Ethiopia Flips the Script from Banning Crypto to Launching CBDC
By Ketema Adane
Ethiopia Enters the Digital Age: From Crypto Ban to CBDC Launch
Introduction
While Ethiopia’s National Bank of Ethiopia (NBE) establishment proclamation (No. 591/2008) designates Birr as the sole legal tender, a significant shift is underway. On June 14, 2024, the Council of Ministers in Addis Ababa approved a draft NBE proclamation. This new legislation establishes a legal framework for introducing a central bank digital currency (CBDC), paving the way for digital currencies to gain official recognition in Ethiopia.
This development acknowledges the undeniable potential of digital currencies. However, caution is necessary. As Ethiopians become increasingly interested in this new technology, user education is crucial to avoid scams perpetrated by individuals posing as legitimate digital currency brokers.
Understanding Digital Currency
Digital currency, existing electronically, is managed, stored, and exchanged primarily on digital systems, often over the internet. It lacks physical attributes and is solely available in digital form, yet functions similarly to physical currencies. There are various types, including:
- Cryptocurrency: A decentralized digital currency using cryptography for security. Bitcoin is a well-known example.
- Virtual Currency: A digital representation of value issued by a company or organization, usable for specific purposes within a particular ecosystem.
- Central Bank Digital Currency (CBDC): A digital form of a country’s official currency issued by its central bank.
Digital currency can be stored in various ways, including distributed ledgers on the internet, centralized databases owned by institutions, or even on digital wallets or stored-value cards.
Pros and Cons of Digital Currencies
Pros:
- Faster transaction times
- No physical manufacturing required
- Lower transaction costs
- Easier implementation of monetary and fiscal policy
- Offers greater privacy compared to other forms of currency
Cons:
- Difficulty in storing and using
- Vulnerability to hacking
- Volatile prices leading to lost value
- May not allow for irreversible transactions
- Limited acceptability
Ethiopia’s Digital Currency Landscape: A Work in Progress
The global digital currency landscape is diverse. China pilots its government-backed digital yuan, while the Bahamas became the first country with a CBDC, the Sand Dollar. Sweden explores an e-krona to address declining cash use, Nigeria’s eNaira targets financial inclusion, and the US cautiously considers a digital dollar, highlighting the ongoing debate about digital currency implementation worldwide.
Ethiopia presents a unique case. Bitcoin and similar cryptocurrencies are currently illegal for transactions, with the NBE considering Birr the only legal tender. This stance is further emphasized by warnings of “legal measures” against users. However, reports suggest Ethiopians engage in cryptocurrency use, and interestingly, Ethiopia allows Bitcoin mining. This might be due to the NBE’s potential interest in the foreign currency generated by miners to pay for electricity, with Ethiopia’s relatively low electricity costs being an additional incentive for miners.
Adding complexity, the Information Network Security Administration (INSA) previously required registration for “Crypto providers,” hinting at a potential shift towards regulation before the full legality of cryptocurrency use was established.
Despite the current ban, the NBE is actively studying digital currencies. A significant development occurred on June 14, 2024, when the Council of Ministers in Addis Ababa approved a draft proclamation for the NBE. This paves the way for introducing a CBDC upon approval by the House of People’s Representatives.
It’s important to note that digital currencies require a high degree of technological expertise. Even with potential legalization, enforcement needs to be implemented progressively, considering Ethiopia’s technological infrastructure. While recent developments suggest a path towards digital currency adoption, a cautious approach is necessary to manage both the potential benefits and risks.
Ethiopia’s Customs Valuation Reform: Bridging the Gap Between Directive and Practice
Customs valuation has long stood at the centre of Ethiopia’s trade, investment, and foreign exchange challenges. While revenue protection and foreign currency control remain legitimate state objectives, the persistent reliance on arbitrary reference prices—particularly under Customs Valuation Directive No. 158/2011—has created serious distortions in trade administration, banking operations, and domestic taxation. The recent circular issued by the National Bank of Ethiopia on January 26, 2026, requiring banks to use customs prices as a reference for Letters of Credit, has once again brought this debate to the forefront, exposing the far-reaching consequences of valuation practices that diverge from internationally accepted principles.
