Mayet & Associates | Legal Insights

Digital currencies and blockchain-based financial products have moved from the fringes of technology news into everyday commercial conversations. Entrepreneurs, investors and established financial institutions increasingly want to know how these products fit into the legal landscape of the countries in which they do business. For Lesotho, the short answer is that no tailored rulebook has yet been written, but a patchwork of existing legislation can, and often does, apply. This note sets out how the Kingdom currently approaches virtual assets, which authorities oversee activity in this area, and what stakeholders should be watching as the policy environment evolves.

1. Are Virtual Assets Money in Lesotho?

Put simply, no. Bitcoin, Ether, stablecoins and similar instruments do not enjoy the status of money in the Kingdom, and a creditor cannot be compelled to accept them in discharge of a debt. The Loti remains the currency of the realm, circulating alongside the South African Rand under the arrangements of the Common Monetary Area. Any use of a virtual asset as a medium of payment therefore rests on private contractual agreement between the parties concerned, not on any legal recognition of it as tender.

Nor does Lesotho’s statute book supply a technical meaning for the expression “virtual asset” or “cryptocurrency”. The Central Bank of Lesotho has used the phrase informally, most notably in a consumer advisory drawing attention to the risks of investing in such products, but no legislative instrument has fixed a precise definition. For practical purposes, the expression bears its commonly understood meaning, and the legal analysis of any particular product turns on its economic substance rather than on a category label.

2. The Laws That Might Apply

Although Parliament has not passed legislation addressed specifically to virtual assets, this does not mean that a cryptocurrency business operates outside the reach of the law. Several statutes of general application may come into play, their relevance depending entirely on what the business actually does. The most important of these are:

• the Money Laundering and Proceeds of Crime Act, 2008, and the regulations made under it;
• the Central Bank (Capital Markets) Regulations, 2014;
• the Exchange Control Order of 1987, read with the Exchange Control Regulations of 1989; and
• the Income Tax Act, 1993.

The practical consequence is that two businesses with superficially similar crypto offerings may face quite different legal obligations. A venture that operates a consumer-facing trading platform, holds client funds or issues its own tokens to the public will almost certainly need to consider one or more of the regimes listed above. A business that merely develops software, or that facilitates peer-to-peer transactions without taking custody of value, may engage them to a far lesser extent.

Who polices what?

Oversight responsibilities are divided among several institutions. The Central Bank of Lesotho occupies the central role: it supervises banks and non-bank financial institutions, payment systems and the capital markets, and it administers the exchange control framework through authorised dealers. The Financial Intelligence Unit leads on anti-money laundering and counter-terrorism financing supervision, working in conjunction with the Central Bank where a supervised institution is involved, while the Revenue Services Lesotho enforces the tax laws. A virtual asset business may therefore find itself answerable to more than one regulator at the same time.

3. Licensing: What Is, and What Is Not, Required

Lesotho has not introduced a licensing regime aimed at virtual asset service providers as such. The kind of authorisation that exists in jurisdictions which have moved ahead with dedicated VASP frameworks, a single permission covering exchange, custody and transfer services, is simply not part of local law. That absence, however, should not be mistaken for a free pass.

If the activity in question happens to mirror a regulated financial service, the ordinary licensing regime will apply in the usual way. A business may accordingly need authorisation where it intends to:

• run a payment system or issue electronic money;
• offer money transfer or remittance services;
• trade in securities or operate a securities exchange; or
• carry on a foreign exchange business that is subject to regulation.

The question is therefore functional rather than nominal. A product labelled as a “token” may in substance be a security; a “wallet” service may in substance involve the issuance of e-money. Each product should be tested against each regime in turn.

Presence, capital and local shareholding

Because there is no dedicated licensing regime for virtual asset service providers, no location requirement, minimum capital threshold or indigenous ownership quota has been set for them. Where a crypto business is structured to operate through a licensed bank or other regulated financial institution, that entity will of course remain bound by the prudential standards that apply to it under the Financial Institutions Act and its attendant regulations, including minimum capital rules.

