Date: 23 January 2018
Source: Al-Wafd via The Egyptian Center for Economic Studies (ECES)
The Central Bank of Egypt (CBE) warned against dealing in all types of encrypted virtual currencies, particularly the Bitcoin. The CBE said in a statement: "In light of the Central Bank of Egypt’s follow-up of recent news about encrypted virtual currencies, such as Bitcoin and others, the Central Bank reiterates its warnings about dealing in all types of these currencies, including Bitcoin. Dealing in those currencies involves high risks due to their price instability and volatility as a result of (unmonitored) global speculations, rendering investment in these currencies risky and warns of the possibility of a sudden loss of their full value".
· Bitcoin has become the focus of interest and study of many central banks, governments and financial institutions around the world, including Egypt. But many questions surround this digital currency. It is a term that is almost ambiguous for common people and investors alike, as they do not know the meaning of this currency, its means of trading, and the legality of dealing in it locally and globally.
· Despite warnings from the Central Bank of Egypt against dealing in all types of encrypted virtual currencies, including the Bitcoin, this has not prevented precursors of their spreading in Egypt, according to a number of Egyptian news sites. This could be a result of not taking decisive actions towards establishing its illegality, as neither the Egyptian government nor the Parliament has announced a law that officially prohibits dealing in Bitcoin or other digital currencies, imposes a penalty in this regard, and provides a justification of the Egyptian stance in terms of its seriousness to both individuals and the economy. It should be made clear whether the warning is about digital currencies in general or about the Bitcoin in its current form only, and whether it is a temporary decision until the legislative and technological structure is completed and the central bank gains control of this type of currency or a permanent decision a permanent decision that is based on specialized studies conducted by CBE. These decisions need clear and quick answers to protect the Egyptian citizen who may decide to deal in these currencies in light of the economic difficulties in search of large and rapid gains, which may negatively affect the Egyptian economy as a whole.
· Notably, countries around the world, whether developed or developing, are divided over the recognition of this currency. Both Germany and Japan have officially recognized Bitcoin as a digital currency. Germany has also imposed taxes on corporate profits from trading in the Bitcoin. Canada has allowed the trading in Bitcoin, although it has not officially recognized it. England, on the other hand, is in the process of issuing an encrypted digital currency linked to the sterling pound, which means that it accepts this type of currency in general. This would encourage citizens of many countries, including Egypt, to deal in this currency despite warnings. On the other hand, some countries banned dealing in these virtual currencies, and even enacted sanctions on dealing in them, such as China, Russia and a number of Arab countries such as Jordan, the UAE and Saudi Arabia, citing that these transactions are risky, and lack an institutional structure to regulate them. Also, the identity of dealers is not disclosed, which may make them a means of money laundering.
· Therefore, there is a need to conduct technical studies in Egypt in this regard in order to reach a decision on a sound scientific basis that copes with global developments, in light of international non-consensus on the safety or risk of dealing in these currencies.
Worthy of Note:
· Bitcoin is a virtual digital currency, first introduced in 2009 by a software developer called Satoshi Nakamato. This currency is not printed, nor is it covered by tangible assets such as traditional currencies, and is traded through the Internet. This is in addition to the fact that they are not issued through central banks, and are not subject to any governmental control or supervision from any regulatory authority. Therefore, sales and purchases cannot be tracked, since they do not have a serial number associated with them.
· A Bitcoin wallet is controlled only by its owner who has a unique user name and password. Bitcoin exchange takes place through thousands of computers and laptops around the world, and it can be used in selling and purchasing goods and services online.
· Though Blockchain technology has been associated with the bitcoin, it has many other useful uses.
· The idea of cryptocurrencies is taken from video games.