DeFi protocol frontend in Tanzania

Lack of Specific Licensing Regime: There is no specific law or regulation in Tanzania that explicitly defines, regulates, and provides for the licensing of cryptocurrency exchanges, custody providers, or payment processors as virtual asset businesses.

Current Stance (Implied): While formal prohibition may not be explicit in specific crypto legislation, the lack of a regulatory framework and the BOT's historical cautious stance on unregulated financial activities mean that operating an unlicensed crypto business could face significant legal uncertainty and potential challenges under existing general financial laws.

Currently Undefined: Since there is no specific regime, the distinction between registration and licensing for virtual assets is currently moot.

HIGHLY LIKELY & CRITICAL: Even without a specific crypto licensing regime, Tanzania has a robust Anti-Money Laundering Act, 2006 (and subsequent amendments/regulations) and a Financial Intelligence Unit (FIU). Financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) are obligated to comply with AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) requirements.

Virtual asset service providers, if operating, would be expected to implement robust KYC (Know Your Customer) and AML procedures, including customer due diligence, transaction monitoring, record-keeping, and suspicious transaction reporting to the FIU. This aligns with FATF (Financial Action Task Force) recommendations, which Tanzania adheres to.

Bank of Tanzania (BOT):

Relevant Law (General): The National Payment Systems Act, 2015. While not crypto-specific, it regulates payment systems and services in Tanzania.

The Anti-Money Laundering Act (AMLA), 2006 (as amended): This is the principal legislation establishing the legal framework for combating money laundering. It defines "financial institutions" and "other reporting institutions" and imposes obligations on them. While VASPs may not be explicitly listed, their activities are likely to be interpreted as falling under the scope of financial services or other reporting obligations.

The Anti-Money Laundering Regulations, 2012 (as amended): These regulations provide detailed rules and procedures for implementing the AMLA, including customer due diligence, suspicious transaction reporting, and record-keeping.

Identification and Verification of Customers:

Beneficial Ownership: Identifying and verifying the identity of the ultimate beneficial owner(s) of the virtual assets or the entity, ensuring that the VASP knows who ultimately owns or controls the funds/assets.

Purpose and Intended Nature of the Business Relationship: Understanding the purpose and intended nature of the customer's virtual asset activities and the business relationship.

Ongoing Monitoring: Continuously monitoring the business relationship and transactions undertaken by the customer to ensure that they are consistent with the VASP's knowledge of the customer, their business, and risk profile. This includes monitoring for unusual or suspicious activities.

Enhanced Due Diligence (EDD): Applying EDD for higher-risk situations, which may include:

Obligation to Report: Any VASP, or its employees, that knows or suspects that a transaction (or attempted transaction) involves funds or virtual assets derived from illegal activity, or is related to money laundering or terrorism financing, must report it.

Reporting Mechanism: Reports must be submitted to the FIU Tanzania promptly and without delay, typically through a prescribed format (e.g., an online portal or specific form).

No Tipping-Off: VASPs and their employees are prohibited from "tipping-off" customers or third parties that an STR has been or will be submitted.

Duration: All records must be kept for a minimum period of five (5) years after the business relationship has ended or after the date of the transaction.

Regulator Name: Bank of Tanzania (BoT)

Entity Targeted: The general public, financial institutions, and any individuals or entities attempting to deal in, facilitate, or operate businesses involving cryptocurrencies. Violation Type: Dealing in, facilitating, or promoting instruments not recognized as legal tender; operating unauthorized financial services. Penalty Amount: Not a specific fine amount applied in a single action, but the outcome implies potential prosecution under existing financial laws for unauthorized activities.

Outcome: Cryptocurrencies are not recognized as legal tender in Tanzania. Financial institutions are prohibited from facilitating crypto transactions. This creates a high-risk environment for anyone operating a crypto business, as they would be operating outside the legal framework and subject to potential criminal charges rather than regulatory fines.

Context: Following comments by President Samia Suluhu Hassan in June 2021 urging the central bank to explore cryptocurrencies, the BoT clarified its long-standing position that crypto is not legal tender and warned the public about the risks. While they mentioned studying the technology, the ban on financial institutions dealing with crypto remained. This effectively served as a strong "enforcement" measure preventing the emergence of licensed crypto businesses.