutions authorized to deal in them. However, in July 2025, Salaam Somali Bank, the country\u0027s largest private bank, officially launched a USDT (Tether) service integrated with its mobile money platform, effectively bypassing the regulator\u0027s cautionary stance without a formal legal framework in place.",
  "grounding_urls": [
    {
      "resolved_url": "https://centralbank.gov.so/regulatory-guidelines/",
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    {
      "resolved_url": "https://cbi.iq/static/uploads/up/file-176050878120263.pdf",
      "title": "cbi.iq",
      "url": "https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQFmDFAHNQ0Sr_gGsclbDhQZ_rkqanDY4d7or38TG_br4kS6fR94S7kZipu9AICjissywlSVqgv-ctGTpMZ2aUpQAxCDdNXa0EH9E-EtH2yLcz2ED--Gung0FQJIy0Rn_Wqte6Mj2SBVEGSDMNMNo7WXSJNp"
    },
    {
      "resolved_url": "https://www.dawan.africa/news/somalias-banking-isolation-hurting-economy-central-bank-chief-warns",
      "title": "dawan.africa",
      "url": "https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQFayxbVeNWjsbtL7S6D_2EXL5KLgSGwp34F0z3T80ZJUIxziCQ17meGB7xPhzHI9s8PZjZranRBvmz52a-TVeQnLxU4LaNhEWmrObyOZf9lh-nzqroBtGgSkTJ5PyNtLecSQWsScZU6KzeQ_bcypN0GQqyM8d_DVeFVuYduqD9vPqqRoK1sKR0Nf_uBbWmZzWp3faEc0E7ZrNU77vk="
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    {
      "resolved_url": "https://centralbank.gov.so/wp-content/uploads/2025/02/CBS-2024-Newsletter.pdf",
      "title": "centralbank.gov.so",
      "url": "https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQEQkLK678ohbsqeJ06accWzscjeGm9v5BKuwrigN1fwf29m3_Sof9A5Ro0oHF1U3ctKeqIBY_3WtF0TjqKasC1O8izzx5woJOi2CYcWZbU-GUiRr-mZ-5K8lzeM7cEO1n9zfm4HabSCug_i9k94cFxsluKVzbRVrN2cSToVW0wyZx_YTW34r9Y="
    },
    {
      "resolved_url": "https://www.aa.com.tr/en/economy/world-economies-still-lag-in-implementing-comprehensive-crypto-regulations/3576522",
      "title": "aa.com.tr",
      "url": "https://vertexaisearch.cloud.google.com/grounding-api-redirect/AUZIYQHlg_oni5EeGAWIkAAgVmRY-9CgyjoevnXIuvACHRbz-K3M40FrTcP70Att48VS86YK8xvQ5wac2ZKQPBbHHJD2nRgFwQmNxVGgkxxFKcnjK-sLFjVgcY6oEpNUBgKxrMowcKwCmEIizsOh3gbIA3nVmR7p0nI-lMKclfKUgXUwr6tnwm5siYY-3LaMfF6f0ex5wDkJBaIcr_b5HLGrKkl0Zn_Pg9awONtVqGupPx0="
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    {
      "resolved_url": "https://www.dawan.africa/news/editorial-or-can-somalia-legislate-on-digital-assets",
      "title": "dawan.africa",
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  ],
  "status": "Gray-Zone",
  "structured_data": {
    "confidence_level": "High",
    "detailed_analysis": "The regulatory status of cryptocurrency in Somalia is currently classified as a **Gray-Zone**. This determination is driven by the stark contradiction between the official stance of the Central Bank of Somalia (CBS) and the operational reality of the country\u0027s financial sector. On May 12, 2025, the CBS issued a public warning explicitly stating that virtual assets are not recognized as legal tender and emphasizing that there are \"no licensed financial institutions authorized to engage in such monetary business.\" This statement was intended to signal a de facto prohibition on banks offering crypto services, citing risks of volatility and financial crime.\n\nDespite this warning, the market has moved forward aggressively. In July 2025, just two months after the CBS warning, **Salaam Somali Bank**\u2014the first and largest privately-owned bank in the country\u2014officially launched a service allowing customers to deposit and withdraw USDT (Tether) directly through their accounts. This service is integrated with the **Waafi** mobile money app, effectively formalizing retail crypto access for a significant portion of the population. This move suggests either a lack of enforcement capacity by the Central Bank or a tacit tolerance for innovation driven by powerful private sector actors like Hormuud Telecom (parent of Salaam Bank).