Legal Opinion in Capital Markets: Standards, Independence, and Verification
A) Why Legal Opinion?
Lawyers are envisaged to play pivotal roles in capital market especially in security registration.
Investor Protection: Legal opinions often assess existential risks like litigation, asset ownership, and regulatory compliance. A biased opinion could mislead investors.
Market Integrity: Capital markets rely on trust. Conflicted legal opinions undermine transparency and fairness.
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The ownership rights of foreign nationals over residential houses are governed by Proclamation No. 1388/2017. The proclamation consists of twenty-one (21) articles organized into four sections.
Ethiopia’s Investment Incentive Reform 2026: Key Legal Shifts from Regulation 517/2022 to 586/2026
Ethiopia has significantly revised its investment incentive regime with the replacement of Investment Incentive Regulation No. 517/2022 by the new Regulation No. 586/2026. This reform shifts the system from multi-year tax holidays and broad customs exemptions to a performance-based framework with targeted incentives. In essence, blanket income tax holidays are eliminated, replaced by reduced tax rates tied to priority sectors and performance, and new incentive categories (such as Special Economic Zones, start-ups, and green investments) have been introduced. The core customs duty benefits are largely retained but with refined conditions. This legal update outlines the key changes between the two regulations across five dimensions: tax incentives, customs duty incentives, administrative procedures, eligibility criteria, and sectoral priorities, and concludes with implications for investors and practitioners.
Legal Insight: New Developments in Ethiopia’s Foreign Exchange Framework
Following the comprehensive macroeconomic reform program, the National Bank of Ethiopia (NBE) has undertaken significant measures aimed at liberalizing the foreign exchange regime and fostering the development of a more efficient and market-oriented forex system. A central pillar of these reforms has been the gradual removal of current account restrictions and the introduction of regulatory flexibility designed to stimulate foreign exchange inflows, encourage investment, and enhance market confidence.
The licensing and supervision of banking business reserve requirements (9th replacement) directive number SBB/97/2025
By Kaleegziyabher Gossaye.
Legal update on The licensing and supervision of banking business reserve requirements (9th replacement) directive number SBB/97/2025
Risk Based Capital Adequacy Requirements for Banks-Directive No. SBB/95/2025
By Kaleegziyabher Gossaye.
The directive is organized into six parts. The first part outlines the general provisions of the directive. The second part deals with definition of capital. The third part discusses the capital requirements for credit risk. The forth and the fifth part extend to the capital requirements of market risks and operational risks. The last part, but not the least, is dedicated to miscellaneous provisions.
Ethiopia’s Amended Income Tax Proclamation: Implications for Revenue, Professionals, & Investors
The goals of the amendment are typically outlined in the preamble of the proclamation. Therefore, the objectives mentioned in the preamble include: improving revenue collection through adjustments to the rates applied to certain incomes; expanding the tax base; creating an efficient system of tax incentives; and curbing tax avoidance strategies, which encompass restrictions on cash payments.
U.S. International Tax Law in a Coffee Bean
The highlands of Ethiopia are widely regarded as the birthplace of coffee. The story of Ethiopian coffee dates back to around 850 AD, when both Arabica and Robusta coffee are believed to have originated. Today, Ethiopia remains the top coffee producer in Africa, cultivating over 5,000 varieties. Coffee is a major global export for the country, where agriculture remains a key driver of the economy. Ethiopia also ranks first in wheat production and third in maize production across Africa.
Tax Audits in Crisis: Can Ethiopia’s New Directive Restore Trust in the System?
Ethiopia has introduced new tax audits, conducting procedures, and the Assessment Directive No. 1063/2025, marking a significant development in its tax history. Tax audits represent a major challenge within the Ethiopian tax system; the implementation of tax audits contradicts the voluntary compliance expected from taxpayers under the self-declaration tax policy. During these audits, tax auditors often seek additional taxes without a legal foundation, aiming to meet monthly revenue collection targets. This trend significantly harms taxpayers, leading to non-compliance with tax laws and fostering illegal practices.