Cabo Verde -- Stablecoin Regulations Regulatory Overview

Cabo Verde, like many smaller island nations, is still developing its regulatory framework for novel financial technologies such as stablecoins. As of early 2024, there is no specific, comprehensive legislation directly addressing stablecoins in Cabo Verde.

However, any stablecoin activity would likely fall under existing general financial laws, consumer protection laws, and particularly Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) regulations. The Banco de Cabo Verde (BCV) is the central bank and the primary financial regulator.

Here's a breakdown of how stablecoins would likely be treated under the current framework:

Regulatory Framework for Stablecoins in Cabo Verde

1. Classification (e-money/payment tokens/securities):

• No Explicit Classification: There is no specific law classifying stablecoins as e-money, payment tokens, or securities.
• Potential E-money Classification by Analogy: If a stablecoin is pegged to the Cabo Verde Escudo (CVE) or another fiat currency, is issued against receipt of funds, and is accepted as a means of payment by parties other than the issuer, it could potentially be categorized as "electronic money" under existing legislation.
  • Legal Reference: Lei n.º 137/VIII/2015, de 31 de Dezembro (Regime Jurídico das Instituições de Moeda Electrónica) – This law establishes the legal framework for Electronic Money Institutions (EMIs).
    • URL (Official Journal of Cabo Verde): While a direct official government gazette link is harder to maintain, the law can be found through official government publications or legal databases. The BCV often refers to it.
    • General BCV Legal Framework page: https://www.bcv.cv/pt/Legislacao/Paginas/Regulamentos.aspx (You'd need to navigate to "Instituições de Moeda Eletrónica" or related payment services laws).
• Potential Payment Service: Operations involving stablecoins as a means of transfer might also fall under the scope of general payment service provider regulations.
  • Legal Reference: Lei n.º 9/IX/2018, de 25 de Maio (Lei dos Serviços de Pagamento) – This law governs payment services.
    • URL (Official Journal of Cabo Verde / BCV): This law is also a foundational piece of payment regulation.

2. Reserve Requirements:

• If classified as E-money: Institutions issuing e-money under Lei n.º 137/VIII/2015 are subject to strict reserve requirements. They must safeguard funds received in exchange for electronic money by holding them in a separate account in a credit institution or investing them in secure, low-risk assets.
  • Specific prudential requirements, including initial capital and ongoing capital requirements, would also apply.
• If not classified as E-money: Without specific stablecoin legislation, there are no explicit reserve requirements solely for stablecoins that are not deemed e-money. However, operating without proper classification and compliance would be highly risky and likely illegal if it constitutes unauthorized financial activity.

3. Issuer Licensing:

• If classified as E-money: Any entity intending to issue stablecoins that are deemed electronic money would need to obtain a license as an Electronic Money Institution (EMI) from the Banco de Cabo Verde (BCV). This involves meeting stringent capital, governance, operational, and anti-money laundering requirements.
• If not classified as E-money: There is no specific "stablecoin issuer" license. However, offering financial services without proper authorization (e.g., acting as a payment service provider, or taking deposits) is illegal under Cabo Verdean financial law.

4. Redemption Rights:

• If classified as E-money: Lei n.º 137/VIII/2015 explicitly grants e-money holders the right to redeem their electronic money at par value at any time, free of charge, unless specific conditions for fees are met (e.g., redemption before the termination of a contract). The issuer must make the funds available promptly.
• If not classified as E-money: If a stablecoin is not classified as e-money, there are no specific statutory redemption rights under Cabo Verdean law solely for the stablecoin itself. Redemption rights would depend entirely on the terms and conditions set by the issuer, which may not be enforceable without a robust regulatory framework.

5. Algorithmic Stablecoin Rules:

• Given the general lack of specific stablecoin regulation, there are no specific rules or prohibitions for algorithmic stablecoins in Cabo Verde.
• However, the inherent volatility and lack of direct fiat-backed reserves of algorithmic stablecoins would likely put them at an even higher risk of being viewed as speculative assets, and potentially even securities if they promise returns or participation in a common enterprise. They would likely face even greater scrutiny than fiat-backed stablecoins from the BCV.

6. CBDC Interaction:

• No Active CBDC: As of now, the Banco de Cabo Verde has not launched a Central Bank Digital Currency (CBDC). While central banks globally are exploring CBDCs, Cabo Verde is not among the countries that have advanced to an implementation stage.
• Potential Future Interaction: In the future, should Cabo Verde introduce a CBDC, it would inherently become the primary digital fiat anchor. Stablecoins operating within Cabo Verde would then need to define their relationship with the CBDC, potentially interacting as complements (e.g., for specific use cases) or facing competitive pressure. Any future framework for stablecoins would likely consider their interoperability and regulatory harmony with a national CBDC.

Key Regulatory Body and Relevant Legislation

• Banco de Cabo Verde (BCV): The primary financial regulator.
  • Website: https://www.bcv.cv/
• Lei n.º 66/IX/2019, de 30 de Dezembro (Lei Anti-Branqueamento de Capitais e Financiamento do Terrorismo): The primary AML/CFT law in Cabo Verde. This law applies broadly to financial institutions and any entities conducting financial operations. While it doesn't specifically mention "virtual assets" or "stablecoins" in a comprehensive manner, any entity dealing with funds, including stablecoin issuers or exchanges, would be subject to its requirements regarding customer due diligence, suspicious transaction reporting, and record-keeping.
  • URL (BCV page with legal framework): https://www.bcv.cv/pt/Legislacao/Paginas/Regulamentos.aspx (You'd need to locate the AML/CFT law within this section, often under "Combate ao Branqueamento de Capitais e Financiamento do Terrorismo").

Summary:

In essence, the regulatory landscape for stablecoins in Cabo Verde is nascent. While there's no specific framework, fiat-backed stablecoins could be implicitly regulated under existing e-money and payment services laws if they meet the criteria, requiring full licensing and compliance. Algorithmic stablecoins currently lack specific rules, operating in a greater regulatory vacuum. The overarching concern for the BCV would be financial stability, consumer protection, and especially AML/CFT compliance for any entity involved in virtual asset activities. Businesses considering operating with stablecoins in Cabo Verde should seek specialized legal advice to navigate the current legal ambiguities and ensure compliance with general financial regulations.