1st Australian International Conference on Industrial Engineering and Operations Management

A STUDY OF THE EFFECTS OF CRYPTOCURRENCY USAGE ON MONEY LAUNDERING AND TAX COMPLIANCE IN ZAMBIA

LUKWESA CHISALE & Lubinda Haabazoka
Publisher: IEOM Society International
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Track: Graduate Student Paper Competition

Cryptocurrency usage has been on a rise in Zambia and other countries. Many concerns have been raised regarding the bad vices that have emerged as a result of Cryptocurrency usage. However, little evidence exists on the effects that Cryptocurrency usage has on money laundering and tax compliance in Zambia. This study sought to assess the relationship between Cryptocurrency usage, money laundering and tax compliance in Zambia. The study was conducted on the FIC, DEC and ZRA for in-depth interviews and 106 survey respondents consisting of employees of one of the commercial banks in Zambia. The study adopted a mixed approach, with the utilization of an interview guide to collect information through an in-depth interview with the key informants and a semi-structured questionnaire to collect data from the survey respondents. Correlation and regression analyses were used to establish the relationship among the variables of the study.

The results of the study showed that Cryptocurrency usage has a positive but insignificant effect on money laundering and negative but insignificant effect on tax compliance in Zambia. The study further established that a strong negative correlation exists between money laundering and tax compliance in Zambia. Perceptions from the respondents were that an increase in Cryptocurrency activities, due to unregulated crypto environment, would increase money laundering activities. This is only supported by the observed sign of the correlation coefficient. In addition, since no legal framework has been put in place to guide the legal jurisdictions and operation of digital assets, levels of none tax compliance would become high in Zambia and this is equally supported by the observed sign of the correlation coefficient.

The study has identified other effects such as fraud, terrorism, interfere with consumer protection and increase in the scamming levels in association with Cryptocurrency usage. Prevention of these vices was pointed to the centralization and unifying the Cryptocurrency transaction by the Central Bank. The study thus recommends that Zambia should consider investing in the investigation of how digital transactions can operate in order to quicken the regulation process of crypto operation. The government should also consider setting up an institution that can be strictly responsible for monitoring and regulating digital assets transactions in order to focus resources in the formulation of legal frameworks.

Published in: 1st Australian International Conference on Industrial Engineering and Operations Management, Sydney, Australia

Publisher: IEOM Society International
Date of Conference: December 21-22, 2022

ISBN: 979-8-3507-0542-3
ISSN/E-ISSN: 2169-8767