Changes of ownership

Shares in a virtual asset business are, as a rule, transferable in the same way as shares in any other Lesotho company, and standard company law governs the process. The caveat arises where the business is itself a regulated entity, a licensed financial institution or a capital markets licensee, for example. In those cases a change in the shareholding, or any transaction that alters control, may need to be notified to the Central Bank, the Commissioner or the Registrar, and in some cases the regulator’s prior approval or letter of non-objection will be required before the transaction can be completed.

Who can run a virtual asset business?

For an unregulated crypto venture, no statutory personal qualifications attach to directors or shareholders. The position changes where a regulated financial services or capital markets licence is in play. In that setting the regulator will apply “fit and proper” standards to owners, board members and senior managers, looking at matters such as integrity, financial soundness and relevant experience. The Central Bank has issued guidance on these tests, and applicants should expect close scrutiny.

AML/CFT registration

There is at present no separate registration regime obliging virtual asset service providers to enrol with a supervisor for anti-money laundering purposes. That said, virtual asset activity that falls within the definition of a reporting or accountable institution under the Money Laundering and Proceeds of Crime Act will attract the familiar obligations: customer due diligence, record-keeping, suspicious transaction reporting and the rest. Compliance should be designed into the business model from the outset rather than retrofitted.

4. Stablecoins and Blockchain Infrastructure

Stablecoins, tokens designed to hold a steady value, typically by reference to a fiat currency, have no distinct treatment under Lesotho law. They are not defined in any statute, they are not legal tender, and no dedicated regime governs their issuance. Whether they fall within any existing regulatory net depends on how they are engineered. A stablecoin that functions, on analysis, as an electronic store of value redeemable on demand may well sit within the definition of “electronic money”, bringing the Payment Systems Act, 2014 and the Payment Systems (Issuers of Electronic Payment Instruments) Regulations, 2017 into play. Anyone contemplating a stablecoin offering in or from Lesotho would be well advised to test the product against that framework before going to market, and to engage with the Central Bank where genuine doubt exists.

Blockchain and distributed ledger technology itself is not governed by any specific Lesotho legislation. A business is therefore free to build on, or deploy, these technologies, subject always to the general obligations of the legal system, contract, consumer protection, data protection, taxation and, where applicable, financial services regulation. The point is not that blockchain is unregulated, but that it is regulated, if at all, by laws that were written with other technologies in mind.

5. What Might 2026 and 2027 Bring?

At the time of writing, no dedicated virtual asset or VASP bill has been tabled in Parliament, and none has been circulated publicly in draft form. Policy work has, however, been under way, notably in relation to risk assessments of virtual asset activity, and it is reasonable to anticipate that reform proposals will follow in due course. International standard-setters, in particular the Financial Action Task Force, continue to press member jurisdictions to bring virtual asset service providers within formal AML/CFT supervision, and Lesotho is likely to respond to those expectations. Industry participants would do well to monitor announcements from the Central Bank and the Financial Intelligence Unit over the coming months, and to contribute to any consultation processes that are opened to public comment.

6. Where to Begin: A Checklist for Operators

Because the legal position turns on the detail of the activity rather than on a label, we routinely recommend that clients considering a virtual asset project in Lesotho work through the following questions at the earliest stage:

• How should the token, coin or instrument be classified in legal terms, is it, in substance, a security, e-money, a utility or something else?
• Does the proposed service mirror a regulated financial activity such as payments, remittance, securities dealing or foreign exchange?
• Will the product involve cross-border movement of value, and how does the exchange control regime affect it?
• What AML/CFT duties arise, and how will customer onboarding and monitoring be designed to meet them?
• How will the transactions be treated for income tax purposes, both in the hands of the business and its customers?

Working through these questions early tends to be far cheaper than addressing them once a product is live and a regulator has already made contact.

How Mayet & Associates can help

Our team advises local and international clients on the Lesotho law implications of fintech, payments and digital asset projects. Our work spans structuring and regulatory classification, engagement with the Central Bank and other authorities, AML/CFT compliance, exchange control clearance, and tax planning. If you would like to discuss a specific project or product, please get in touch.

Disclaimer: This article is for general information and does not amount to legal advice. The reader should obtain advice on the specific facts of any matter before taking, or refraining from, action.