by Jamie Holmes
Egypt will see its first bitcoin exchange, Bitcoin Egypt, launch at the end of August. Citizens gain direct access to the cryptocurrency for the first time.
International bitcoin exchanges have refused to deal with Egyptian Pound, acting as a barrier to adoption. Acquiring bitcoin can be done via LocalBitcoins or with money exchangers who work with other payment methods. Two entrepreneurs from Alexandria, Rami Khalil and Omar Abdelrasoul, want to change this.
“We got the idea after we saw that there were lots of people in Egypt who wanted to trade cryptocurrencies but they were a hard time doing it on international exchanges as they were unable to buy coins using Egyptian Pound (EGP). So we decided to offer a solution by giving them the chance to trade using the EGP.”
Egyptian’s have suffered a severe loss of purchasing power of their national currency. The central bank devalued the currency in November as part of a deal with the IMF for a three-year loan for $12 billion. Since the devaluation, the Egyptian Pound lost more than 50 percent of its value against the US Dollar, illustrated by the chart below.
While a currency devaluation is good for bringing in investment from overseas, it has hit savers and lower-income groups hard. And with most of the population under the poverty line, it is doubtful whether the government can prescribe a policy solution for the detrimental effect on low-income households.
The weaker currency may have increased investment, but inflation has skyrocketed to 30 percent, with a potential side effect being that bitcoin will be a savior to Egyptians. With citizens feeling the pinch of austerity, it will be no surprise if Bitcoin Egypt is immensely popular when it launches at the end of August. With the number of bitcoin in existence never to exceed 21 million and the decreasing rate of money supply growth, countries that have experienced sharp increases in inflation, such as Venezuela, have adopted bitcoin widely. The cryptocurrency provides them one of their only safe spaces if the economy is experiencing catastrophe.
However, Sherif Samy, Chairman of the Egyptian Financial Supervisory Authority, recently warned the public that no legal protections exist for bitcoin.
With bitcoin’s resistance against devaluations, like the one the Egyptian government undertook, the cryptocurrency could become very popular as the population senses a deepening economic crisis. In a similar vein to how the IMF destroyed Latin American economies in the 1980’s, Egypt has privatized state assets (and sold two islands in the Red Sea to Saudi Arabia) to stay afloat.
The effects of the IMF policies on Argentina’s economy is still a fresh memory. A similar austerity plan introduced in the 1980’s saw living standards decline. The IMF even admitted to exacerbating Argentina’s currency crisis in the early 2000’s. The results of these interventions have been negative. And by no accident, it is a region of the world where bitcoin is very popular.
Could Egypt follow in the footsteps of India, and become a major hub for bitcoin trading in a short period? Austerity will have lasting economic impacts. Bitcoin Egypt has arrived at the right time. Furthermore, the birth of an EGP-denominated exchange bodes well for the future of the Bitcoin ecosystem in Egypt, according to Abdelrasoul:
“We think it will bring lots of positivity for Egypt with lots of opportunities for innovation and development. Now that there is an exchange accepting EGP, it will allow people to start developing applications and uses for Bitcoin in Egypt.”