Profits and arrests: The Egyptian regime is floundering faced with Bitcoin

An ambiguous position, incomprehensible procedures, and illegal accusations. This is the summary of the confusion in which the Egyptian regime and its economic officials have lived during the past years in the face of the spread of electronic currencies in Egypt.

Electronic currencies, or cryptocurrency known as Bitcoin, have received great popularity among citizens in Egypt during the last period, despite the Central Bank of Egypt’s warnings. Faced with the huge demand for new technology which is widespread in Egypt, especially after the large profits recently achieved by Bitcoin, officials in Egypt tried to understand the situation and issue legislation to legalise it.

The Central Bank of Egypt announced that it is preparing a draft law to regulate work in the trade and issuance of electronic currencies under certain conditions, which was interpreted by some as a retraction after previous warnings. The procedures remained slow as usual, and the conditions announced by the Central Bank were not understood, and what increased the confusion was the arrest campaigns launched by the security services on some of the Bitcoin miners during the past months.

The Ministry of the Interior arrested some of them and confiscated their devices, claiming that they were doing work that harms the Egyptian economy and the national currency, and charged them with fraud and electronic fraud. Human rights defenders said the accusations were vague, and that there is no legal conflict between Egyptian law and personal mining operations, in principle. Last January, the security services blocked Egyptian users from accessing many new technology platforms and websites, such as the Chinese Binance platform.

Spread and dividends

This week, the most famous virtual currency’s price hit a new record in trading, reaching $22,160, amid increasing demand for high-risk investments. Investors found in virtual currencies a feasible investment tool after the decline in gold prices and the dollar. Virtual currencies turned out to be, over the past eight months, a safe haven for dealers due to the coronavirus. The large profits recently pushed many citizens in Egypt to invest in these virtual currencies, as search indicators on Google showed that they are among the most searched words in Egypt.

The reports of the Egyptian Centre for Economic Studies said that despite the Central Bank of Egypt warnings against dealing in all kinds of virtual cryptocurrencies, this did not prevent its spread in Egypt. In August 2018, the Central Bank warned of those currencies and said in a statement that this virtual currency is not guaranteed by the banking system or the central bank, and dealings with it are carried out on the responsibility of those dealing with it. In turn, the Financial Supervisory Authority confirmed that it had not issued licences to establish an exchange to trade Bitcoin electronic currency or any other in Egypt and that the authority would pursue its founders. According to the CBE reports, the situation on the ground indicates that Egyptians penetrated the field of electronic currencies strongly, through intermediaries inside and outside Egypt, despite the bank’s repeated warnings.

Ambiguity and confusion

The new banking bill, which is currently being prepared, prohibits the creation of platforms or operation for issuing or trading cryptocurrencies or electronic money or promoting them without obtaining the necessary licences in advance. The new banking law granted the Board of Directors of the Central Bank of Egypt the right to issue rules regulating circulation and dealing with that type of currency and money.

Egyptian banks have not waited for the law to be passed. In April, the National Bank of Egypt joined the Blockchain R3 consortium. It is a consortium of more than 200 banks around the world trying to discover commercial applications powered by blockchain technology. In addition to revealing the strong entry of Egyptian business people into the field of cryptocurrencies, the joining of Egyptian banks to the alliance showed the extent of confusion and ambiguity surrounding the new technology among officials in Egypt. Security measures showed that ordinary individuals in Egypt do not enjoy the freedom that business people and banks enjoy when trading electronic currencies.

The Ministry of Interior arrested an Egyptian dentist in 2016 on charges of trafficking in Bitcoin via the popular local Bitcoin platform. The same happened last June when one of the miners of the blockchain-based cryptocurrency Ethereum was arrested, and security forces confiscated his mining equipment. The arrests have raised questions about the government’s legal basis to rely on criminalising individual citizens’ use of blockchain technology, whether mining or trading. Security measures and countering banking measures have raised questions about the government’s seriousness in adopting new technology after announcing the new bill.