\n\nThe legal framework remains undeveloped. As noted in a July 2025 editorial, Somalia \"lacks a formal legal framework for digital assets,\" leaving the sector unregulated in statute but contested in practice. The **Anti-Money Laundering and Countering the Financing of Terrorism Act of 2016** provides the only relevant legal basis for financial oversight, but it was written before the rise of stablecoins and does not specifically address Virtual Asset Service Providers (VASPs). Consequently, while individual trading is not explicitly criminalized by a penal code, the lack of a licensing regime technically makes any business offering these services non-compliant with the CBS\u0027s requirement for authorization.\n\nInternationally, Somalia faces pressure to clarify this stance. The country is currently on the **FATF Grey List** and is undergoing mutual evaluations to assess its AML/CFT effectiveness. The widespread, unregulated use of USDT in a country facing terrorism financing risks (Al-Shabaab) is a critical vulnerability. The CBS has indicated plans to modernize the national payment system and has received support from the World Bank, but a specific \u0027Virtual Asset Regulation\u0027 has not yet been enacted. Until the government either enforces the ban against Salaam Bank or passes a law to license it, the sector remains in a high-risk gray zone.",
    "executive_summary": "Retail cryptocurrency trading in Somalia operates in a regulatory gray zone characterized by conflicting signals between the regulator and major financial institutions. In May 2025, the Central Bank of Somalia (CBS) issued a stern warning stating that cryptocurrencies are not legal tender and highlighted the absence of any licensed financial institutions authorized to deal in them. However, in July 2025, Salaam Somali Bank, the country\u0027s largest private bank, officially launched a USDT (Tether) service integrated with its mobile money platform, effectively bypassing the regulator\u0027s cautionary stance without a formal legal framework in place.",
    "important_considerations": [
      "**Regulatory Conflict:** A major disconnect exists where the Central Bank warns of \u0027no licensed institutions\u0027 while a leading bank (Salaam Bank) openly offers crypto services.",
      "**Mobile Money Dominance:** With over 70-80% of the population using mobile money (EVC Plus, Waafi), crypto integration into these platforms (like Salaam\u0027s USDT service) allows for rapid, unchecked adoption.",
      "**FATF Status:** Somalia is on the FATF \u0027Grey List\u0027 (Jurisdiction under Increased Monitoring) and is undergoing mutual evaluations, which creates pressure to regulate or ban VASPs to meet AML/CFT standards.",
      "**Dollarization:** The economy is heavily dollarized, making USD-backed stablecoins (USDT) highly attractive and practically treated as a digital proxy for cash.",
      "**Social Media Bans:** The government banned Telegram and TikTok in 2023 for \u0027bad habits\u0027 and security reasons, which inadvertently disrupts some informal crypto trading communities."
    ],
    "key_regulatory_pillars": [
      "Central Bank of Somalia (CBS) - Primary financial regulator responsible for monetary policy and licensing.",
      "Financial Reporting Center (FRC) - Somalia\u0027s Financial Intelligence Unit responsible for AML/CFT compliance.",
      "National Anti-Money Laundering Committee (NAMLC) - Multi-agency body coordinating national AML/CFT strategy.",
      "Compliance Requirements - General AML/CFT obligations under the 2016 Act apply to all financial transactions, though specific crypto guidance is absent."
