Financial sector watchdogs – the Bank of Ghana (BoG) and Securities and Exchange Commission (SEC) – must adopt a hybrid regulatory approach combining principles-based and risk-based frameworks to effectively supervise its growing virtual assets ecosystem, according to a new policy recommendation by banking and governance consultant Dr. Richmond Akwasi Atuahene.

The recommendation, contained in a paper dubbed ‘Pathways to the financial regulation of virtual assets (crypto-assets) eco-systems in Ghana: A Case for Hybrid Financial Regulatory Approaches’, comes as the country prepares for its first comprehensive regulatory regime on cryptocurrencies and digital assets.

The proposed model seeks to balance regulatory flexibility with targeted enforcement in high-risk areas such as money laundering, consumer fraud and market volatility. Dr. Atuahene argues that such an approach will provide a stable foundation for innovation while protecting financial integrity and investor interests.

“Principles-based regulation enables Ghana to accommodate technological change without constantly rewriting the rules, while a risk-based approach ensures that the most dangerous activities receive the most regulatory attention,” Dr. Atuahene said in a recent policy briefing. “It is a measured response to a dynamic, high-stakes environment.”

The recommendation comes as Ghana moves toward formal oversight of the digital assets sector. In August 2024, the Bank of Ghana released draft guidelines for regulating Virtual Asset Service Providers (VASPs), with plans to enact a VASP Act by the end of September 2025. All VASPs, including crypto exchanges, custodians and wallet providers, are required to register with the central bank by August 15, 2025, or face disqualification from future licensing.

Historically, both the Bank of Ghana and the SEC maintained a conservative stance on cryptocurrencies. In 2018 and 2022, the central bank issued public notices warning that cryptocurrencies were not legal tender and operated outside the existing regulatory framework. The SEC echoed this position in 2019, cautioning investors that it had not approved any crypto investment products.

Despite these warnings, the domestic market for virtual assets has expanded rapidly, fuelled by high mobile phone penetration, widespread Internet access and growing interest in alternative financial assets. A recent study suggests that up to 17 percent of Ghanaian adults now own some form of digital asset, predominantly Bitcoin and stablecoins.

The proposed hybrid regulatory model aligns with international best practices promoted by the Financial Action Task Force (FATF), the Financial Stability Board (FSB) and the International Monetary Fund (IMF). These bodies have consistently advised jurisdictions to adopt frameworks that are proportionate, risk-sensitive and technologically neutral.

Under a principles-based approach, regulators articulate desired outcomes—such as transparency, fair dealing and market stability—without prescribing rigid rules. This gives regulated entities the flexibility to determine how best to comply, encouraging innovation and adaptability.

A risk-based approach, by contrast, prioritises regulatory focus and enforcement according to the relative risk posed by different actors or activities. It allows for efficient allocation of regulatory resources, with heightened scrutiny applied to entities with systemic reach or those exposed to financial crime risks.

Some investment analysts believe that combining these models, the country can build a regulatory system that is both resilient and responsive, where the framework avoids the rigidity of a rules-based approach, which often lags behind innovation, while ensuring adequate safeguards in areas of highest concern.

Dr. Atuahene’s report emphasises the need for institutional preparedness to implement such a framework. Both the Bank of Ghana and the SEC will require significant capacity-building, including specialised training in blockchain analytics, digital forensics and market surveillance. Cross-agency coordination will also be critical to address regulatory overlaps and ensure comprehensive supervision.

Additionally, the report recommends the use of regulatory sandboxes—controlled environments where firms can test innovative products under regulatory supervision—as a tool to support market development while maintaining oversight.

“The success of any hybrid regulatory model will depend not only on its design, but also on the institutional strength and enforcement capabilities of the regulators involved,” Atuahene noted.

The urgency of regulatory clarity is heightened by recent developments in global crypto markets. Bitcoin reached a new all-time high of US$123,000 in early July before stabilising around US$120,000, driven by institutional demand, favourable U.S. policy signals and expectations of looser monetary conditions. Ghanaian participation in the market has followed suit, with a growing number of retail investors exposed to the asset’s volatility.

Without a clear regulatory framework, local investors remain vulnerable to fraud, market manipulation and the collapse of unregulated platforms.

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