As the financial world rapidly digitises, virtual assets like cryptocurrencies are gaining traction in Lesotho, especially among Basotho seeking alternatives to conventional banking. Many locals actively trade and invest in crypto, yet they face considerable difficulties when attempting to convert these assets into Maloti or access their earnings through domestic banks. This is largely due to the absence of a regulatory framework, which leaves crypto-related activity in a legal grey area and hinders the country’s ability to benefit economically from this growing sector.
A recent development offers a potential solution. The Commonwealth Model Law on Virtual Assets has been introduced as a universal standard for Commonwealth countries. It provides clear guidance on how to regulate virtual asset service providers (VASPs), enforce compliance with international financial norms, and balance financial innovation with necessary safeguards. By adopting and tailoring this framework, Lesotho can protect its citizens, secure its financial system, and unlock new economic opportunities.
At present, cryptocurrency trading in Lesotho occurs without any formal oversight. Most transactions are conducted on foreign platforms or through informal peer-to-peer arrangements. This regulatory vacuum creates serious risks. Local banks are often unwilling to process crypto-linked transfers due to the lack of legal clarity. Without a formal system, the government cannot collect taxes or license fees, and Basotho remain vulnerable to scams and losses with no legal recourse. The crypto economy continues to grow, but Lesotho cannot benefit from it under the current circumstances.
Implementing a legal structure for crypto would allow Lesotho to tax capital gains made through trading, apply levies to transaction fees, and require businesses to pay licensing and registration fees. Even modest taxes on these transactions could significantly boost national revenue. Service providers like exchanges and wallet operators would be required to register and comply with set standards, generating income through regulatory fees while enhancing market integrity.
Regulating this space could also improve remittance flows. With a large diaspora, Lesotho receives substantial remittances from Basotho abroad, many of whom now use cryptocurrencies to avoid high transfer fees. If the country recognised legal crypto-to-fiat exchanges, it could facilitate smoother conversions into Maloti, collect fees on each transaction, and strengthen its foreign exchange reserves through official channels instead of informal routes.
A legal framework would also signal to international investors that Lesotho is serious about embracing digital finance. Blockchain companies and fintech firms are far more likely to enter a market where the rules are clear and enforceable. With the right legislation, Lesotho could become a regional destination for crypto innovation, attracting foreign investment and creating jobs in technology, finance, and compliance sectors.
To make this happen, Lesotho must begin by setting up a regulatory body dedicated to virtual assets. Clear rules must be developed to govern the conversion of crypto into local currency, and tax policies should be introduced to capture a portion of the value flowing through these digital transactions. Banks and the broader public will also need education on how to safely and legally engage in this space.
Lesotho stands at a pivotal point. The opportunity to transform the crypto economy into a formal, regulated, and revenue-generating sector is within reach. With more citizens entering the world of digital assets every day, inaction could result in continued losses, both financial and reputational. By acting now and embracing the Commonwealth Model Law, Lesotho can strengthen its economy, protect its people, and take a leading role in Africa’s digital transformation.