Lesotho

**No Dedicated VASP Regime:** Lesotho has not yet enacted specific legislation to define, license, or regulate virtual assets or virtual asset service providers. There is no specific registration or licensing regime for crypto businesses.

**Cautious Stance:** The **Central Bank of Lesotho (CBL)**, which is the primary financial regulator, has previously issued public notices warning the public about the risks associated with investing in and transacting with cryptocurrencies. This indicates a cautious "wait-and-see" or risk-averse approach rather than active promotion or regulation.

**Indirect Application of Existing Laws (AML/CFT):** While there's no specific VASP law, any entity operating within Lesotho that handles funds or facilitates financial transactions (even if virtual) could potentially fall under the scope of existing **Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT)** legislation.

**Cryptocurrency Exchanges:** There are no specific licenses required for a "cryptocurrency exchange" if it deals *only* with virtual assets. However, if the exchange offers services that involve fiat currency conversion, holds fiat currency for customers, or facilitates remittances in traditional currency, it *could* potentially be deemed to be conducting activities that fall under existing banking, money transmission, or payment services regulations, which *would* require a license from the CBL. This is a grey area and depends heavily on the specific nature and integration with traditional financial systems.

**Custody Providers:** Similarly, there are no specific licenses for "virtual asset custody providers." If the custody provider *also* provides traditional financial services (e.g., managing fiat bank accounts, lending fiat against crypto), then existing financial services licenses might be required.

**Payment Processors:** If a payment processor exclusively handles virtual asset payments without any conversion to or from fiat currency in Lesotho, there isn't a specific license. However, if it facilitates payments that involve fiat currency or traditional money transmission services, it would likely require a **Payment Services Provider (PSP) license** or similar authorization from the CBL.

**Capital Requirements:** There are no specific capital requirements for VASPs. However, traditional financial institutions (banks, PSPs, etc.) are subject to significant capital requirements set by the CBL. If a crypto business were deemed to fall under such existing categories, these requirements would apply.

**AML/KYC:** This is the most critical area. Lesotho is a member of the **Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)**, which means it is committed to implementing the **Financial Action Task Force (FATF) recommendations**. FATF Recommendation 15 specifically applies to VASPs, requiring them to be regulated for AML/CFT purposes and supervised.

The **Money Laundering and Proceeds of Crime Act, 2008** (as amended) and the oversight of the **Financial Intelligence Unit (FIU) Lesotho** are the primary instruments for AML/CFT.

While VASPs are not explicitly designated as "reporting institutions" under Lesotho's current AML law, the FIU would expect any entity involved in financial flows to conduct customer due diligence (KYC), monitor transactions, and report suspicious activities to prevent money laundering and terrorist financing. Failing to do so could lead to investigations and penalties, especially if illicit activities are facilitated.

**Local Presence:** There are no specific local presence requirements for a VASP. However, if a business were to be licensed as a traditional financial institution (e.g., a payment service provider), it would generally require a physical presence and local management in Lesotho.

**Central Bank of Lesotho (CBL):** The primary financial regulator.

(You may need to search their press releases or publications sections for any past notices on cryptocurrencies, though direct links can be hard to find for older notices.)

**Financial Intelligence Unit (FIU) Lesotho:** Responsible for AML/CFT oversight.

**Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG):** Lesotho is a member, and their publications relate to regional AML/CFT efforts and FATF recommendations.

FATF Recommendations (relevant context for Lesotho's future actions): https://www.fatf-gafi.org/recommendations/

**Shares or debentures** of a company or other body corporate.

**Bonds or other instruments of indebtedness**.

**Warrants or other instruments** entitling the holder to subscribe for or purchase shares, bonds, or debentures.

**Unit trusts** or other collective investment schemes.

**Options, futures, and other derivatives** related to commodities, currencies, interest rates, indices, or other securities.

**Any other instruments** or interests declared by the Minister, by notice in the Gazette, to be securities for the purposes of this Act.

**Interests in a collective investment scheme**, which itself is defined as a scheme in which members of the public are invited to invest money or other assets in a portfolio, and where the participants do not have day-to-day control over the management of the portfolio, but rather the portfolio is managed by or on behalf of the manager of the scheme.

**Investment Schemes:** Tokens issued as part of an Initial Coin Offering (ICO) or similar fundraising activity, where investors contribute capital with the expectation of future profit based on the project team's efforts, would likely be deemed interests in a **collective investment scheme**.