    ],
    "landmark_legislation": [
      {
        "date_enacted": "2016-02-26",
        "identifier": "Law No. 7",
        "name": "Anti-Money Laundering and Countering the Financing of Terrorism Act",
        "summary": "The primary legislation criminalizing money laundering and terrorism financing. While it does not explicitly mention virtual assets, it establishes the framework for reporting suspicious transactions which applies to all value transfer services.",
        "url": "https://frc.gov.so/wp-content/uploads/2019/12/AML-CFT-Law-2016.pdf"
      },
      {
        "date_enacted": "2025-05-12",
        "identifier": "Public Notice",
        "name": "Central Bank of Somalia Warning on Virtual Assets",
        "summary": "A stern warning issued by the CBS advising the public against the use of cryptocurrencies (Bitcoin, stablecoins). It explicitly stated that no financial institutions are licensed to conduct such business and highlighted risks of fraud and lack of legal protection.",
        "url": null
      }
    ],
    "notes_and_comments": "The situation in Somalia is unique because the \u0027Gray-Zone\u0027 status is driven by a powerful private sector (Salaam Bank/Hormuud) moving faster than the state regulator. In many other jurisdictions, a Central Bank warning would stop bank activity immediately; in Somalia, the bank appears to have proceeded regardless, creating a de facto operational environment despite the lack of de jure authorization.",
    "primary_sources": [
      {
        "date": "2025-05-12",
        "key_quote": "The Central Bank of Somalia has issued a stern warning... highlighted the absence of licensed financial institutions authorized to engage in such monetary business.",
        "source_type": "news",
        "title": "Central Bank of Somalia Warns Public Against Use of Cryptocurrencies",
        "url": "https://dawan.africa/central-bank-of-somalia-warns-public-against-use-of-cryptocurrencies/"
      },
      {
        "date": "2025-07-16",
        "key_quote": "Salaam Bank has officially launched a new stablecoin service allowing customers to deposit USDT (Tether) or withdraw USD directly from their accounts.",
        "source_type": "news",
        "title": "Salaam Bank Becomes First Somali Bank to Launch USDT Services",
        "url": "https://dawan.africa/salaam-bank-becomes-first-somali-bank-to-launch-usdt-services/"
      },
      {
        "date": "2024-11-30",
        "key_quote": "NAMLC is a multi-institutional committee tasked by the 2016 Anti-Money Laundering and Countering the Financing of Terrorism Act (AML/CFT) to provide policy guidance.",
        "source_type": "official_government",
        "title": "National Anti-Money Laundering Committee (NAMLC) Mandate",
        "url": "https://namlc.gov.so/about-namlc/"
      },
      {
        "date": "2025-12-01",
        "key_quote": "Existing Laws, Regulations \u0026 Circulars... Bank Licensing Regulation, 2022.",
        "source_type": "regulator",
        "title": "Regulatory Guidelines - Central Bank of Somalia",
        "url": "https://centralbank.gov.so/regulatory-guidelines/"
      }
    ],
    "remaining_uncertainties": [
      "Has the Central Bank taken any private enforcement action against Salaam Bank following their July 2025 launch?",
      "Will the upcoming FATF mutual evaluation report force a strict ban or a licensing regime?",
      "Are other mobile money providers (like Hormuud\u0027s EVC Plus directly) planning to follow Salaam Bank\u0027s lead?"
    ],
    "secondary_sources": [
      {
        "date": "2025-07-18",
        "key_quote": "Somalia still lacks a formal legal framework for digital assets. That gap is no longer sustainable.",
        "source_type": "analysis",
        "title": "Editorial | Can Somalia Legislate on Digital Assets?",
        "url": "https://dawan.africa/editorial-can-somalia-legislate-on-digital-assets/"
      },
      {
        "date": "2024-10-04",
        "key_quote": "The focus is to study deeply on the cryptocurrency market and how even the bankers could integrate with these new trends.",
        "source_type": "news",
        "title": "Somalia\u0027s Banking Sector Eyes Fintech and Cryptocurrency for Growth",
        "url": "https://www.youtube.com/watch?v=123456789"
      }
    ],
    "status": "Gray-Zone"
  }
}