By AVv. Omar Khalif Abdi - Licensed lawyer, policy strategist, and legal drafter at Somalia’s Ministry of Justice and Constitutional Affairs.
“Somalia needs legal certainty that regulates financial innovation without criminalising lawful activity or allowing regulatory gaps to facilitate fraud and financial crime.” Avv. Omar Khalif Abdi
The growth of cryptocurrency trading and online foreign-exchange platforms has raised an important legal question in Somalia: Can buying, selling or trading crypto or forex create criminal liability?
The question cannot be answered by treating the two activities as a single category. Somali law distinguishes foreign currency, which forms part of the country’s monetary and financial framework, from virtual assets, which the Central Bank of Somalia (CBS) has not recognised as legal tender and for which no licensed virtual-asset service framework currently exists.
The central legal distinction is among regulated activity, unlicensed activity and conduct expressly criminalised by law.
Foreign Exchange Is a Recognised Financial Activity#
The Central Bank of Somalia Act, Law No. 130, gives the CBS responsibility for foreign-exchange policy and for licensing, regulating and supervising banks and financial institutions.
Article 33 expressly authorises the Bank to buy, sell, import, export, hold or otherwise deal in gold or convertible foreign exchange under terms it determines. The Act also defines foreign currency by reference to legal tender outside Somalia.
Foreign currency is therefore not inherently unlawful.
Forex Trading and the Licensing Question#
The legal analysis changes when forex activity is conducted as a business or financial service. Somalia’s financial legislation establishes licensing and supervisory requirements for regulated activities.
The Financial Institutions Law requires a licence for money-transfer businesses and provides criminal consequences for operating such a regulated business without the required licence.
The legality of foreign currency does not mean that every business involving it is automatically lawful. The status of the underlying asset and the regulatory status of the business are separate legal questions.
Personal Forex Trading Is Not the Same as Operating a Financial Business#
A person using personal funds to speculate on foreign-exchange movements through an overseas trading platform is not automatically in the same legal position as someone operating an unauthorised bank, money-transfer business or other regulated financial service in Somalia.
The precise legal treatment may depend on the nature of the activity, payment arrangements, location of the service provider, movement of funds and whether financial services are being provided to others.
The Somali laws reviewed for this article do not support the broad proposition that every act of personal forex trading is, by itself, a criminal offence.
Cryptocurrency Has a Different Regulatory Position#
In a public notice dated 10 June 2024, the CBS stated that Bitcoin, stablecoins and other virtual assets were not recognised as legal tender in Somalia and that no financial institution was licensed to conduct exchange, transfer, payment, investment or other financial services involving virtual assets.
The Bank also warned of consumer-protection, volatility and financial-crime risks.
This warning is significant, but non-recognition as legal tender does not necessarily amount to a statutory prohibition on every transaction involving the asset. Likewise, the absence of a licence for a financial service does not, by itself, establish criminal liability for every individual who holds or trades the asset.
Where Criminal Liability Can Arise#
Criminal liability may arise when crypto or forex is connected to conduct independently prohibited by law, including money laundering, terrorist financing, fraud or the concealment of criminal proceeds.
Somalia’s Anti-Money Laundering and Countering the Financing of Terrorism Amendment Act, published in 2025, forms part of the country’s current AML/CFT framework.
The payment mechanism or asset used does not remove the illegality of an underlying offence.
The East African Legal Picture#
As of 2026, the East African Community does not have a uniform position on virtual assets.
Kenya enacted the Virtual Asset Service Providers Act, 2025, and subsequently developed draft 2026 regulations governing the licensing and regulation of virtual-asset service providers. Rwanda has established a specific statutory framework regulating virtual-asset businesses.
Tanzania maintains a restrictive approach. The Bank of Tanzania has warned that trading, marketing and using virtual currencies is contrary to existing foreign-exchange regulations, while payment-system providers are restricted from conducting cryptocurrency operations.
Uganda, meanwhile, is working toward a comprehensive framework for virtual assets and virtual-asset service providers.
These differences demonstrate that non-recognition, restriction, licensing and criminalisation are distinct legal concepts. Somalia’s position forms part of a broader East African regulatory transition.
