The Reserve Bank of Malawi (RBM) says it does not have total control over pyramid schemes because they are listed under exempted activitiesin section 4 of the Microfinance Act.
Speaking on the sidelines of the Financial Services Lawyers Conference in Mangochi on Friday, RBM general counsel and bank secretary George Chioza said this is despite the pyramid schemes being illegal services.
He said: “Pyramid schemes are private arrangements where people make decisions to go and invest money. When everything is going on well, the registrar won’t know about them unless when something has gone wrong.
“It could be a gap with the regulation, but it is a challenge to the extent that people still believe that the registrar of financial institutions must be on top of all financial transactions. At the moment, it’s not possible to do that.”
Chioza said that while money fraud rests more with money providers themselves, the central bank is yet to take a stance on cryptocurrencies, following a request by the Financial Action Task Force (Fatf)—an international body regulating money laundering issues—for each country to indicate whether within their jurisdiction, they allow it or not.
“At the moment, Malawi is on the borderlines, we have not said yes or no,” he said.
Fatf defines cryptocurrencies as digital representations of value that can be digitally traded and function as a medium of exchange, a unit of account or a store of value, but do not have legal tender status in any jurisidiction.
University of Malawi Chancellor College dean of law Sunduzwayo Madise said in an interview regulating cryptocurrencies is not an immediate thing to do.
But he said RBM has to start thinking about them in the near future with the future of money being digital and more youths taking part in the same.
On his part, Malawi Law Society vice-chairperson Patrick Mpaka said with cyber fraud on the rise, there is need for the law to respond as events unfold.
Meanwhile, RBM says it is reviewing the Microfinance Act and it will also start reviewing the Financial Cooperatives Act in 2021.