**Equity/Debt Instruments:** Tokens that represent ownership (like shares) or a debt obligation (like bonds) in an underlying entity or project would be classified as traditional **shares or debentures**. These are often called "security tokens."

**Derivatives:** Tokens whose value is derived from an underlying asset, index, or other security could fall under the definition of **derivatives**.

**Utility Tokens (with an investment component):** Even if marketed as "utility tokens," if their primary purpose at the time of issuance is speculative investment with an expectation of profit before their actual utility is fully developed or widely adopted, they could be reclassified as securities.

**Registration:** The issuer would generally be required to register the offering with the relevant regulatory authority (likely the CBL or an authority designated under the Act, which in practice for securities is the Capital Market Department of the CBL). This would typically involve preparing and filing a **prospectus** that provides full and accurate disclosure of all material information relevant to the offering and the issuer.

**Licensing:** Entities involved in the issuance, distribution, or trading of such tokens (e.g., brokers, dealers) would also need to be appropriately licensed under the Securities Act.

**Exemptions:** The Act may provide for certain exemptions from prospectus requirements for specific types of offers (e.g., private placements to sophisticated investors, small offers below a certain threshold), similar to traditional securities regulations. However, given the CBL's stance, it's highly unlikely that any such exemption would currently apply to a general crypto token offering without specific, prior regulatory engagement and approval.

**Licensed Platforms:** Secondary trading platforms (exchanges) for such tokens would need to be licensed as **securities exchanges** under the **Securities Act, 2010**. They would be subject to rules regarding market integrity, investor protection, and operational resilience.

**Broker-Dealers:** Intermediaries facilitating trades would need to be licensed as **broker-dealers**.

**Current Reality:** As no crypto-related entities are currently licensed or regulated by the CBL, any secondary trading of tokens in or from Lesotho, if those tokens are considered securities, would be occurring outside the regulated framework. The CBL advises against participation in such activities due to the lack of investor protection.

**CBL Advisories:** The primary "enforcement" to date has been through warnings and advisories from the Central Bank of Lesotho. For example, **Circular No. 2 of 2021** explicitly cautions the public against virtual assets due to their unregulated nature, volatility, lack of investor protection, and potential for fraud and money laundering. This acts as a deterrent and signals the CBL's supervisory stance.

**Financial Intelligence Centre (FIC) Action:** The **Financial Intelligence Act, 2011**, mandates reporting of suspicious transactions. The FIC would take action against any entities or individuals found to be using virtual assets for money laundering, terrorism financing, or other illicit activities, regardless of whether the asset is a security.

**General Fraud/Criminal Law:** If a crypto scheme defrauds investors, general criminal laws related to fraud and misrepresentation could be invoked by the Lesotho Mounted Police Service, independent of securities classification.

**Potential Securities Act Enforcement (Hypothetical):** While no specific crypto-related Securities Act enforcement is known, if a major token offering targeting Basotho investors were to clearly violate the provisions of the Securities Act (e.g., by issuing securities without a prospectus), the CBL (or the relevant authority) would theoretically have the power to issue cease-and-desist orders, impose fines, or refer the matter for prosecution.

**Central Bank of Lesotho (CBL) Official Website:**

Notices and Circulars (where Circular No. 2 of 2021 would be found): Navigate to "Publications" -> "Notices & Circulars" or "Press Releases".

**Circular No. 2 of 2021 on Virtual Assets (Caution):** This is the key guidance. While a direct PDF link can be elusive on government sites over time, searching for "Central Bank of Lesotho Circular No. 2 of 2021" on their website or via a general search engine is the best way to find it. It generally warns the public that virtual assets are not legal tender, not regulated, and carry significant risks, emphasizing the lack of investor protection and potential for financial crime.

This is the primary legislation. Finding a direct, publicly accessible government URL for specific Acts can be challenging for some jurisdictions. It would typically be found on the Lesotho Parliament's website, Government Gazette, or a legal database.

Financial Intelligence Centre (FIC) Lesotho: https://www.fic.org.ls/

The Act itself would be found under "Legislation" or "Resources" on the FIC website.

**Money Laundering and Proceeds of Crime Act (MLPCA) 2008 (as amended):** This is the foundational legislation that defines money laundering offenses, establishes reporting obligations, and sets out the framework for combating financial crime. VASPs are expected to comply with the obligations outlined in this Act, particularly if they are classified as financial institutions or DNFBPs under its scope.

