Egypt’s Shadow Ban of Bitcoin Leads to a 400% Surge in Trading
Government interference has crippled Egypt’s foray into decentralized finance. Nonetheless, the realities of life pose their own pressures to those who are unbanked.
Economic Power is the Source of Liberty
In the last couple of years, we have seen the immense power of corporate consolidation and deplatforming, allowing for established cultural mores and the Constitution to be circumvented. Forming natural monopolies, it doesn’t take much for corporations to trigger an ostracization cascade. With so many infrastructural services in the hands of the few – hosting, payments, search algorithms – a single case of deplatforming signals what is allowable.
In turn, this builds an edifice of precedents, a growing tower looming over the populace. It instills an atmosphere of preemptive deplatforming and auto-censoring, rapidly shrinking the space of allowability and economic growth, which is further leveraged by the few. As we have seen with the stunning hypocrisy surrounding GME trading, at the heart of this is economic power.
Money is the lifeblood of civilization, directed and withheld as needed by those with a running start. For the first time in monetary history, Bitcoin presents itself as the lifeblood freely circulating. The most recent example of Egypt shows us that even institutional gateways can’t stymie its flow.
Egypt’s Cryptocurrency Gray Zone
Much like in China, the status of cryptocurrencies in Egypt is in the limbo zone. Not quite banned, but also frowned upon by the authorities. This is further exacerbated by religious edicts that, although not fully official, hold much sway. Egypt’s highest religious authority – Shawki Allam, the Grand Mufti – issued a fatwa on the use of cryptocurrencies in 2018.
Effectively, this means that cryptocurrency trading was rendered forbidden under Islamic Law. In turn, the edict made secular authorities – Egypt Central Bank (ECB) – reluctant to issue a clear regulatory framework for the use of crypto assets. As of September 2020, Egypt’s banking laws discourage issuing and trading in cryptocurrencies without first having a license from the ECB.
How likely is that license to be forthcoming is anyone’s guess, but more worrying is how the authorities view crypto activity on the ground. Egypt’s local news agency reported on February 24th the arrest of a man for promoting Bitcoin on social media.
With the help of Google Translate, quite a few oddities pop up:
- The individual was charged for enticing citizens to partake in using Bitcoin, from his Facebook page.
- His phone was seized by the authorities, which enabled them to find a crypto wallet confirming cryptocurrency trading.
- Engaging in such trades is illegal without a license, in order to enact proper fees and taxes.
This incident happened less than two weeks ago, which makes Egypt’s increased Bitcoin trading volumes even more revealing.
Egypt’s Bitcoin Trading Volume Skyrockets
For those in Europe, CEX.IO is a well-known and popular crypto exchange. Based in the UK, it hosts 134 cryptocurrencies, of which Bitcoin (BTC) holds the bulk of the trading volume at 31.57%, Ethereum (ETH) as the second one at 13.55%. All other cryptocurrencies are under 10% in trading volume.
CEX.IO’s executive director, Konstantin Anissimov, recently revealed that the exchange had experienced a notable surge in user registration from Egypt – up by 250% from December to January 2021. Moreover, Egyptian trading volume in Bitcoin spiked by 400% in the same time period, just as Bitcoin leaped from $19k to over $30k.
With limited cryptocurrency trading options available, P2P platforms have become leaders in crypto on-ramping from the Egyptian pound (EGP) – LocalBitcoins and Paxful being the top choices. One could only image what the crypto trading volume would be without jumping through multiple institutional hurdles. Here are additional factoids about Egypt that paint a clearer picture:
- 94.7% of Egyptians adhere to the Islamic faith, making it the 6th largest Muslim population, just below Nigeria, with Indonesia being the first.
- As of Q3 2020, official unemployment rate in Egypt was 7.3% – the US has 6.9%.
- Egypt’s GDP per capita is around $2,900, white the US has $63,051.
- A third of Egypt’s population remains unbanked, according to World Bank’s estimates.
- Egypt’s economy is largely based on agriculture, tourism, natural gas and petroleum imports.
Although these prospects may seem gloomy, Egypt’s population size and age distribution are ripe for investments. Out of 100 million citizens, only about 5% are older than 65. You may recall from The Tokenist’s comparative BTC adoption survey that this age group represented a consistent breaking point for entertaining anything other than traditional banking.
If Egypt can lessen religious restrictions, as it appears to be happening across the Muslim world, the demand for cryptocurrencies will increase drastically.
How much reach do you think governments should have on the activity of Bitcoin and other digital assets? Let us know in the comments section below.