Rwanda Drafts Law to Regulate Virtual Assets, Combat Fraud

Rwanda has taken a significant step towards regulating its virtual asset market by drafting a comprehensive law aimed at supervising virtual assets and their service providers. The National Bank of Rwanda (BNR) and the Capital Market Authority (CMA) have collaborated to create this regulatory framework, which seeks to promote financial innovation while mitigating risks such as fraud and money laundering.

The draft law defines virtual assets as any digital token that represents financial value and can be traded or transferred for payments or investments. These assets, often based on blockchain technology, are protected by cryptographic mechanisms or collateral functions to maintain their stability. The new regulations are designed to combat malicious financial activities, with the CMA's Manager of Licensing and Approvals, Carine Twiringiyimana, highlighting the Financial Action Task Force's (FATF) concerns about money laundering through virtual assets. The regulations will provide legal safeguards against these risks, offering clear guidelines for investors and service providers.

The draft law was made public on March 6, inviting feedback from the public. The framework includes cryptocurrency as the primary virtual asset and extends to tokenization, allowing digital tokens to represent real-world assets. However, the law prohibits tokens from representing the Rwandan currency, a measure aimed at preventing market manipulation and ensuring financial stability. The proposed regulations also focus on protecting consumers by safeguarding buyers from unregulated deals and ensuring sellers fulfill their legal obligations.

In addition to consumer protection, the new regulations empower the Rwanda Investigation Bureau (RIB) to handle reports of crypto fraud. Once the regulations are fully approved, the CMA will take over the responsibility of dealing with financial crimes related to virtual assets. This move by Rwanda is a crucial step towards establishing a secure, transparent, and well-structured digital financial market, positioning the country as a leader in financial innovation and regulation in the region.