Stablecoin issuer / redeemer in Somalia

No Specific Classification: Somalia currently has no specific classification for stablecoins as e-money, payment tokens, or securities.

Likely Treatment (by Analogy): If a stablecoin were to gain traction for payments and be pegged 1:1 to a fiat currency (like the Somali Shilling or USD), it would most likely be viewed by the CBS through the lens of e-money or stored value under the National Payment System (NPS) Act, 2021. This Act primarily governs mobile money operations, which are the dominant form of digital payments in Somalia.

Virtual Assets: The CBS issued a Public Notice on Virtual Assets in 2021, stating that virtual assets are not legal tender in Somalia and warning consumers about the risks associated with them (volatility, scams, money laundering). This notice indicates a general caution but does not classify specific types of virtual assets like stablecoins.

No Specific Requirements for Stablecoins: There are no specific reserve requirements tailored for stablecoin issuers.

E-Money Analogy: If a stablecoin were to be treated as e-money under the NPS Act, then by analogy, any entity issuing such a stablecoin (acting as an Electronic Money Institution or EMI) would likely be required to hold 1:1 backing of customer funds in segregated accounts with licensed financial institutions, similar to the requirements for mobile money operators. This ensures that the e-money can be redeemed at par.

No Specific Stablecoin Issuer License: There is no dedicated licensing regime for stablecoin issuers.

General Financial Licensing: Any entity wishing to issue a stablecoin that facilitates payments or stores value would almost certainly be required to obtain a license from the Central Bank of Somalia. This would likely be as a Payment Service Provider (PSP) or an Electronic Money Institution (EMI) under the NPS Act, 2021, or potentially a broader banking license depending on the scope of services. The CBS would assess the application based on existing prudential standards, AML/CFT requirements, and consumer protection measures.

No Specific Rights for Stablecoins: There are no specific regulations outlining redemption rights for stablecoin holders.

E-Money Analogy: If a stablecoin were to be treated as e-money under the NPS Act, then by analogy, any entity issuing such a stablecoin (acting as an Electronic Money Institution or EMI) would likely be required to hold 1:1 backing of customer funds in segregated accounts with licensed financial institutions, similar to the requirements for mobile money operators. This ensures that the e-money can be redeemed at par.

Unlikely to be Permitted as E-Money: Given the CBS's cautious stance on virtual assets and the reliance on traditional fiat-backed models for e-money (mobile money), it is highly improbable that an algorithmic stablecoin, which lacks direct fiat backing and relies on market mechanisms, would be permitted to operate under any recognized financial regulatory category or as a payment instrument. It would likely be considered a highly risky virtual asset.

National Payment System (NPS) Act, 2021:

Public Notice on Virtual Assets (2021):

General Prohibition/Caution: As there is no specific classification test, there is no official list of tokens considered securities. Instead, the CBS has generally viewed all cryptocurrencies with skepticism, warning against their use.

Implied Prohibition: Any entity attempting to issue a crypto token that could be construed as an investment product would likely face immediate scrutiny and opposition from the CBS, potentially being deemed an unauthorized financial activity.

Discouragement of Trading: The CBS's warnings extend to engaging in crypto trading activities generally, highlighting the risks involved. Any platform facilitating such trading would operate outside the formal regulatory perimeter and could face intervention.