Stablecoin issuer / redeemer in Madagascar

Most Likely: E-money/Payment Tokens (if MGA-denominated and backed): If a stablecoin is pegged to the Malagasy Ariary (MGA) and aims to facilitate payments, it would most likely fall under the existing framework for electronic money (e-money). The BCM regulates e-money issuers and payment service providers.

Definition of E-money: Typically, e-money is defined as electronically stored monetary value represented by a claim on the issuer, issued on receipt of funds, and accepted as a means of payment by persons other than the e-money issuer.

Other Possibility: Unregulated Digital Asset / Foreign Currency Instrument: If a stablecoin is pegged to a foreign currency (e.g., USD) and is not formally integrated into the local payment system or issued by a locally licensed entity, it might exist in a regulatory grey area or be treated more akin to a foreign currency instrument or an unregulated digital asset, subject to general foreign exchange regulations if traded or used locally.

If classified as E-money: Issuers of stablecoins operating as e-money providers would be required to obtain a license from the Banque Centrale de Madagascar (BCM). This licensing process typically involves stringent requirements concerning capital, governance, risk management, consumer protection, and AML/CFT compliance.

If classified as E-money: E-money regulations typically require issuers to hold 1:1 backing for all e-money issued. These funds must usually be held in segregated accounts at the central bank or a licensed commercial bank, protected from insolvency claims of the issuer. This ensures that users can always redeem their e-money at par with fiat currency.

If classified as E-money: A fundamental principle of e-money regulation is the right to redeem the e-money at par for fiat currency at any time, free of charge (or at a reasonable, pre-disclosed fee). This would apply directly to a stablecoin classified as e-money.

Loi n° 2018-006 relative aux services de paiement à Madagascar (Law on Payment Services in Madagascar): This law provides the overarching framework for payment services, including e-money. It defines the activities, licensing requirements, and supervision of payment service providers.

No Specific Rules: Madagascar currently has no specific rules or prohibitions regarding algorithmic stablecoins. Given their inherent volatility and lack of direct fiat or asset backing, such stablecoins would likely face significant scrutiny.

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.

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

Banque Centrale de Madagascar (BCM):

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.

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.

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.

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.

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.

Source of funds and source of wealth verification may be required for EDD.

Enhanced CDD (EDD): Required for higher-risk situations, such as: