Crypto Law in Papua New Guinea
Papua New Guinea's legal framework for cryptocurrencies focuses on the following;
Legal Framework and Government Position on Crypto
In Papua New Guinea (PNG), cryptocurrencies do not yet have a fully developed legal framework, and they are not recognized as legal tender. The Bank of Papua New Guinea, the central regulatory authority, has clearly stated that it does not regulate or endorse cryptocurrencies, meaning that crypto assets lack official recognition or support as currency.
However, there is a growing interest in blockchain and cryptocurrency, and the government seems cautiously open to exploring these areas, especially as tools for financial inclusion and technological innovation. For instance, the government's recent efforts focus on adopting blockchain to improve financial accessibility, signaling potential future engagement with the crypto sector.
Crypto Trading and Exchanges
While there is no outright ban on buying or trading cryptocurrencies in PNG, individuals engaging in these activities primarily use international exchanges that accept PNG users. Binance, for example, introduced peer-to-peer trading for PNG’s currency, the Kina, enabling users in the country to buy and sell cryptocurrencies such as Bitcoin and Ethereum in a regulated peer-to-peer environment.
However, PNG-based exchanges or fully localized services are limited due to the unclear legal environment. International platforms are generally accessible, but investors should be cautious as there are limited legal protections in place.
Consumer Protection and Compliance Requirements
The legal ambiguity around cryptocurrencies in PNG means that consumer protection measures are still developing. Without strong local regulations, risks related to fraud, cybercrime, and financial scams persist, and traders may lack the recourse available in more regulated markets.
However, some financial advisers suggest that as PNG further explores crypto and blockchain technology, regulatory updates might bring greater transparency, especially if anti-money laundering (AML) and counter-terrorism financing (CTF) standards are integrated into future crypto laws.
Crypto Adoption in Papua New Guinea
As of now, cryptocurrency is not considered legal tender in Papua New Guinea (PNG). This means it isn’t officially recognized as a currency in the same way as the national currency, the Papua New Guinean kina (PGK). The Bank of Papua New Guinea (BPNG), the country’s central bank, has taken a cautious stance on cryptocurrency.
While BPNG has explored digital finance and recognizes the potential benefits of blockchain technology, it has not approved cryptocurrency as a formal medium of exchange. The central bank continues to study the sector but highlights concerns over cryptocurrency’s volatility and potential misuse in unregulated transactions. Although cryptocurrency trading and ownership are not banned, citizens are advised to proceed with caution.
Despite this cautious approach, Papua New Guinea is experiencing a steady growth of interest in digital assets. The Digital Assets market in the country is expected to generate revenue of approximately US$2,629.0 thousand by 2024. However, the market is projected to slightly decline with a compound annual growth rate (CAGR) of -4.53% from 2024 to 2025, resulting in US$2,510.0 by 2025.
The number of users in PNG’s Digital Assets market is expected to reach 162.70 thousand by 2025, with a user penetration rate of 1.65% in 2024, which might slightly adjust to 1.64% by 2025. On average, each user in this market is estimated to contribute US$16.2 in revenue in 2024, reflecting the sector's early-stage potential.
From a global perspective, the United States leads with US$9,981.0m in digital asset revenue in 2024, showcasing how PNG’s market is still in its infancy. Nonetheless, the country's interest in digital assets is seen as a potential path toward financial inclusion and economic empowerment, particularly as more people gain internet access and explore alternative financial tools.
These developments suggest a growing curiosity among citizens and businesses to integrate cryptocurrency and blockchain technology into everyday practices, even as the government works toward a clearer regulatory framework.
The average revenue per user in the cryptocurrency market for Papua New Guinea is estimated to be US$15.9 in 2024
Current Economic Situation in Papua New Guinea
Papua New Guinea (PNG) has a mixed economic sector with both promising growth areas and persistent challenges. In recent years, growth has been modest, with GDP projected to rise by around 2.6% in 2024. Key growth sectors include resource industries, especially in oil, gas, and mining, but these sectors face volatility.
For example, the recent reopening of the Porgera gold mine and the expected final investment decision on the Papua LNG project could inject new momentum into the economy, potentially boosting tax revenue, employment, and exports.
Foreign exchange availability has also shown signs of improvement, with the government and the Bank of Papua New Guinea making efforts to address longstanding currency shortages by boosting foreign exchange reserves and shortening wait times for transactions​.
However, PNG continues to face significant structural hurdles. Challenges such as disrupted power and water supplies, frequent domestic flight cancellations, and difficulties in obtaining foreign currency make business operations challenging for many sectors.
The mining industry’s recent slowdown, due to lower gold output, has compounded these issues, leading to a sharp 61% year-on-year drop in import volumes earlier in 2023. Inflation remains a concern, currently forecasted at 5%, which, while lower than global levels, still impacts household budgets and investment costs​.
The PNG government has partnered with the International Monetary Fund (IMF) to improve fiscal policy, focusing on debt sustainability and strengthening governance. These reforms aim to stabilize the economy while addressing critical needs such as infrastructure.
Through the "Connect PNG" initiative, for example, the government seeks to establish complete road connectivity nationwide, which could aid long-term economic growth and improve access to essential services​.
According to Trading Economics global macro models and analysts' expectations, Papua New Guinea's GDP is expected to reach 31.55 USD billion by the end of 2024.
