Rumours have spread this week on social media in Egypt that the country’s central bank is considering official adoption of cryptocurrency. These rumours circulated in the Egyptian social media sphere on July 16, and 17. The rumours, however, were debunked by Mr. Gamel Negm, a deputy governor of the Central Bank on July 17. The swift official reaction by the Egyptian Central Bank has catalysed a series of theories trying to proffer reasons for the Government’s seeming outright rejection of the bitcoin adoption idea.
Bitcoin Will Not Be Regulated in Egypt anytime soon
Lawyer Mahmoud Helmi is of the view that the Central Bank’s rejection of bitcoin was based mainly on the fact that the existing legal and regulatory frameworks in the country do not make provisions for individuals to deal in foreign exchange. Since bitcoin is not the legal tender of the Egyptian state, it can be easily classified as foreign exchange and dealings in foreign exchange are limited only to banks.
This then begs the question, will Egyptian banks be allowed to deal in bitcoins instead of individual citizens? And how will this be implemented considering that most bank officials and executives at the moment do not fully grasp the workings of blockchain technology?
Helmi further raised the issue of the promise of “illusory profit” that some bitcoin dealers might paint in order to woo clients but might be unable to fulfill within the promised time-frame due to the high volatility of bitcoin and altcoins. He believes this could lead people into a collision course with the law since Egypt’s penal code “defines the crime of swindling in an ambiguous way”.
Ashraf Ibrahim, a banker and economist with Zagazig University, raises an interesting angle that suggests that the possible lack of control of bitcoin by the government might be a reason for its opposition to bitcoin adoption.
Unlike sovereign currencies where there are defined processes to tax and charge fees on transactions, governments seem to be at a loss on how to track, tax, and charge fees on cryptocurrency transactions. There is the fear that with a wider adoption of cryptocurrencies, the government might gradually become irrelevant and their coffers might begin to run dry due to an inability to tax these transactions.
Concerns over bitcoin’s pseudo-anonymity
There is also the school of thought that the Egyptian government’s opposition might be based on the largely anonymous nature of bitcoin transactions. Ahmad Adam, head of the National Bank of Egypt’s Research and Studies department, states that his support for the Central Bank’s move is based on the fact that the anonymity the cryptocurrency offers might help to fuel money laundering and terrorism financing in the country.
He also assumes that to own bitcoins, citizens would have to convert Egyptian pounds to other foreign currencies such as the dollar and euro before bitcoin purchase could be affected. He believes this could have a negative impact on the value of the Egyptian currency. This view, however, is to some extent erroneous because with the help of mediums such as localbitcoins.com and other OTC transaction processes, people are able to purchase bitcoins directly with their local currency.
It does not seem though that discussions on digital currency adoption by the Egyptian state have been totally thrown out the window. Egyptians, being quite the innovative people, believe there is the likelihood of this topic being re-visited in the near future and an adoption could happen with better regulatory and operational framework.