Legal Crypto In Ethiopia

Cryptocurrency in Ethiopia: Status, Market, and the Legal Perspective

As a distributed digital asset, cryptocurrency has attracted worldwide attention because of its potential to revolutionize financial systems. In Ethiopia, however, the state of cryptocurrency laws and regulations is repressive, reflecting the authorities’ conservative stance toward financial innovation.

Legal Status of Cryptocurrency

Cryptocurrency trading is illegal in Ethiopia. In June 2022, the National Bank of Ethiopia (NBE) announced a ban on cryptocurrencies, including Bitcoin, for use as payment within the country. The NBE emphasizes that only the Ethiopian Birr is recognized as legal tender, and using or holding crypto assets offers no legal protection. Violators may face investigation and punishment as the NBE seeks to control the financial space and mitigate risks of money laundering and fraud.

Ethiopia lacks laws that recognize or legitimize digital currencies. Key regulations, such as the National Payment System Proclamation No. 718/2011 and the Prevention and Suppression of Money Laundering and Financing of Terrorism Proclamation No. 780/2013, focus on traditional banking systems and explicitly exclude cryptocurrencies from legal financial activities.

Despite the ban, informal peer-to-peer (P2P) trading persists, often conducted through social media platforms or encrypted messaging apps. Such activities operate in a legal gray area and carry significant risks, including potential prosecution.

Regulatory Framework

The NBE regulates Ethiopia’s financial system and enforces the cryptocurrency ban as part of its oversight of the national payment system. The central bank’s policies align with anti-money laundering (AML) and counter-financing of terrorism (CFT) standards, requiring banks to monitor and report suspicious transactions. Cryptocurrencies, due to their pseudonymous nature, can bypass these controls, prompting the NBE’s strict stance.

No specific regulations address cryptocurrencies beyond the NBE’s ban, creating uncertainty for potential investors and entrepreneurs. Unlike some African nations like Kenya, which are exploring crypto-friendly policies, Ethiopia prioritizes economic control and stability over legalization.

Exchanges

Due to the cryptocurrency ban, no licensed crypto exchanges operate legally in Ethiopia. Mainstream international platforms like Coinbase, Binance, and Kraken are inaccessible for formal trading due to NBE regulations. Some Ethiopians access these platforms informally using virtual private networks (VPNs) or offshore banking, though this is risky and uncommon.

P2P trading is the primary method for buying and selling cryptocurrencies in Ethiopia. Platforms like LocalBitcoins and Paxful have been used for direct transactions, but their availability is limited due to regulatory restrictions. Cash exchanges and mobile money services, such as M-Pesa, are also used, though M-Pesa does not officially support crypto purchases. These methods expose users to scams and legal risks.

DeFi and NFT Markets in Ethiopia

Decentralized finance (DeFi), which provides financial services without intermediaries using blockchain technology, is virtually nonexistent in Ethiopia’s formal economy. The NBE’s ban on cryptocurrencies extends to DeFi protocols, limiting their use to tech-savvy individuals operating discreetly. Regulatory uncertainty and limited crypto access hinder DeFi adoption.

The non-fungible token (NFT) market in Ethiopia is also underdeveloped. The crypto ban prohibits legal NFT transactions using cryptocurrencies like Ethereum. While some Ethiopian artists access global NFT platforms like OpenSea from abroad, such activities are rare and occur outside Ethiopia’s jurisdiction. The lack of a blockchain ecosystem and regulatory support stifles NFT market growth.

Additional Information

Key institutions overseeing Ethiopia’s financial system include:

• National Bank of Ethiopia (NBE): Regulates the payment system and enforces the cryptocurrency ban.
• Financial Intelligence Centre (FIC): Ensures compliance with AML and CFT laws.
• Ministry of Finance: Supervises financial innovations within the broader macroeconomic framework.

Relevant Laws

Law/Proclamation	Description	Impact on Cryptocurrency
National Payment System Proclamation No. 718/2011	Regulates payment systems and legal tender in Ethiopia.	Declares only Ethiopian Birr as legal tender, banning crypto use.
Prevention and Suppression of Money Laundering and Financing of Terrorism Proclamation No. 780/2013	Establishes AML/CFT compliance requirements.	Increases scrutiny of crypto transactions, reinforcing the ban.
Banking Business Proclamation No. 592/2008	Governs banking operations and financial institutions.	Excludes cryptocurrencies from regulated financial activities.

Conclusion

Ethiopia maintains a strict stance against cryptocurrencies, with the NBE enforcing a ban since June 2022. Regulatory frameworks, including the National Payment System Proclamation and AML/CFT laws, prioritize financial control and stability, leaving no room for cryptocurrencies, DeFi, or NFTs in the formal economy. Informal P2P trading persists but carries significant legal and financial risks. Without regulatory reform, Ethiopia’s crypto market remains stifled, limiting innovation and adoption of global digital finance trends.