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The Botswana Financial Stability Council’s October 2024 report said the virtual assets market and cyber risks from fintech currently pose minimal threats to financial stability.
Tech Advances Fuel Financial Stability Risks
Authorities in Botswana consider both the virtual assets market and cyber risks arising from financial technology (fintech) to be relatively undeveloped, posing minimal threats to financial stability at present. However, the Financial Stability Council’s October 2024 report warns that these risks could increase as technological innovation advances within the fintech sector. In fact, the report identifies risks associated with a growing fintech sector as one of the top five potential threats emanating from the financial system.
Botswana is among a few African countries taking steps to regulate cryptocurrencies despite their nascent market. As reported by Bitcoin.com News in January 2022, Botswana introduced a virtual assets bill alongside five other legislative proposals, demonstrating a bold move towards recognizing crypto assets.
The report speculates that Botswana’s recognition of cryptocurrencies was partly motivated by a desire to address deficiencies in its anti-money laundering and counter-terrorism financing regime, as identified by the Financial Action Task Force (FATF).
Meanwhile, the council’s financial stability report highlights ongoing efforts to mitigate vulnerabilities in the technology landscape to support financial stability, including establishing a fintech working group.
“Relatedly, a National Fintech Working Group was launched on 30 January 2024, to provide
strategic direction on Fintech matters. The working group was specifically established to develop an inclusive National Fintech Strategy and a Fintech Analytical Assessment
Framework that facilitate development of the financial services sector consistent with national priorities on payment systems,” the report said.
According to the report, the fintech working group comprises key national stakeholders, including the Bank of Botswana, government agencies, regulatory authorities, and financial services infrastructure providers.
The report also highlights the risk of emerging digital platforms that “promote anonymity of transactions.” These platforms increase the possibility of Botswana being used as a conduit for money laundering or for raising funds for terrorist activities.
The financial stability report identifies several measures to mitigate these risks, including enhanced offsite monitoring of virtual asset service providers. Frequent engagement with the virtual assets sector, market surveillance, and collaboration with other law enforcement agencies to detect illegal operators are also listed as possible measures.