Legal Crypto In Egypt

Cryptocurrency in Egypt: Fraudulent Schemes and Other Insights

Cryptocurrency, a decentralized virtual currency, is widely accepted globally; however, its legal status varies significantly across jurisdictions. In Egypt, the regulatory environment for cryptocurrencies is highly restrictive, influenced by religious, economic, and security considerations. This article provides an overview of the legal status of cryptocurrencies in Egypt, their regulation, popular methods for buying and selling, and an analysis of decentralized finance (DeFi) and non-fungible token (NFT) markets in the country.

The Legal Status of Cryptocurrency in Egypt

Cryptocurrencies such as Bitcoin and Ethereum are banned in Egypt. The Central Bank of Egypt (CBE) has prohibited all activities involving cryptocurrencies, including trading, buying, selling, and promoting virtual currencies. This stance is reinforced by Law No. 194 of 2020, which grants the CBE authority to regulate financial transactions and explicitly prohibits cryptocurrencies as a payment method or store of value due to risks such as money laundering, terrorist financing, and capital flight.

In 2018, Egypt’s Dar al-Ifta, the principal Islamic legislative body, issued a fatwa declaring Bitcoin transactions haram under Islamic law. The fatwa described cryptocurrencies as intangible and prone to speculative schemes, aligning with Islamic finance principles that emphasize risk awareness. This fatwa has significantly shaped Egypt’s regulatory approach, fostering cultural and legal resistance to cryptocurrencies.

Despite the comprehensive ban, enforcement remains challenging. The decentralized nature of cryptocurrencies enables some individuals to engage in peer-to-peer (P2P) transactions covertly, though such activities carry significant legal risks, including hefty fines and imprisonment. The CBE has warned banks and individuals against crypto-related activities, mandating banks to block digital currency transactions.

Regulatory Framework

The primary legal framework governing cryptocurrencies in Egypt is Law No. 194 of 2020, which empowers the CBE to oversee all financial transactions and payment systems. This law does not provide a regulatory framework for cryptocurrencies but outright prohibits them. Digital assets like DeFi protocols and NFTs lack specific regulations, leaving them in a legal gray area.

The CBE justifies the ban by emphasizing the need to maintain financial stability and protect consumers. The volatility of cryptocurrencies and the lack of governmental oversight are viewed as threats to Egypt’s monetary objectives, particularly given its history of currency devaluations and economic challenges. The government also perceives cryptocurrencies as potential conduits for illegal activities, prompting stringent measures to curb their use.

The Most Popular Exchanges and Exchange Methods

Due to the legal ban, no licensed cryptocurrency exchanges operate in Egypt. Major international exchanges like Binance, Coinbase, and Kraken do not offer services in Egypt, as they adhere to local regulations. Some users bypass restrictions using VPNs to access international platforms, but this is illegal and exposes them to legal and financial risks.

P2P trading is the predominant method for cryptocurrency transactions in Egypt. Platforms like LocalBitcoins and Paxful facilitate direct trading, though regulatory pressures have made their operations increasingly difficult. Informal P2P markets also exist on social media and encrypted messaging apps like Telegram, relying on cash exchanges or mobile payment apps like Vodafone Cash. These methods operate in a legal gray zone and are susceptible to fraud.

DeFi and NFT Markets

The cryptocurrency ban severely restricts DeFi and NFT activities in Egypt. DeFi, encompassing decentralized lending, borrowing, and trading protocols, relies on cryptocurrencies and blockchain networks like Ethereum. The ban renders DeFi inaccessible to most Egyptians, with no local DeFi platforms available. Some tech-savvy users may access protocols like Uniswap or Aave using VPNs and offshore wallets, but such activities are limited.

The NFT market, involving the creation and trading of unique digital assets on blockchains, is virtually nonexistent in Egypt. Global interest in NFTs for digital art, collectibles, and virtual real estate has not translated to Egypt due to cryptocurrency restrictions. No prominent Egyptian NFT marketplaces or creators operate openly, and any NFT trading likely occurs covertly.

Additional Information

• Cryptocurrency ban enforced by the CBE under Law No. 194 of 2020.
• Fatwa issued by Dar al-Ifta in 2018 declares Bitcoin transactions haram.
• Unlawful crypto activities may result in fines and/or imprisonment.
• No licensed exchanges; P2P trading is the primary method.
• No specific crypto tax laws, as all crypto activities are prohibited.

Regulatory Bodies and Laws

Entity/Law	Role/Description
Central Bank of Egypt (CBE)	Enforces cryptocurrency ban and regulates financial transactions under Law No. 194.
Law No. 194 of 2020	Prohibits all cryptocurrency activities, including trading and payments.
Dar al-Ifta	Issued 2018 fatwa declaring Bitcoin transactions haram under Islamic law.
Egyptian Financial Regulatory Authority (FRA)	Oversees non-banking financial markets but has no specific crypto regulations.

Conclusion

Egypt’s stringent regulatory stance, driven by Law No. 194 of 2020 and the 2018 Dar al-Ifta fatwa, significantly hinders cryptocurrency adoption. Trading, DeFi, and NFT markets are effectively illegal and inaccessible to most Egyptians. Informal P2P trading persists but carries substantial legal risks. For Egypt to engage in the global digital asset market, a shift in regulatory policy would be necessary.