Overview of Samoa’s Economy
Samoa’s economy relies heavily on tourism, agriculture, remittances, and foreign aid, making it vulnerable to global crises and natural disasters. The primary export markets for Samoa include the United States, India, New Zealand, and Hungary.
Its main import partners are China, Singapore, New Zealand, South Korea, and the United States. However, the vale of imports significantly exceeds exports.
Agriculture is a key sector in the country, employing about two-thirds of the workforce and accounting for 9% of the nation’s exports. Staple crops in the country include coconuts, bananas, cocoa, and copra.
Fishing also plays a crucial role in both the economy and the local diet, with roughly 25% of households depending on it for income. As stated earlier, Samoa’s economy is vulnerable to global crises and this was evident during the COVID-19 pandemic.
The pandemic had a severe impact on the country, further pushing the economy into a deep recession. As a result, in July 2021, the World Bank downgraded Samoa’s status from an “upper-middle-income” to a “lower-middle-income” country.
This downgrade was largely due to declines in tourism, business services, transportation, and communications. Luckily, after a challenging period during and after the COVID-19 pandemic, Samoa’s economy showed a strong recovery in 2023.
This rebound was largely driven by tourism, which has nearly returned to pre-pandemic levels. However, the economy remains highly dependent on remittances and foreign aid, with limited diversification.
Samoa is also highly susceptible to natural disasters, including the infamous 2009 earthquake and tsunami and severe cyclones in 2012 and 2018. These disasters together inflicted economic losses and destroyed several properties in the country.
“Our house has been taken by the tsunami and we have lost everything. Everything dropped on the floor and we thought the house was going to go down as well. Thank God, it didn’t.”
Current State of Crypto Adoption in Samoa
Source: Pixabay
The Central Bank of Samoa (CBS) has consistently warned the public about the risks of investing in cryptocurrencies like Bitcoin, OneCoin, Ethereum, EOS, and Litecoin. In a 2017 statement, the Bank advised people to be cautious and fully understand how these investments work.
The Bank also pointed out the speculative nature and lack of regulation in the digital currency market. They also encouraged individuals to contact the Bank if they had any doubts about these ventures.
“There is currently a lack of information and public awareness as to how this cryptocurrency works, as such, this will often lead to people making ill-informed decisions, such as investing in get-rich-quick schemes!”
The Bank has since launched extensive awareness campaigns to educate the public on the dangers of speculative schemes and unregulated crypto investment. The Government noted that these campaigns are important, especially as promotions targeting Samoan investors continue to rise.
“We have had people from overseas who came here to promote this scheme and we had them visit the Central Bank of Samoa (C.B.S.) and the end result was that this is just that – a scheme.”
Furthermore, specific schemes like OneCoin, a “Hybrid Ponzi-Pyramid Scheme” have attracted attention for allegedly promising high rewards while carrying significant risk. The C.B.S. therefore warned investors to avoid such schemes.
This warning came after learning of fraudulent activities linked to OneCoin, including police raids at its headquarters in Bulgaria. In response, Samoa’s Exchange Controls Regulations prohibit transferring funds out of the country for OneCoin transactions without the Central Bank’s approval.
The CBS also moved to amend the Anti-Money Laundering Prevention Act of 2007 to address these issues. In June 2018, Parliament endorsed these updates to strengthen laws on money laundering and counter-terrorist financing.
These laws aimed to help protect Samoa’s financial infrastructure from the impact of unregulated digital currencies. In 2023, the Government of Samoa clarified that it had not endorsed new initiatives like the Samoa Stock Exchange, Samoa Digital Asset Exchange, or the Oceania Special Economic Zone.
The Government stressed that it would only support projects that have undergone a thorough review and are proven to be safe, beneficial, and sound for the Samoan economy and its people.
Challenges to Crypto Adoption in Samoa
Source: Freepik
Adopting cryptocurrencies in Samoa faces several significant hurdles, largely due to economic, regulatory, and societal factors. Despite the growing global interest in digital currencies, Samoa’s cautious regulatory approach makes widespread crypto adoption challenging.
Here’s a look at these barriers to adopting crypto in Samoa:
Lack of Regulation and Legal Framework
One of the most pressing issues is the absence of a clear regulatory framework for cryptocurrencies. The Central Bank of Samoa (C.B.S.) has not recognized digital currencies as legal tender, leaving the industry unregulated.
