Navigating the Future of Digital Assets in Ghana: Key Strategies for Compliance and Success

By Dennis Akwaboah

As the digital assets ecosystem in Ghana continues to evolve, businesses operating within or looking to enter this dynamic space must brace themselves for forthcoming regulatory oversight. The Bank of Ghana’s Draft Guidelines on Digital Assets, released in August 2024, signal a significant shift towards a more structured regulatory environment. These guidelines prioritize consumer protection, financial stability, and the prevention of financial crimes. For firms aiming to thrive in this rapidly changing landscape, understanding and implementing key strategies is essential.

Engage Early with Regulatory Bodies

For companies offering or planning to offer digital asset products, early and ongoing engagement with regulatory bodies such as the Bank of Ghana and the Securities and Exchange Commission (SEC) is crucial. The draft guidelines highlight the importance of proactive communication with these agencies, especially as the regulatory framework for Virtual Asset Service Providers (VASPs) is still in development.

Establishing a collaborative relationship with regulators from the outset can help firms navigate compliance challenges more efficiently and facilitate a smoother approval process. Additionally, businesses should be prepared to educate regulators about new technologies, innovative business models, and effective risk mitigation strategies, as these areas may be unfamiliar to oversight bodies.

Develop a Strategic Vision

A clear strategic vision is vital for firms entering the digital assets space. Companies must articulate how digital assets align with their overall business strategy and the broader financial ecosystem. Whether leveraging blockchain for cross-border payments or utilizing tokenization for new asset classes, firms should present a vision that addresses economic opportunities while mitigating potential risks outlined in the guidelines, including consumer protection, anti-money laundering (AML), and counter-terrorism financing (CFT) concerns.

Risk Management and Compliance

To succeed in the digital asset landscape, companies must enhance or establish enterprise risk management frameworks that are adaptable to the unique risks associated with digital assets. Key focus areas include:

• Inherent and Residual Risks: Identifying specific risks related to digital assets, such as market manipulation, fraud, and cybersecurity threats.
• Financial Crime Prevention: The guidelines emphasize the need for comprehensive risk assessments. VASPs must implement rigorous AML/CFT protocols in line with Financial Action Task Force (FATF) standards, including customer due diligence, transaction monitoring, and reporting suspicious activities.
• Consumer Protection: Firms must demonstrate a robust understanding of safeguarding client assets and data, ensuring compliance with privacy laws and integrating consumer risk disclosures.

Cybersecurity and Information Security

Given the reliance on secure systems in the digital assets space, cybersecurity is a top regulatory concern. The Bank of Ghana will closely examine how firms protect sensitive data, including transaction information and personal customer data. Key considerations include:

• Security Protocols: Implementing controls over transaction signing, key management, and the physical security of digital assets.
• Cyber Risk Assessments: Conducting regular assessments to identify and respond to emerging threats.
• Business Continuity: Developing robust plans to ensure seamless operations in the event of a cybersecurity incident or system outage.

Third-Party Risk Management

Many firms depend on third parties for essential services such as custodial services, wallet management, and exchange operations. These relationships introduce additional risks that must be managed through a rigorous third-party risk management (TPRM) framework. Companies should ensure that their partners comply with local regulations and global best practices for cybersecurity, data privacy, and consumer protection. The Bank of Ghana may require firms to disclose how they manage these relationships to ensure operational resilience.

Governance and Accountability

Strong governance structures are essential for meeting regulatory expectations. The board and senior management must define and oversee risk management strategies, ensuring that policies and procedures align with regulatory requirements. The draft guidelines emphasize that governance is foundational to risk management, requiring firms to demonstrate consistent monitoring, testing, and updating of their governance frameworks. This includes:

• Risk Appetite: Clearly defined risk appetite statements tailored to digital assets.
• Compliance Oversight: Ongoing internal audits and compliance reviews to ensure adherence to laws, regulations, and internal policies.

Capital and Liquidity Management

Firms venturing into digital assets must demonstrate their ability to maintain sufficient capital and liquidity to protect customer funds, especially during financial stress. The Bank of Ghana’s draft guidelines outline expectations for financial resilience, including how firms manage liquidity and capital buffers. For those affiliated with parent companies, regulators will assess how the parent entity can support the firm during crises, ensuring that digital asset offerings do not jeopardize overall financial stability.

Consumer Education

Given the nascent nature of digital assets, firms must commit to educating clients about the associated risks. The Bank of Ghana emphasizes the need for adequate disclosures to ensure consumers are fully aware of potential risks, such as price volatility, cybersecurity threats, and fraud. Firms should incorporate transparent and accessible risk disclosures into their service models and enhance consumer protection measures.

Long-Term Sustainability and Resolution Planning

The draft guidelines underscore the importance of sustainability in the digital asset space. Firms need to consider long-term operational viability, including staffing and resource allocation for compliance and risk management. As firms scale their digital asset offerings, they must also develop resolution plans akin to those in the banking sector to ensure orderly unwinding in case of business failure.

Conclusion

By focusing on these priority areas, firms operating in the digital asset space or those transitioning from traditional financial services can better prepare for regulatory oversight. As the Bank of Ghana’s guidelines continue to evolve, early preparation and strategic alignment with these best practices will be crucial for success in Ghana’s emerging digital asset ecosystem.

The writer is an Associate at Sustineri Attorneys PRUC, specializing in legal service provision for startups, SMEs, fintechs, and other technology companies. He welcomes feedback on this article via [email protected].