**Financial Intelligence Act 2011 (as amended):** This Act establishes the Financial Intelligence Unit (FIU) of Lesotho, defines its powers, and details the requirements for reporting suspicious transactions.

**For Individuals:** Obtaining and verifying name, residential address, date of birth, nationality, and a unique identification number (e.g., national ID, passport). Verification should be done using reliable, independent source documents or data.

**For Legal Entities:** Obtaining and verifying company name, legal form, proof of incorporation/registration, address of principal place of business, directors' names, and beneficial ownership information.

**Understanding the Nature of Business/Purpose of Relationship:** VASPs must understand the nature and purpose of the business relationship or occasional transaction.

**Ongoing Monitoring:** Continuously monitoring the business relationship, including scrutiny of transactions undertaken throughout the course of the relationship, to ensure that the transactions are consistent with the VASP's knowledge of the customer, their business, and risk profile, including, where necessary, the source of funds.

**Source of Funds/Wealth:** Given the inherent risks of virtual assets, VASPs are expected to obtain information on the source of funds or source of wealth, especially for large transactions or high-risk customers.

**Enhanced Due Diligence (EDD):** Required for high-risk situations, which typically include:

Customers from high-risk geographic areas (as identified by FATF, national authorities, or the VASP's own risk assessment)

Transactions involving new technologies or products where the risks have not been fully assessed (which can include certain crypto activities).

**Simplified Due Diligence (SDD):** Permitted in strictly defined low-risk scenarios, but this is less common for VASP activities due to the inherent risks.

**Report Suspicious Transactions:** Report to the FIU any transaction (or attempted transaction) where they have reasonable grounds to suspect that it may involve the proceeds of criminal activity, or relates to money laundering or terrorist financing. This includes suspicious activities in virtual assets.

**No Tipping-Off:** Prohibit informing the customer or third parties that an STR has been made (no "tipping-off").

**Prompt Reporting:** Reports must be made promptly, usually within a few days of the suspicion arising.

**Customer Identification Data:** Copies of identity documents, verification records.

**Transaction Records:** All transaction data, including dates, amounts, types of virtual assets, originators, beneficiaries, and payment methods.

**Business Correspondence:** Relevant correspondence with customers regarding their transactions and relationships.

**Analysis of Complex/Unusual Transactions:** Records of the background and purpose of any complex, unusual large transactions, and all unusual patterns of transactions.

**Duration:** Records must typically be kept for a minimum period of **five (5) years** after the business relationship is terminated or after an occasional transaction is completed.

**Financial Intelligence Unit (FIU) of Lesotho:** The FIU is the central national agency responsible for receiving, analysing, and disseminating suspicious transaction reports. It also provides guidance and exercises oversight on AML/CFT compliance across various sectors, including those that might encompass VASPs.

**Central Bank of Lesotho Website:** https://www.centralbank.org.ls/

**Partial/Cautionary:** Lesotho does not have a comprehensive, dedicated legal framework for regulating cryptocurrencies or virtual assets. There is no explicit ban on owning or trading them, but neither is there a licensing regime for Virtual Asset Service Providers (VASPs) or exchanges.

**AML/CFT Focus:** The primary regulatory attention comes from the perspective of combating financial crime, aligning with international standards set by the Financial Action Task Force (FATF). This means that while crypto activities aren't explicitly regulated as financial services, they would be scrutinized for money laundering or terrorism financing risks.

**Public Warnings:** The central bank has issued warnings to the public regarding the risks associated with cryptocurrencies.

**Role:** The central bank and primary financial regulator. It is responsible for monetary policy, financial stability, and the oversight of traditional financial institutions. The BOL has issued public warnings about the risks of cryptocurrencies, emphasizing that they are not legal tender and are unregulated within Lesotho.

**Financial Intelligence Unit (FIU Lesotho):**

**Role:** Responsible for receiving, analyzing, and disseminating suspicious transaction reports to combat money laundering and the financing of terrorism. While there may not be specific crypto legislation, the FIU would likely interpret its mandate to cover financial flows involving virtual assets for AML/CFT purposes.

**Anti-Money Laundering and Combating of Financing of Terrorism Act, 2011 (as amended):**

**Date:** 2011 (with potential subsequent amendments).

**Relevance:** This is the foundational law for AML/CFT efforts in Lesotho. While it may not explicitly mention "virtual assets" in its original form, any financial activity that could facilitate money laundering or terrorism financing would fall under its purview. The FIU's powers derive from this Act, and they would be expected to monitor suspicious transactions involving cryptocurrencies as per international standards.

