Ghana High Court: Virtual Asset Service Providers Act Takes Effect

• Ghana's Virtual Asset Service Providers Act adopts a risk-based approach to regulating digital assets.
• The law requires providers to meet strict capital adequacy requirements and ensure the custody of client assets.
• Regulators used a pre-legislative policy sandbox to study emerging business models before finalizing the operational framework.

Ghana's new Virtual Asset Service Providers Act adopts a risk-based and technology-neutral approach, avoiding both an outright ban and a completely unregulated market.

Ghana's Virtual Asset Service Providers Act has adopted a risk-based approach to regulating digital assets, striking a balance between innovation and consumer protection. The law avoids an outright ban on digital assets, instead opting for a technology-neutral framework that allows for flexibility in responding to emerging trends such as tokenisation and decentralised finance. This approach is seen as a major step towards giving the digital asset sector regulatory legitimacy, which could improve access to banking services and boost investor confidence. However, challenges such as fraud, high compliance costs, and counterparty risks remain, and operators are urged to deploy automated sanctions-screening systems and strong contractual safeguards.

The Virtual Asset Service Providers Act requires providers to meet strict capital adequacy requirements, ensure the custody of client assets, and comply with anti-money laundering and counter-terrorist financing rules. Regulators used a pre-legislative policy sandbox to study emerging business models before finalizing the operational framework, ensuring that consumer protection remains central to the regime. The Act also prohibits foreign currency-backed stablecoins, describing it as 'dollarisation on the blockchain', but allows for cedi-backed stablecoins to be tested within a regulatory sandbox.

Fintech law expert Kwesi Dadzie-Yorke Esq. described the Act as a major step towards giving the digital asset sector regulatory legitimacy, but warned that challenges such as fraud and high compliance costs remain. Dr. Virág Blazsek, Associate Professor of Law at the University of Leeds, agreed that Ghana's principles-based framework provides flexibility to respond to new developments in the digital asset space. The panel also discussed the potential for formal supervision to improve access to banking services and boost investor confidence, but cautioned against over-regulation which could stifle innovation.

Lawyers should watch for the implementation of Ghana's new Virtual Asset Service Providers Act, which adopts a risk-based and technology-neutral approach to regulating digital assets, and be prepared to advise clients on compliance with capital adequacy, custody of client assets, and anti-money laundering rules.

Source: Original reporting via UPSA Law School Roundtable