Central bank studies online forex trading amid calls for regulations

With forex trading, one makes profit based on how the exchange rate between currency pairs fluctuates. It is different from bureau de change business.

In Tanzania, forex trading is not recognised by law, similar to crypto currencies.

Neighbouring Kenya and Rwanda have already developed regulatory framework to guide forex trading, which has been growing fast in recent years.

BoT said it is currently researching to determine whether the risks identified in terms of value security, money transfers, and payment processing can be addressed or controlled without affecting the stability of Tanzania’s economic activities.

“The central bank is continuing its research to determine whether the risks previously identified regarding value security, fund transfers, and payment execution can be resolved or mitigated without disrupting the stability of economic activities within the country,” BoT governor Emmanuel Tutuba told The Citizen.

“Essentially, these are illegal investment businesses involving assets whose values fluctuate, and their origins cannot be traced, nor do their values align with the economic activities carried out,” he said.

Mr Tutuba added that companies or individuals involved in these businesses in the country are putting their assets at risk because if they seek to recover their money collectively, they will not be able to obtain it, as it does not align with the economic activities undertaken to achieve the value of their assets.

Independent analyst Christopher Makombe said regulating retail forex trading could pave the way for a safer, more transparent and reliable trading environment.

By establishing clear regulations, Mr Makombe said the government would enhance investor confidence, stimulate economic growth and provide new job opportunities within the financial and technology sectors.

“Proper regulations could transform retail forex trading into a legitimate financial activity. Brokers would be required to segregate client funds, ensuring the safety and integrity of transactions,” he said.

Mr Makombe added that the potential benefits of regulating forex trading are multifaceted. In addition to ensuring the safety of investments, regulation could spur job creation within brokerage firms, educational institutions and related fields such as technology, finance and customer service.

“It would also provide the government with new sources of revenue through licensing fees and taxes. Furthermore, financial inclusion could be enhanced, allowing individuals greater access to diverse income streams.”

Mr Makombe said while the risks associated with unregulated forex trading remain a concern, proper regulation could transform the sector into a legitimate, growth-oriented business.

“For Tanzania, striking a balance between oversights and fostering innovation will be key to integrating Forex Trading into the broader economy while safeguarding the interests of its citizens.”

Another analyst Mr Oscar Mkude, noted that the majority of forex trading is foreign, and if not properly regulated, it could lead to money laundering.

“The impact of forex trading could result in an influx of foreign currency into circulation, which may cause the country’s currency to depreciate,” he explained.

Mr Mkude added that there is no effective control over this influx because the authorities responsible for regulating currency flow need to implement a tighter system, similar to those in countries like the United States or Dubai, which are able to control such currencies.

“It’s only a matter of time, especially as forex trading continues to grow. Therefore, Tanzania and other countries will need to create an environment that allows this activity without compromising their ability to monitor it.”

Weports indicate that forex trading is already regulated in several neighbouring countries, including Kenya and Rwanda.

Both countries have implemented regulatory frameworks for retail forex trading, with Kenya issuing guidelines in 2017 and Rwanda following suit with its guidelines in February 2024.

These regulations provide a structured and legal pathway for citizens to participate in financial markets as legitimate traders, offering further insights for Tanzania as it considers its approach.