**URL (General Legislation Section):** The Act itself may not be directly linked as a PDF on public sites, but information regarding AML/CFT efforts and the FIU's mandate would be under the FIU's legislation section. https://www.fiulesotho.org.ls/legislation/

**Central Bank of Lesotho Act:**

**Relevance:** This Act establishes the powers and functions of the Bank of Lesotho, providing the legal basis for its role in maintaining financial stability and issuing warnings regarding unregulated financial activities.

**Relevance:** This Act governs the licensing and supervision of traditional financial institutions. While not directly applicable to crypto, some crypto-related businesses might offer services that could, by interpretation, overlap with aspects covered by this Act (e.g., money transmission), though this is largely untested in Lesotho.

**No Explicit Ban, No Licensing:** There is **no explicit ban** on individuals trading or holding cryptocurrencies. However, there is also **no specific regulatory framework or licensing requirement** for cryptocurrency exchanges or other Virtual Asset Service Providers (VASPs) to operate within Lesotho.

**Unregulated Market:** This means that entities facilitating crypto trading and exchanges operate in a largely **unregulated environment**. This lack of specific oversight means there are no formal consumer protection mechanisms, capital requirements, or specific operational guidelines for crypto businesses.

**Bank of Lesotho Warnings:** The Bank of Lesotho has consistently issued warnings to the public, advising caution due to:

The volatile nature of cryptocurrencies.

The absence of regulatory oversight and consumer protection.

Their non-legal tender status (meaning they are not recognized as official currency).

The potential for fraud and illicit activities.

**AML/CFT Scrutiny:** Any entity or individual involved in significant crypto transactions, particularly those crossing borders or involving large sums, would likely fall under the scrutiny of the FIU Lesotho for potential AML/CFT violations, as per the Anti-Money Laundering and Combating of Financing of Terrorism Act. They would be expected to report suspicious transactions, even if there isn't specific VASP regulation.

**Adopted:** Yes, Lesotho has adopted the FATF Travel Rule by amending its principal AML/CFT legislation to include virtual assets and VASPs. The **Money Laundering and Proceeds of Crime (Amendment) Act, 2022** effectively brought VASPs under the regulatory scope of financial institutions, subjecting them to the same AML/CFT obligations, including those related to wire transfers which encompass the Travel Rule.

The **Central Bank of Lesotho** is the primary regulator for financial institutions and is responsible for overseeing compliance.

**Effective Date:** The Money Laundering and Proceeds of Crime (Amendment) Act, 2022, was assented to on **14th July 2022**. This is the date from which the provisions relating to virtual assets and VASPs became law.

Lesotho's AML/CFT framework, as updated, generally requires financial institutions (now including VASPs) to conduct Customer Due Diligence (CDD) and collect originator and beneficiary information for transactions above specific thresholds.

While the specific "Travel Rule" threshold (e.g., USD/EUR 1,000 for cross-border transfers as per FATF guidance) may not be explicitly stated in the *Amendment Act itself* for VA transfers, the general requirements for "wire transfers" and "electronic funds transfers" apply.

**For identifying information and CDD:** The principal **Money Laundering and Proceeds of Crime Act, 2008** (and its amendments) generally sets thresholds for identification and verification for transactions exceeding **M20,000 (approximately USD 1,000 - 1,100 depending on exchange rates)** or equivalent in foreign currency. This threshold is typically applied for triggering enhanced CDD and transaction monitoring requirements.

It's generally understood that for cross-border virtual asset transfers, the **FATF-recommended threshold of USD/EUR 1,000** (or local currency equivalent) for the collection of originator and beneficiary information would apply implicitly, as VASPs are now treated akin to other financial institutions involved in fund transfers.

Exchange between virtual assets and fiat currencies.

Exchange between one or more forms of virtual assets.

Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.

Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.

The legislation mandates that VASPs, as reporting institutions, must establish and maintain systems and controls to comply with AML/CFT obligations, including those related to the Travel Rule. This includes:

**Collecting required information:** Originator (sender) and beneficiary (receiver) information for VA transfers.

**Storing information:** Securely retaining this information for a specified period (typically 5-7 years).

**Transmitting information:** Ensuring the required information travels with the virtual asset transfer, or is made available to the beneficiary VASP upon request.

