Addis Ababa — Ethiopia’s central bank has formally prohibited peer-to-peer cryptocurrency transactions denominated in the local currency, tightening oversight of a fast-growing informal market that has operated largely outside the country’s regulated financial system.

In a public notice issued Friday, the National Bank of Ethiopia (NBE) said any Birr-paired P2P trading conducted through digital-asset platforms, exchanges, or similar services is illegal unless explicitly authorized. The directive applies to transactions involving cryptocurrencies as well as other virtual assets settled in Ethiopian birr.

The move marks one of the most explicit policy statements to date on how Africa’s second-most-populous nation intends to manage the intersection of digital assets and domestic monetary controls.

Targeting the On-Ramp Between Birr and Crypto

P2P trading platforms allow users to buy and sell digital assets directly from one another, typically settling payments through bank transfers or mobile money while the platform holds crypto in escrow. By focusing on Birr-denominated arrangements, the central bank is effectively restricting the domestic entry point into global crypto markets.

Under existing law, foreign-exchange transactions and payment services require authorization from the central bank. Regulators view Birr-settled crypto trades as falling within that perimeter because they involve conversion of local currency into assets linked to foreign value.

“Any form of Birr-denominated P2P trading or exchange involving cryptocurrencies is prohibited,” the notice said, unless approved by the NBE.

Financial Stability Concerns

Authorities cited a range of systemic and operational risks associated with unregulated digital-asset markets. These include extreme price volatility, exposure to exchange-rate manipulation, fraud, and the absence of safeguards typically required in licensed financial institutions.

The central bank also highlighted the lack of Anti-Money Laundering and Counter-Terrorism Financing controls on many offshore platforms, a concern for regulators seeking to align Ethiopia’s financial system with international compliance standards.

Such risks are particularly sensitive in a country that maintains tight controls over capital flows and foreign currency access.

Lessons From Global Market Failures

The notice pointed to international incidents in which crypto exchanges faced financial or technical disruptions, sometimes restricting users’ access to funds. These episodes have reinforced regulators’ caution toward platforms that operate outside conventional supervisory structures.

Officials emphasized that consumers using such services may lack legal protection or recourse in the event of disputes or insolvency.

Regulatory Framework Under Development

Despite the prohibition, the central bank signaled that it is not dismissing digital assets outright. The NBE said it is working on a comprehensive regulatory framework that would allow “safe and orderly participation” in emerging financial technologies.

According to the statement, the process involves consultations with international peer regulators and domestic stakeholders to ensure alignment with global best practices while preserving financial stability and the integrity of the national payments system.

Until that framework is formally introduced, Birr-paired P2P cryptocurrency transactions remain banned.

Part of Broader Financial Reform

The announcement comes as Ethiopia undertakes wide-ranging financial reforms aimed at modernizing its banking sector, expanding digital payments, and preparing for greater integration with global markets.

Managing new forms of digital finance without undermining monetary policy has become a central challenge for policymakers across emerging economies. Ethiopia’s approach suggests a preference for sequencing—first strengthening regulatory capacity, then allowing controlled innovation.

Consumer Protection Emphasis

The NBE reiterated its mandate to safeguard the public and maintain a stable financial system amid rapid technological change. Officials framed the prohibition as a precautionary measure rather than a rejection of innovation.

“The National Bank of Ethiopia reaffirms its commitment to consumer protection and to maintaining a stable and sound financial system,” the notice said.

Policy Direction

The statement positions Ethiopia alongside a group of countries that have restricted local-currency crypto trading while evaluating how to regulate the sector. Whether future rules will permit licensed exchanges, supervised P2P platforms, or alternative digital-asset services remains unclear.

For now, the central bank’s message is definitive: without explicit authorization, using Ethiopian birr to conduct peer-to-peer transactions on cryptocurrency trading platforms is not permitted.