Chad -- Custody Regulations Regulatory Overview

Executive Summary

As of October 2024, Chad has not enacted specific legislation directly regulating cryptocurrency or digital asset custody. The existing legal framework primarily addresses financial services through general banking and anti-money laundering (AML) provisions, which may indirectly affect the operation of crypto custodial services. No formal licensing regime is in place for digital asset custodians within Chad. Practically, entities offering such services operate in a regulatory gray area, potentially facing future legislative action. Currently, there are no reported instances of licensed cryptocurrency custodial providers operating legally in Chad.

Key Licensing Insight: No specific license is required solely for digital asset custody; however, any operation that involves money transmission or payment processing related to cryptocurrencies would fall under the broader category of “financial service providers” subject to existing banking licenses.

Regulatory Framework

Regulatory Bodies

• Central Bank of the Central African States (BCEAO) – Oversees monetary policy for the West African Economic and Monetary Union (WAEMU) and indirectly influences financial regulations within Chad.
• Ministry of Finance and Economic Development – Drafts and implements financial laws, including those pertaining to banking and AML compliance.

Primary Laws

• Law No. 2007-001 on Financial Services and Non-Banking Activities (as amended) – Sets the baseline for licensing and supervision of financial institutions within Chad.
• Decree No. 2018-123 on Anti-Money Laundering (AML) – Requires financial entities to implement AML/KYC measures, which may extend to digital asset custodial services.

International Standing

Chad is a member of the Financial Action Task Force (FATF), meaning it aligns its regulatory framework with international standards for combating money laundering and terrorist financing. However, specific guidance on cryptocurrency custody remains absent in Chad’s domestic legislation.

Licensing Requirements

• Who Needs a License: Currently, no explicit license is required solely for digital asset custody services. Entities providing such services may be considered under the broader category of “financial service providers” subject to existing banking licenses.
• Activities Requiring Licensing: Money transmission, payment processing, and banking-like activities related to cryptocurrencies would likely fall under the purview of existing financial licensing requirements.
• Capital Requirements: Not specified for digital asset custody; however, general banking regulations may impose minimum capital thresholds for financial institutions.
• Application Process & Timeline: No dedicated application process exists for crypto custodians. Applicants would need to navigate through generic financial services licensing channels, which could involve extensive documentation and scrutiny.
• Structural Requirements: Entities must demonstrate compliance with AML/KYC standards as per Decree No. 2018-123.

Has Anyone Been Licensed?
No entities have been officially licensed for cryptocurrency custody in Chad as of the latest available data (October 2024).

AML/KYC Requirements

• Customer Due Diligence (CDD): Mandatory identification and verification of customers’ identities.
• Enhanced Due Diligence (EDD): Required for higher-risk clients or transactions.
• Suspicious Transaction Reporting (STR): Obligation to report unusual activities to the appropriate regulatory authority.
• Record Retention: Detailed records must be maintained for at least five years, per AML guidelines.
• Beneficial Ownership Disclosure: Transparent disclosure of ultimate beneficial owners is necessary.
• PEP Screening: Politically exposed persons must undergo additional scrutiny.

Enforcement Actions

No specific enforcement actions related to cryptocurrency custody have been documented in Chad. However, non-compliance with general financial and AML regulations could lead to penalties such as fines or suspension of operations.

Tax Treatment

Chad does not currently provide explicit tax guidance on virtual assets or cryptocurrency transactions. Income from crypto activities is likely taxed under general income tax provisions unless amended legislation specifies otherwise.

Pending Legislative Clarity: As of October 2024, no pending bills specifically address the taxation of cryptocurrency transactions in Chad; stakeholders should monitor official government releases for updates.

Key Gaps & Risks

• Regulatory Ambiguity: The lack of specific laws governing digital asset custody creates uncertainty for market participants.
• AML/KYC Compliance Risk: Without tailored regulations, compliance with existing AML frameworks may be challenging and subject to evolving interpretations.
• Future Legislative Risk: Pending legislation could introduce mandatory licensing or stricter supervision for crypto custodial services.

Sources

• Understanding Child Custody and Adoption Laws in Chad
• Law No. 2007-001 on Financial Services and Non-Banking Activities (Official Government Document)
• Decree No. 2018-123 on Anti-Money Laundering (AML) (Official Government Document)
• FATF Recommendations on Virtual Assets (International Standard)

Bullet Points:

• Chad lacks specific legislation for cryptocurrency custody, operating under general financial regulations. Understanding Child Custody and Adoption Laws in Chad
• No licensed digital asset custodians exist as of October 2024 due to regulatory gaps.
• AML/KYC requirements are indirectly applicable, posing compliance challenges. Decree No. 2018-123 on Anti-Money Laundering (AML)
• Future legislative actions may introduce mandatory licensing for crypto custodial services. Law No. 2007-001 on Financial Services and Non-Banking Activities

Recommendations

1. Monitor Regulatory Updates: Regularly track official government releases and FATF updates to stay informed about potential legislative changes affecting cryptocurrency custody in Chad.
2. Prepare for Licensing Requirements: Begin the process of applying for relevant financial service licenses if planning to operate within the digital asset space, anticipating future regulatory clarity.
3. Ensure Robust AML/KYC Compliance: Implement comprehensive AML/KYC measures aligned with Decree No. 2018-123 to mitigate compliance risks and prepare for possible enforcement actions.
4. Engage with Regulatory Authorities: Proactively engage with the Ministry of Finance and Economic Development and BCEAO to seek clarification on regulatory expectations for digital asset custody services.

Conclusion: Chad’s regulatory environment for cryptocurrency custody remains underdeveloped, with existing financial and AML frameworks providing only indirect oversight. Stakeholders should monitor potential legislative updates that could formalize licensing requirements and compliance standards for digital asset custodial services in the country.

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