Centralized exchange in Madagascar

Such activities are currently unrestricted but carry significant legal and operational risks due to the absence of specific protections or guidelines.

No Specific Crypto Licensing Regime: There is no specific law or regulation mandating licenses for cryptocurrency exchanges, custody providers, or virtual asset payment processors in Madagascar, unlike jurisdictions that have implemented frameworks like MiCA (EU), MAS (Singapore), or VARA (Dubai).

Central Bank Caution/Warnings: The Banque Centrale de Madagascar (BCM) – the country's central bank and primary financial regulator – has historically maintained a cautious, if not prohibitive, stance towards cryptocurrencies. They have likely issued public warnings about the risks associated with virtual assets, including price volatility, lack of consumer protection, and potential for illicit finance. These warnings often imply that crypto is not recognized as legal tender and regulated financial institutions should not facilitate their use.

AML/CFT Implications: While there are no crypto-specific AML/CFT regulations, Madagascar, as a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and subject to FATF recommendations, has general anti-money laundering and combating the financing of terrorism (AML/CFT) laws. The Cellule de Renseignement Financier (CRF) is Madagascar's Financial Intelligence Unit.

In the absence of specific VASP regulations, these general AML/CFT laws could be interpreted to apply to entities dealing with virtual assets, especially if they interact with the traditional financial system. However, without specific guidance, the application remains ambiguous.

FATF Recommendation 15 specifically calls for countries to regulate and supervise VASPs for AML/CFT purposes. Madagascar is expected to implement these recommendations, which could lead to future regulations.

Registration vs. Licensing Regime: Currently, neither a dedicated registration nor a licensing regime for VASPs exists in Madagascar.

Exchanges (Fiat-to-Crypto/Crypto-to-Crypto): There are no specific licenses required. However, if an exchange facilitates fiat currency transactions (e.g., MGA deposits/withdrawals), it might inadvertently touch upon existing payment services regulations overseen by the BCM, potentially requiring a payment service provider license for the fiat portion of its operations.

Custody Providers: No specific licenses are required for virtual asset custody.

Local Presence: Typically, a locally incorporated entity (e.g., a company registered in Madagascar) with a physical presence and local management.

High Regulatory Risk: Operating a cryptocurrency business in Madagascar currently carries significant regulatory risk due to the absence of clear rules. This can lead to uncertainty regarding legality, potential for sudden regulatory changes, or difficulties in interacting with traditional financial institutions.

Evolving Landscape: The global regulatory landscape for virtual assets is rapidly evolving. Madagascar, like other countries, is under pressure from international bodies (like FATF) to address VASP regulation. This situation could change at any time with the introduction of new laws or decrees.

Not Legal Tender: Cryptocurrencies are not recognized as legal tender in Madagascar.

No Official Recognition or Supervision: The BCM explicitly stated that it does not recognize, regulate, or supervise cryptocurrencies or their underlying technologies.

No Specific Framework: There is no specific legal or regulatory framework governing the issuance, trading, or custody of cryptocurrencies in Madagascar.

Custodial License Requirements: There are no specific licenses required for entities wishing to provide cryptocurrency custody services, as such services are not officially recognized or regulated.

Segregation of Client Assets Rules: Without a regulatory framework for digital assets, there are no specific rules mandating the segregation of client digital assets from the custodian's own assets.

Insurance/Bonding Requirements: There are no specific insurance or bonding requirements for digital asset custodians.

Cold Storage Mandates: There are no specific mandates for the use of cold storage (offline storage) for digital assets. Operational security measures would be at the discretion of the service provider, if any exists.

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) Laws: Madagascar is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). While not specifically targeting crypto custody, if any entity were to facilitate financial transactions involving digital assets, it might indirectly fall under the purview of general AML/CFT obligations, such as customer due diligence and suspicious transaction reporting, especially if the assets are converted to/from fiat currency within a regulated financial institution. However, this typically applies to financial institutions, and crypto exchanges are not formally regulated as such.

Loi n° 2018-043 du 19 décembre 2018 relative à la lutte contre le blanchiment de capitaux et le financement du terrorisme (Law No. 2018-043 of December 19, 2018, on the Fight against Money Laundering and the Financing of Terrorism).

Identification and Verification:

Beneficial Ownership: Identify and verify the natural person(s) who ultimately own or control the customer, or the natural person(s) on whose behalf a transaction is being conducted.

Purpose and Intended Nature of Business Relationship: Understand the rationale behind the customer's transactions and the nature of their relationship with the VASP.

Ongoing Monitoring: Conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that 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.

Risk-Based Approach: Apply CDD measures on a risk-sensitive basis:

Obligation to Report: VASPs, as reporting entities, are legally obligated to report any suspicious transactions or activities to the Financial Intelligence Unit (FIU), regardless of the amount involved. This includes transactions that are unusual, lack clear economic rationale, or appear to be connected to money laundering or terrorist financing.

No Tipping-Off: Reporting entities and their employees are prohibited from disclosing to the customer or to third parties that a suspicious transaction report is being, or has been, submitted to the FIU.

Duration: Records must typically be kept for at least five (5) years after the business relationship has ended or after the date of an occasional transaction.