Introduction
The cryptocurrency development has been a world sensation with decentralized and digital currencies in offering competition to conventional currencies. Acceptance of cryptocurrencies differs across the globe. The strict anti-cryptocurrency position in Egypt reflects apprehension over financial instability, legal aspects, and religious considerations.
Legal Aspects of Cryptocurrencies
Central Bank and Banking System Law No. 194 of 2020
The Egyptian regulatory framework on cryptocurrencies is based on the Central Bank and Banking System Law No. 194 of 2020. Under the letter of Article 206 of this law, the issuance, trading, promotion, or operation of any platform that deals with crypto assets without prior approval from the Central Bank of Egypt (CBE) is strictly prohibited. Violating any of these provisions attracts far-reaching penalties, including imprisonment, while fines of up to EGP 1 million to EGP 10 million can also apply.
Reasons behind Prohibition
There are several reasons behind the CBE’s firm stance:
- Volatility: The extreme volatility of cryptocurrencies, such as Bitcoin, represents risk for both investors and the financial system at large.
- Fraud and Scams: The very nature of cryptocurrencies can serve as an enabler for fraud and scam schemes and activities.
- Illegal Activities: The use of cryptocurrencies for money laundering, financing terrorism, and other unlawful activities.
With their issuance and regulation free from the whims of a central authority, cryptocurrencies generate concern about their legitimacy and stability.
Religious Factors
As far back as 2018, Egypt’s Grand Mufti had declared, through the issuance of a fatwa that cryptocurrencies such as Bitcoin are haram (forbidden) under Islamic lexicon. This decision certainly refers to both the speculative characteristics of cryptocurrencies as well as their use in alleged illegal activities.
Public Warnings and Enforcements
The Central Bank of Egypt (CBE) has persistently warned the public against dealing in cryptocurrency. In their statements of 2021 and 2022, the CBE called upon the crypto assets not to be considered currencies since they are not issued by any official authority and have no legal backing. It also drew attention to the temporary nature of cryptocurrencies and the possibilities of these assets to be used with some form of criminal activity.
Implications for Related Technologies
Although the intent of the law is mainly directed at cryptocurrencies, it creates implications for technologies that are related:
- Non-fungible tokens (NFTs): These rely on cryptocurrencies for usage in transactions-their legality in Egypt is, therefore, somewhat obscure.
- Decentralized Finance (DeFi): Again, given that DeFi platforms provide their services without traditional intermediaries, the entire subject is likely to be governed by cryptocurrencies and thus equally affected by the legality.
Cryptocurrency legislation varies among countries, and herein lies the global trend as a point of comparison:
- United States and European Union: These regions are working toward the integration of cryptocurrencies into their financial systems through regulation and taxation.
- China: The country has issued outright bans against cryptocurrency mining and trading.wired.com
- Gulf Cooperation Council (GCC) Countries: Nations such as the UAE and Saudi Arabia are looking into regulated adoption of cryptocurrencies and block chain technology.
In contrast, Egypt has opted for a very restrictive approach, with its focus on monetary sovereignty, combating financial crimes, and keeping public trust in its financial system.
The Challenges and the Way Forward
Even with prohibitions in place, there exists persistent interest in cryptocurrencies in Egypt, quite significantly among the technology-inclined youth. Among the challenges are:
- Lack of Legal Protection: Those using cryptocurrency in Egypt do so without a legal framework that can protect them from sudden losses.
- Restriction in Access to Global Financial Innovations: Restrictive regulations in place may cause Egypt to miss out on global financial innovations.
In any case, the increasing acceptance of cryptos and blockchain technology around the world might incite the Egyptian policymakers to reconvene and reevaluate the current regulations in the future.
Conclusion
At this time, Egypt’s legal framework remains categorical in its prohibition of any issuance, trading, or marketing of cryptocurrencies, without express permission from the Central Bank. This is also tied into concerns regarding financial stability, legal provision, and religion. Egypt still walks on eggshells, but the use of an evolving global marketplace might get these laws reconsidered.
This article offers a general overview of the subject matter and is not a substitute for legal advice. For guidance tailored to your specific circumstances, professional consultation is recommended.
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