Bangladesh Bank clamps down on digital currency transactions

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Bangladesh Bank has tightened the screw for virtual assets service providers in the country by ordering banks and other financial institutions to increase their monitoring on digital asset transactions.

The order was given via a circular issued by the Banking Regulation and Policy Department of the central bank and takes immediate effect from the date of publication. Furthermore, banks are expected to increase their supervision over the industry and report suspected transactions linked to digital assets.

The financial institutions have been ordered to display notices of the new development in all branches, including the head office, branches, and agent banking outlets. The central bank has also demanded that the websites of banks should display the notice of the new mandate and trainees in the current batches should be abreast with the new changes.

The circular highlighted the trend of service providers like exchanges using the bank accounts of Bangladesh citizens to facilitate transactions. With the operation of the new order, the local virtual currency ecosystem has taken a huge blow, but a cross-section of the industry believes that traders would simply move to Peer-to-Peer (P2P) to carry out transactions.

Under section 23 (1) of the Foreign Exchange Control Act, the transfer or trade of any virtual asset or currency is illegal and is an offense punishable by a fine or a term of imprisonment. The regulators are concerned about the risks that virtual currencies pose to investors due to their extreme volatility and the lack of regulations.

Financial institutions are the first to be targeted

Preventing banks and other financial institutions from facilitating virtual currency transactions are often the first step employed by hostile central banks. This playbook was used in Nigeria when the country’s central bank banned commercial banks from dabbling in digital assets and gave the order to close individual and corporate accounts involved in trading.

“It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion,” Osita Nwanisobi AG Director, Corporate Communications said.

The People’s Bank of China (PBoC) employed the same method at the start of the crackdown of 2021, leading to the mass migration of miners and service providers like Huobi. Residents are leveraging P2P platforms and using a Virtual Private Network (VPN) to cover their tracks in regions affected by a ban on banking institutions.

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