Potential Benefits and Challenges of Cryptocurrency Integration in Papua New Guinea
Cryptocurrency integration in Papua New Guinea has both promising potential and notable challenges. The nation could use digital currencies to improve financial inclusion and economic diversity while mitigating associated risks by addressing these barriers and implementing supportive regulations.
Benefits of Cryptocurrency Integration
1. Financial Inclusion
Cryptocurrency has the potential to reach the unbanked population in Papua New Guinea, which currently faces barriers to traditional banking. With mobile connectivity improving, digital currencies could offer people in rural areas a way to access financial services directly from their mobile devices, making basic transactions and savings more accessible.
2. Secure Transactions
Blockchain technology, which underpins cryptocurrencies, provides a secure method for recording transactions. This could help prevent fraud, as each transaction is immutable and traceable. For businesses and individuals, this increased security could build trust in digital transactions, encouraging more participation in digital finance.
3. Lower Transaction Costs
Traditional remittances to and from Papua New Guinea can be expensive. Cryptocurrencies could reduce transaction fees, especially for international transfers, making it more affordable for citizens and local businesses to conduct global trade or receive funds from abroad, which is particularly important in a country where remittances play a vital role.
4. Economic Diversification
As Papua New Guinea looks to diversify its economy, embracing cryptocurrency could open up new avenues for investment and entrepreneurship. The crypto space offers opportunities for innovation, potentially leading to tech-based startups and job creation, providing an alternative to the nation’s reliance on natural resources.
5. Transparency in Public Spending
Blockchain's transparency can help track and verify government spending and aid distribution, reducing corruption. Public funds managed on blockchain platforms could be audited in real-time, ensuring that resources reach intended projects and communities.
Cryptocurrencies are seen as a way to provide financial services to underserved populations in Papua New Guinea.
Challenges of Cryptocurrency Integration in Papua New Guinea
1. Regulatory Uncertainty
Papua New Guinea currently has no clear regulations for cryptocurrency use. Without a regulatory framework, investors and consumers lack protections, which could hinder adoption. Establishing laws that protect users while allowing innovation is necessary to support growth in the sector.
2. Limited Infrastructure
Many areas in Papua New Guinea lack the internet connectivity and technological infrastructure needed for cryptocurrency. The limited availability of smartphones and digital literacy poses a significant hurdle, as accessing and using crypto platforms requires a certain level of digital competence and connectivity.
3. Security Risks
While blockchain technology is secure, cryptocurrencies still face risks such as hacking and scams. Papua New Guineans new to crypto may be particularly vulnerable to scams, and without adequate security measures, the country might experience fraud and theft, undermining trust in the technology.
4. Volatility of Cryptocurrencies
The high volatility of cryptocurrencies can pose a financial risk for users. Without stable crypto options, the value of holdings can fluctuate wildly, leading to potential losses. This volatility may make crypto less appealing for everyday transactions and savings among citizens.
5. Potential for Misuse
Cryptocurrencies can be used for illicit activities due to their pseudonymous nature, which could pose challenges in enforcing laws against money laundering and fraud. For Papua New Guinea, establishing a framework to monitor crypto activities will be essential in preventing misuse without discouraging adoption.
The Future Prospect and Trends for Cryptocurrency in Papua New Guinea
Source: Pixabay
Cryptocurrency has seen gradual progress in Papua New Guinea (PNG), and its future is shaped by a mix of growing interest, developing regulation, and the country's unique economic sector. Below are five key trends and prospects for cryptocurrency in PNG:
1. Increasing Financial Inclusion
Cryptocurrencies have significant potential to improve financial inclusion in PNG. With a large portion of the population unbanked or underserved by traditional financial systems, digital currencies offer a way to access financial services. Projects like the proposed PNG Digital Currency aim to bring banking services to remote areas, reducing the reliance on cash-based transactions and fostering economic activity​.
2. Growth of Local Blockchain Initiatives
PNG is witnessing the rise of local blockchain-based projects. For instance, the government is exploring blockchain for secure and transparent transactions in public services. The "Crypto for Good" initiative uses Bitcoin donations for social projects, showcasing how digital currencies can be leveraged for community development​.
3. Stronger Regulatory Frameworks
The Bank of Papua New Guinea (BPNG) has been actively developing a regulatory framework for cryptocurrencies. Public consultations on the draft framework indicate a focus on licensing exchanges, protecting investors, and implementing anti-money laundering measures. Clear regulations are expected to attract foreign investment and stimulate local fintech innovations​.
4. Education and Awareness Efforts
Education about blockchain and cryptocurrencies is expanding in PNG. Universities and organizations now offer specialized programs to train individuals in digital finance, equipping them to participate in the growing global crypto economy. These efforts are important for building a knowledgeable workforce to support the local adoption of digital currencies​.
5. Potential Partnerships and Global Integration
International collaborations are anticipated to play a key role in PNG's crypto development. By partnering with established blockchain firms, PNG can learn from global best practices and accelerate its digital transformation. Additionally, increasing acceptance of Bitcoin and other cryptocurrencies worldwide could encourage more adoption in PNG’s economy​.
Blockchain could help integrate PNG’s informal economy, which accounts for 80% of its GDP, into formal financial systems.
Conclusion
Cryptocurrency adoption in Papua New Guinea (PNG) is still in its early stages, with no formal recognition as legal tender. While the government and the Bank of Papua New Guinea (BPNG) have shown interest in the potential of blockchain technology, they are approaching it cautiously. This measured approach reflects the need to balance innovation with economic stability and consumer protection