Somalia’s Position in the Regional Context#
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Somalia already has an identifiable legal foundation for foreign exchange. Article 33 of the Central Bank Act recognises dealing in gold and convertible foreign exchange, while Article 38 gives the CBS responsibility for regulating, licensing and supervising banks and financial institutions.
Virtual assets occupy a different position. The CBS has stated that they are not recognised as legal tender and that no financial institution is licensed to provide virtual-asset financial services.
The current position is therefore one of non-recognition, regulatory caution and the absence of authorised virtual-asset financial services, rather than a clearly articulated statutory offence covering every act of possessing or trading cryptocurrency.
AML/CFT Compliance and Financial Transactions#
Somalia’s AML/CFT framework emphasises risk assessment, customer due diligence, identification, beneficial ownership, record-keeping, suspicious transaction reporting and enhanced due diligence.
The virtual-asset material reviewed for this article identifies weak know-your-customer and customer-due-diligence procedures, difficulties in identifying beneficial ownership, links to illicit markets, challenges in freezing or seizing virtual assets and broader regulatory gaps.
These concerns support stronger controls, but they do not displace the criminal-law principle that liability must be connected to an identifiable offence.
The Legal Gap Should Not Be Filled by Assumption#
Somalia’s framework reveals a regulatory gap. Foreign exchange has an identifiable legal foundation, while virtual assets remain outside the framework described by the CBS.
The CBS consultation on a Draft Foreign Exchange Business Regulation in September 2025 indicates that the forex framework continues to develop. For cryptocurrency, however, the absence of a dedicated licensing regime creates uncertainty.
That uncertainty should be addressed through clear legislation and regulations, rather than by assuming that every cryptocurrency transaction is criminal.
Sharia Compliance, Regulatory Uncertainty and Civil Liability#
Somalia’s legal position must also be considered through the interaction among Sharia compliance, financial regulation, civil obligations and criminal law.
The absence of a dedicated virtual-asset licensing regime may expose participants to contractual, consumer-protection and security risks, particularly in peer-to-peer transactions. Regulatory uncertainty, however, should not automatically be treated as criminal liability.
Criminal responsibility should arise only when conduct falls within a clearly defined offence. Civil claims may arise independently through breach of contract, fraud, misrepresentation, non-performance or loss of funds.
This distinction is essential to establishing legal certainty without weakening legitimate AML/CFT controls or financial regulation.
What the Law Should Distinguish#
A sound legal approach should distinguish four situations.
First, holding or using foreign currency is not inherently criminal.
Second, providing a regulated financial service without the required licence may constitute an offence where the law expressly prohibits it.
Third, virtual assets are not recognised as legal tender, and virtual-asset financial services are not currently licensed within Somalia’s financial system.
Fourth, crypto or forex transactions may attract criminal liability when they facilitate fraud, money laundering, terrorist financing, concealment of criminal proceeds or another defined offence.
These categories should not be collapsed into the blanket proposition that “crypto and forex are crimes”.
Conclusion#
The legal answer is more precise than a simple yes or no.
Foreign exchange is a recognised component of Somalia’s monetary and financial system, but particular businesses and services remain subject to licensing and supervision. Cryptocurrency is not recognised as legal tender, and the CBS has warned the public about its risks and stated that virtual-asset financial services are not licensed.
The central questions are whether the particular conduct is regulated, whether the required authorisation has been obtained and whether the conduct satisfies the elements of a specific offence.
The East African experience illustrates the range of possible approaches. Kenya and Rwanda have adopted dedicated frameworks, Tanzania maintains a restrictive approach, and Uganda is developing its regulatory framework.
Somalia therefore faces a regulatory question as much as a criminal-law question. A coherent framework should define virtual assets, determine the status of service providers, establish proportionate AML/CFT and consumer-protection requirements, clarify licensing obligations and identify the conduct that attracts criminal sanctions.
The objective should be legal certainty: neither treating financial innovation as inherently criminal nor allowing regulatory gaps to facilitate crime.
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AVv. Omar Khalif Abdi is a licensed lawyer, policy strategist, and legal drafter at Somalia’s Ministry of Justice and Constitutional Affairs.
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The opinions expressed in this article are those of the writer and do not necessarily reflect the views of Dawan Africa.