**Risk assessment:** Developing and implementing a risk-based approach to identify, assess, and mitigate ML/TF risks.

**Reporting:** Reporting suspicious transactions to the Financial Intelligence Unit (FIU) of Lesotho.

The Act itself does not specify particular technological solutions (e.g., specific protocols or software). Instead, it sets the *requirement* for VASPs to have systems in place that enable them to meet these obligations. VASPs are expected to adopt technology solutions that facilitate the secure, efficient, and compliant exchange of information.

**Individuals:** Imprisonment for a term of up to **10 years** and/or substantial fines.

**Body Corporates (VASPs):** Significant monetary penalties, which can run into **millions of Maloti**, and can also lead to the revocation of licenses or operating permits.

Specific offences related to failure to report suspicious transactions, failure to keep records, or failure to implement proper AML/CFT controls carry their own set of penalties as outlined in the Act.

**Money Laundering and Proceeds of Crime (Amendment) Act, 2022:** While a direct official government gazette URL can be difficult to maintain, the Act's full text can often be found through legal databases or by searching "Lesotho Money Laundering and Proceeds of Crime (Amendment) Act, 2022 pdf".

**Money Laundering and Proceeds of Crime Act, 2008 (Principal Act):** This act forms the basis of Lesotho's AML/CFT framework.

**Central Bank of Lesotho:** As the regulator, the CBL's website would be the primary source for any implementing regulations or guidance related to VASPs.

**Central Bank of Lesotho Official Website:** https://www.centralbank.org.ls/

**No specific cryptocurrency custody license currently exists in Lesotho.**

Any entity seeking to offer services that could be interpreted as "financial services" or holding client funds would generally fall under the purview of the **Financial Institutions Act 2012** or the **Central Bank of Lesotho Act 2000**. However, these acts are designed for traditional financial institutions (banks, insurers, etc.) and do not explicitly cover or provide licensing categories for digital asset custodians.

**Financial Institutions Act 2012:** While not directly for crypto, it's the general licensing framework for financial institutions.

[No direct government PDF link easily accessible, but often referenced by CBL]

**Segregation of Client Assets Rules:**

**There are no specific rules in Lesotho mandating the segregation of client digital assets from the custodian's own assets.**

In traditional finance, the **Financial Institutions Act 2012** and prudential guidelines issued by the CBL would dictate segregation for licensed entities. However, these do not extend to unregulated digital asset custodians. General fiduciary duties under common law might apply to any entity holding assets on behalf of others, but without specific statutory backing for digital assets.

**No specific insurance or bonding requirements for digital asset custodians currently exist in Lesotho.**

Licensed financial institutions under the **Financial Institutions Act 2012** would be subject to capital adequacy and other prudential requirements, but these are not tailored for the unique risks of digital asset custody (e.g., cyber theft).

**There are no specific mandates for digital asset custodians regarding cold storage or other specific security measures.**

The absence of a regulatory framework means there are no prescribed technical or operational standards for how digital assets must be stored.

**There is no specific definition of a "qualified custodian" for digital assets in Lesotho.**

**There is no publicly available information indicating specific, dedicated digital asset custody legislation is currently pending in Lesotho.**

Like many countries, Lesotho may be exploring broader frameworks for virtual assets, potentially influenced by international bodies like the Financial Action Task Force (FATF). However, specific bills or proposals for custody regulations are not publicly announced.

**Money Laundering and Proceeds of Crime Act 2008 (as amended):** This act and its regulations establish the AML/CFT framework in Lesotho. Entities dealing with virtual assets might be considered "designated non-financial businesses and professions" (DNFBPs) or be brought under the scope of "financial institutions" through future amendments or interpretations, thereby imposing KYC/CDD, record-keeping, and suspicious transaction reporting (STR) obligations.

**Money Laundering and Proceeds of Crime Act 2008:** https://www.fiu.org.ls/images/pdf/Money-Laundering-and-Proceeds-of-Crime-Act-2008.pdf

**National Payment Systems Act 2018:** This act provides a framework for the regulation, oversight, and supervision of payment systems and payment service providers in Lesotho. Depending on the nature of the digital asset service, some aspects could potentially be construed as falling under "payment services" if they facilitate transfers of value.

**National Payment Systems Act 2018:** https://www.cbl.org.ls/national-payment-systems-act-2018/

**Central Bank of Lesotho Act 2000:** This act establishes the powers and functions of the Central Bank, including its role in regulating the financial system.

**Central Bank of Lesotho Act 2000:** https://www.cbl.org.ls/wp-content/uploads/2021/07/Central-Bank-of-Lesotho-Act-2000.pdf