Botswana Virtual Assets Act, 2022

The Act was enacted to regulate the sale and trade of virtual assets, the licensing of virtual asset service providers, and the licensing of issuers of initial token offerings. It defined “virtual asset” as a digital representation of value that may be digitally traded, transferred, or used for payment or investment purposes, while excluding digital representations of legal tender and securities or other financial assets regulated under Botswana’s banking and securities laws.

The 2022 framework applied to participants in the formation, promotion, sale, or redemption of initial token offerings and to persons carrying on virtual asset business, including activities conducted from outside Botswana. It also captured exchange between virtual assets and fiat currency, exchange between virtual assets, virtual asset transfers, payment services using virtual assets, and financial services connected to an issuer’s offer or sale of a virtual asset.

The Act placed supervisory responsibility with the Non-Bank Financial Institutions Regulatory Authority. NBFIRA was empowered to license VASPs and initial-token-offering issuers, regulate and supervise virtual asset business in Botswana, issue rules and guidance, request information, appoint inspectors, and take enforcement action. Section 9 prohibited carrying on or participating in virtual asset business without a VASP licence or an issuer-of-initial-token-offerings licence.

Licence applications under the Act had to include prescribed information, including business plans, management arrangements, customer due diligence information for relevant owners and officers, and policies designed to meet obligations under the Act and the Financial Intelligence Act. NBFIRA announced that the Act and the related 2022 Regulations were effective from February 25, 2022. Existing operators were given a three-month transitional period; NBFIRA later stated that the period ended on May 31, 2022.

• Customer asset protection: custodial licence holders had to maintain sufficient virtual assets for customer obligations, and customer assets were not treated as the licence holder’s property or as assets available to its creditors.
• Market integrity: licence holders had to maintain systems and controls addressing information protection, transaction monitoring, safeguarding of customer assets, business continuity, and market-abuse risk.
• Token offers and white papers: virtual asset offers had to use accurate, non-misleading information consistent with the issuer’s white paper, and white papers had to provide full and accurate disclosure for potential purchasers.
• Professional conduct: licence holders were expected to act honestly and fairly, apply due care, preserve customer confidentiality, maintain data-protection measures, and file annual audited financial statements.

The Virtual Assets Regulations, 2022 supplemented the Act with application details, minimum financial-resource requirements, human and technology resource standards, business rules, systems and controls, customer-protection provisions, and complaint-handling expectations. The virtual assets regime also interacted with Botswana’s Financial Intelligence Act. NBFIRA’s later AML/CFT guidance states that the FI Act applies to regulated entities conducting virtual asset business and is intended to address money laundering, terrorist financing, and proliferation financing risks.