Cryptocurrency Regulations in Bangladesh Prior to 2023

The legislative landscape for cryptocurrencies in Bangladesh before 2023 was marked by caution and strict regulation. The country’s approach towards these digital assets can be understood through several key aspects of its legal framework.

Government’s Stance on Blockchain Technology: In 2020, the Government of Bangladesh recognized the importance of emerging technologies like blockchain in its National Blockchain Strategy. This document highlighted the potential of blockchain technology to advance technical capacity, increase e-governance efficiency, and foster innovation. The strategy was aimed at guiding Bangladesh towards becoming a blockchain-enabled nation, acknowledging the challenges and opportunities presented by the Fourth Industrial Revolution (4IR)​​.

Prohibition and Legal Warnings Against Cryptocurrencies: Despite the interest in blockchain technology, Bangladesh historically maintained a hostile view towards cryptocurrencies. In 2017, the Central Bank of Bangladesh issued a stern warning against the transaction of cryptocurrencies like Bitcoin, citing their potential use in illegal activities. This was not an outright ban but significantly hindered the adoption of cryptocurrencies. The official stance was that the use of virtual currencies like Bitcoin was prohibited under existing foreign exchange regulations​​​​.

Penalties for Cryptocurrency Use: The government made it clear that using digital currencies could lead to severe consequences. Under the Money Laundering Prevention Act of 2012 and the Foreign Currency Control Act of 1947, individuals caught using cryptocurrencies could face imprisonment or substantial fines. This legal framework created a high-risk environment for anyone involved in cryptocurrency transactions​​.

Lack of Specific Cryptocurrency Laws: As of before 2023, Bangladesh did not have specific laws or regulations dedicated to cryptocurrencies. The only existing regulation that could be interpreted to apply to cryptocurrencies was the Foreign Currency Control Act, which stringently regulated the use of foreign currency without explicit permission from the Bangladesh Bank​​.

Legal Status of Cryptocurrency Trading: Given the strict stance of the Bangladesh Bank and the government, cryptocurrency trading was effectively considered illegal. While there was no explicit law prohibiting the trade of cryptocurrencies, the central bank’s warnings and the potential penalties under existing laws created a prohibitively risky environment for crypto trading​​.

Applicable Laws: The primary laws applicable to cryptocurrency transactions in Bangladesh were the Foreign Currency Control Act of 1947 and the Money Laundering Prevention Act of 2012. These laws were used as the basis for interpreting and enforcing regulations on cryptocurrency transactions​​.

In summary, before 2023, Bangladesh’s legislative environment for cryptocurrencies was characterized by significant caution and restrictions. While the government recognized the potential of blockchain technology, it maintained a largely prohibitive stance towards cryptocurrencies, underscored by stern warnings from the central bank, potential severe penalties for usage, and a lack of specific regulatory frameworks dedicated to these digital assets.