Tanzania -- Custody Regulations Regulatory Overview

Tanzania's regulatory landscape for cryptocurrency and digital assets, particularly concerning specific custody requirements, is still in its very early stages and largely undefined by detailed, specific legislation. While there has been a shift in the government's stance towards exploring and potentially adopting digital assets, a comprehensive framework has yet to be enacted.

Here's a breakdown based on the current publicly available information:

Overall Regulatory Stance and Context:

Historically, the Bank of Tanzania (BOT) issued warnings against cryptocurrencies, deeming them unregulated and highly volatile. However, in November 2021, President Samia Suluhu Hassan urged the Bank of Tanzania to prepare for the adoption of cryptocurrencies, signaling a significant shift in policy direction. Following this directive, the BOT announced it was studying the sector and working on a framework.

As of late 2023/early 2024, the BOT is still in the process of conducting research and preparing for the adoption of a framework for digital assets. This means that specific, detailed regulations for cryptocurrency custody are not yet in place.

Specific Custody Requirements:

Given the nascent stage of regulation, there are no specific, explicit regulations in Tanzania addressing the following for cryptocurrency custody:

1. Custodial License Requirements:

   • There is no specific "crypto custodian license" currently established in Tanzania. Any entity wishing to offer such services would operate in a largely unregulated space, though they might fall under general financial service provider rules if their activities are deemed to align with existing licensed financial services.
   • Future frameworks are expected to address licensing, potentially under the purview of the Bank of Tanzania (BOT) or the Capital Markets and Securities Authority (CMSA).

2. Segregation of Client Assets Rules:

   • There are no specific rules mandating the segregation of client digital assets from the custodian's proprietary assets.
   • However, general principles of good financial governance and anti-money laundering (AML) practices, which are typically found in existing financial sector legislation, would strongly imply or require such segregation if an entity were to operate.

3. Insurance/Bonding Requirements:

   • There are no specific insurance or bonding requirements for crypto custodians.
   • This is a common feature in more developed crypto regulatory regimes, designed to protect client assets in case of breaches, hacks, or insolvency. Such requirements are likely to be considered in any future framework.

4. Cold Storage Mandates:

   • There are no specific mandates requiring the use of cold storage (offline storage) for client digital assets.
   • Best practices in crypto security widely recommend cold storage for a significant portion of client assets, but this is not a regulatory requirement in Tanzania at this time.

5. Qualified Custodian Definitions:

   • There is no specific legal definition for a "qualified crypto custodian" in Tanzanian law.
   • In jurisdictions with developed crypto regulations, a qualified custodian often refers to a regulated financial institution (like a bank or trust company) that meets specific capital, security, and operational standards.

Pending Custody Legislation:

While the Bank of Tanzania (BOT) is actively researching and working on a framework for digital assets, there is no publicly disclosed draft or pending legislation specifically detailing custody rules at this time. The BOT's efforts are focused on developing a broader regulatory approach for the entire crypto sector, which would then likely include custody aspects.

Key Regulatory Bodies:

• Bank of Tanzania (BOT): The central bank responsible for monetary policy and financial sector oversight, including payment systems. They are currently leading the efforts to develop a regulatory framework for digital assets.
• Capital Markets and Securities Authority (CMSA): If digital assets are classified as securities, the CMSA would likely have jurisdiction over certain aspects, including custody for such assets.
• Financial Intelligence Unit (FIU): Oversees Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) compliance. Any future crypto entity, including custodians, would be subject to existing AML/CFT laws.

Specific Regulatory References and URLs:

Given the lack of specific custody regulations, direct references for those points are not available. However, for general context on the BOT's activities regarding digital assets:

• Bank of Tanzania Official Website: This is the primary source for any official announcements or frameworks. You would monitor their "Publications" or "News" sections for updates.

  • URL: https://www.bot.go.tz/

• News Reports on Presidential Directive and BOT's Response (for contextual understanding): While not direct regulatory documents, these confirm the government's intent.

  • Example (news report referencing the President's directive and BOT's response):
    • You would typically search news archives from late 2021/early 2022 for reports like "Tanzania central bank studying cryptocurrencies after president's call". A specific unchanging URL for a news report isn't a regulatory reference, but it confirms the official statements.

• The Anti-Money Laundering Act, 2006 (and its subsequent amendments): Any future crypto framework will almost certainly integrate and require compliance with existing AML/CFT laws.

  • Finding the most up-to-date version of Tanzanian Acts online can sometimes be challenging, but they are typically found on the Attorney General's Chambers website or legal databases.

Conclusion:

Tanzania is proactively exploring the integration of digital assets into its financial system. However, specific, detailed regulations governing cryptocurrency custody (including licensing, asset segregation, insurance, cold storage, and qualified custodian definitions) are not yet in place. Businesses considering offering crypto custody services in Tanzania should monitor the Bank of Tanzania's announcements closely and be prepared for significant regulatory developments in the coming years. It is highly advisable to seek local legal counsel for the most up-to-date and specific guidance.