Ethiopia’s crackdown on digital financial service providers began with a late-2025 investigation into what authorities initially described as a 100 billion Birr ($1.8 billion) tax evasion and money laundering scheme linked to payment companies, informal foreign exchange networks (hawala), and online betting operations.

The investigation prompted coordinated raids by the Ministry of Revenues, Ministry of Justice, Federal Police, and other agencies. As part of the operation, authorities froze bank accounts belonging to several of the country’s largest fintech firms, including ArifPay, Chapa, SantimPay, and Kacha. Company executives were detained, and servers and business records were seized.

During the coordinated operation:

• bank accounts were frozen;
• corporate servers were seized; and
• high-profile executives, including CEOs, were placed under arrest or held in pre-trial detention.

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However, a later review found that the alleged tax liability largely stemmed from what lawyers representing the firms described as a calculation error by the National Bank of Ethiopia. Even after the companies were reportedly informed that they owed much less than initially claimed, authorities continued freezing and withdrawing funds from their accounts, pushing several startups into financial distress.

The affected firms appealed to the courts, the central bank, and the Prime Minister’s Office, but those appeals were unsuccessful.

According to the World Bank, the South Sudanese Pound and the Ethiopian Birr were the worst-performing currencies of 2025, with each depreciating by more than 10%. Those declines were not isolated technical issues, but reflected deeper structural weaknesses that also help explain the scale of Ethiopia’s regulatory response.

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Ethiopia’s crackdown on payment gateways can be traced to regulatory reforms introduced by the National Bank of Ethiopia (NBE) in 2020 to help digitize the country’s cash-based economy.

Those reforms established the Payment Instrument Issuers (PIA) framework, which enabled mobile money services such as Telebirr and M-PESA, and the Payment Systems Operators (PSO) framework, which created four license categories:

• Payment Switch Operators;
• Point of Sale (POS) Operators;
• Automated Teller Machine (ATM) Operators; and
• Payment Gateway Operators (PGOs), including Chapa, Arifpay, Santimpay, and Kacha.

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Unlike ATM and POS operators, which required substantial investment in physical infrastructure, PGOs operated software platforms that connected digital wallets with merchants. But Ethiopia’s e-commerce market remained underdeveloped, and payment gateways struggled to find meaningful commercial use cases during their first two years.

Their fortunes changed after the Addis Ababa Peace and Security Bureau shut down physical sports betting outlets in an effort to reduce public gatherings, pushing the country’s multi-billion-Birr sports betting industry online.

Payment gateways quickly integrated with online betting platforms and began processing millions of deposits and withdrawals each day.

By 2025, online sports betting accounted for more than 99% of all payment gateway transaction volume in Ethiopia, with gateways handling billions of Birr in payments. PGOs typically charged a 2.5% transaction fee, of which 60% was paid to Ethio telecom for infrastructure services, while the gateways retained the remaining 40%.

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The dispute has shaken confidence in Ethiopia’s once fast-growing fintech sector, which the government had promoted as a key pillar of its digital economy reforms before it became the target of tax evasion, money laundering, and foreign exchange investigations. It also underscores how quickly regulated payment rails can become exposed when a small number of high-volume use cases dominate transaction flows, leaving both operators and regulators more vulnerable to abrupt enforcement.

The financial crackdown has also come alongside a broader tightening of Ethiopia’s oversight of digital assets.

Based on user testimonials online, Binance P2P trading was reportedly used extensively by freelancers, small business owners, remote workers, traders, and many other Ethiopians as a financial tool.

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Last week, the National Bank of Ethiopia reiterated that cryptocurrencies and all other virtual assets remain prohibited unless expressly authorized, expanding its warning beyond crypto trading to include custody, transfers, exchange services, and other virtual asset activities. The central bank cited concerns over financial stability, fraud, money laundering, and illicit capital flows.

The renewed warning follows months of heightened scrutiny of digital payments and foreign exchange transactions as Ethiopian authorities seek tighter control over capital movement under the country’s ongoing macro-economic reforms, even as Ethiopia continues to support large-scale Bitcoin mining operations aimed at generating foreign currency.

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