- This is a first case in Tanzania to address matters related to digital currencies. In this case one of the issues was determining whether there was a valid agreement between the parties.
- The Court ruled that although digital assets and currencies are unregulated in Tanzania, they are not illegal. That means a valid contract cannot be invalidated because of lack of legal and regulatory framework regulating it.
- This case demonstrates that cryptocurrencies although not regulated in Tanzania they are not illegal.
- The Finance Act, 2024 amended Section 3 of the Income Tax Act, Cap 332, to expand the definition of a digital asset to also include all forms of digital currencies such as cryptocurrencies. It further added Section 83C, which introduces withholding tax on payments to resident owner of digital assets of which includes cryptocurrencies.
As an emerging and unregulated concept in Tanzania, cryptocurrencies and digital assets have not been subject rigorous judicial interpretation. However, considering the developments in digital economy and increased use of digital currencies, recently the Court has found itself interpreting issues concerning the legality of cryptocurrency agreements and transactions.Yellow Card Tanzania Limited Vs Nyamwero Michael Nyamwero, Commercial Case No. 12171 of 2024, High Court of Tanzania (Commercial Division) At Dar Es Salam (Unreported), is a first case in Tanzania to address matters related to digital currencies. In this case one of the issues was determining whether there was a valid agreement between the parties.
The agreement in contention arose from a dispute over mishandling of funds associated with cryptocurrency transactions. Thus, the Court was tasked to determine whether unregulated subject matter of a contract (cryptocurrency) can form part of a valid contract.
Unlike fiat money, which is issued by many central banks across the globe, cryptocurrency is an alternative mode of payment to fiat money. This type of currency can be described as a digital currency where transactions are verified and the records are maintained by a decentralized system using cryptography rather than by a centralized authority.
VIRTUAL CURRENCY ARE NOT ILLEGAL
The Court ruled that although digital assets and currencies are unregulated in Tanzania, they are not illegal. That means a valid contract cannot be invalidated because of lack of legal and regulatory framework regulating it.
The Court Observed that, “it should be noted that digital cash or virtual currency and cryptocurrency transaction is not illegal albeit of lack of legal framework”
The Court recognized digital currencies to have value hence capable of being transacted if the contract between parties is valid and free from illegalities such as cyber-money laundry or any form of illegal transactions.
DEFINITION OF VIRTUAL CURRENCY
The Court went further and defined virtual currencies (cryptocurrency) thus “It should also be noted that a virtual currency that is a digital representation of value. Indeed, cryptocurrency in a form of virtual currency is stored and transacted through designated mobile or computer applications. General, transactions involving virtual currencies occur through secure, dedicated networks or the internet.”
RECOGNITION OF THE TRANSACTION
On a different thinking, the Court also used implied recognition of virtual currency through taxation laws to legitimize cryptocurrency transactions. The Court observed that, “Now since the parties who are involved in digital money and digital assets have been paying tax under the taxation laws, their transactions cannot be declared illegal”
ILLEGALITY OF THE VIRTUAL CURRENCY
The Court warned however, cryptocurrency may be illegal if it involves money laundering or other illegal transaction. In this regard the court noted that “in my view cryptocurrency can only become illegal if it involves cyber-money laundering or other illegal transactions. However, various laws and regulations related to finance, money laundering, and securities may indirectly apply to cryptocurrency activities.”
The Court recognized that in Tanzania the regulatory framework of virtual currency is not regulated or directly recognized under the law. Nevertheless, that does not invalidate the transaction.“The regulatory stance on cryptocurrencies in Tanzania is still evolving, and the government and central bank (Bank of Tanzania) have issued guidance on the matter. In this regard, since the electronic transactions using cryptocurrencies or virtual cash that is conducted by the Plaintiff is not illegal it means that the contract between the plaintiff and the defendant was valid”
The Finance Act, 2024 amended Section 3 of the Income Tax Act, Cap. 332, to expand the definition of a digital asset to also include all forms of digital currencies such as cryptocurrencies. It further added Section 83C, which introduced withholding tax on payments to resident owner of digital assets of which includes cryptocurrencies.The said amendments opened a route for recognition of the “virtual currencies” and transactions in Tanzania. Equally, this judgment “legalized and validated a cryptocurrency transaction” by considering the validity of the contract and parties’ tax compliance under the tax laws.
Despite the fact that the Judgment was delivered in December 2024, five months after the coming into operation of the Act. The Court did not base its decision of using the taxation criteria from the Act rather that the Plaintiff’s stable taxation history.
With the Act now formally recognizing cryptocurrencies as digital assets and formulated a manner to obtain taxes from such transactions, the case supplies a wider prospect for development and recognition of Digital Currencies in Tanzania.
CONCLUSION
The judicial recognition of cryptocurrency transactions in Tanzania marks a crucial step toward adapting the legal system to technological and economic innovation.
The Court’s reasoning reflects a progressive interpretation of contract law, acknowledging the evolving nature of e-commerce while ensuring that legality and fairness remain central to enforcement.
By aligning judicial understanding with emerging fiscal policies, Tanzania is moving toward a more inclusive legal environment that accommodates digital assets.
This evolution not only strengthens public confidence in the use of cryptocurrencies but also sets a foundation for comprehensive regulation that balances innovation with consumer protection.