This lack of regulation creates uncertainty for potential investors and businesses, making it difficult for them to operate securely within the market.
Without proper guidelines, there is no legal protection for consumers against fraud, scams, or loss of investment. Thus, these problems further discourage many from engaging with digital currencies.
Economic Vulnerability
Samoa’s economy heavily relies on tourism, agriculture, remittances, and foreign aid. This makes it vulnerable to external shocks like natural disasters and global economic downturns.
Given these economic sensitivities, the government and financial regulators are highly risk-averse, prioritizing stability over the volatile nature of cryptocurrencies.
Also, investments in digital currencies are considered speculative and high-risk. Consequently, this may not align well with the country’s focus on economic resilience and safeguarding its limited financial resources.
Public Skepticism and Low Awareness
Another significant barrier to crypto adoption in Samoa is the general public’s lack of knowledge about digital currencies and blockchain technology. Many people do not fully understand how cryptocurrencies work or the risks involved.
The Central Bank has issued several warnings about the speculative nature of digital currencies, advising the public to be cautious. High-profile scams like OneCoin, which targeted Samoan investors, have further deepened these speculations.
As a result, many people view cryptocurrency investments as risky or outright fraudulent.
Concerns Over Security and Fraud
Security issues are a major challenge for crypto adoption in Samoa. The risk of cybercrime, hacking, and fraud is high, especially given the lack of robust cybersecurity measures.
Without strong protections in place, potential investors are at risk of losing their money to phishing schemes, hacking incidents, or fraudulent projects. This fear of losing hard-earned money keeps many Samoans away from exploring digital currencies as a viable investment option.
Limited Access to Technology and Internet Services
For widespread crypto adoption, reliable internet access is crucial. However, in Samoa, internet penetration is relatively low, particularly in rural areas.
Many people lack access to smartphones, computers, or high-speed internet, which are necessary tools for engaging with digital currencies. This digital divide means that a significant portion of the population cannot easily access or use crypto platforms, limiting the potential user base.
Focus on Traditional Economic Stability
Samoa’s government and financial regulators prioritize economic stability and protecting citizens from volatile investments. Given the country’s reliance on remittances and external aid, any financial disruptions can have serious consequences.
The Central Bank of Samoa has expressed concerns that the unregulated nature of cryptocurrencies could pose risks to the financial system. This stance thus reflects the government’s preference for safer, more stable financial solutions.
Climate Change and Natural Disasters
Samoa is particularly vulnerable to climate change and natural disasters like cyclones and tsunamis. These disasters usually disrupt economic activities and infrastructure.
In times of crisis, the focus shifts towards rebuilding and providing immediate relief rather than exploring new, speculative technologies like cryptocurrencies. This prioritization of urgent needs further slows the adoption of digital currencies as the nation deals with pressing environmental and economic challenges.
Lack of Local Cryptocurrency Platforms
Currently, there are no significant local exchanges or platforms to facilitate the trading of cryptocurrencies in Samoa. Without local infrastructure, people interested in investing have to rely on international exchanges.
This can be complicated and intimidating for new users. Additionally, using foreign platforms may involve high transaction fees, currency conversion costs, and issues with regulatory compliance, all of which can discourage participation.
Potential Benefits of Crypto Adoption in Samoa
Source: Freepik
While Samoa faces several challenges in adopting cryptocurrencies, there are also promising opportunities that could bring significant benefits to the nation.
Here’s how crypto adoption could positively impact Samoa:
Economic Diversification and Growth
As stated earlier, Samoa’s economy is heavily reliant on tourism, agriculture, and remittances, which makes it vulnerable to external shocks like natural disasters. Introducing and integrating cryptocurrencies into the economy could help diversify Samoa’s economic activities.
By embracing digital currencies and blockchain technology, Samoa could attract foreign investors, fintech startups, and digital entrepreneurs looking to explore new markets.
This influx of innovation could stimulate economic growth, create jobs, and bring new opportunities to the local market. Additionally, by positioning itself as a crypto-friendly destination, Samoa could attract tech-savvy tourists and digital nomads, further boosting the economy.
Hedge Against Economic Instability
For a small economy like Samoa, cryptocurrencies could offer an alternative store of value or a hedge against inflation. During times of economic instability, traditional financial assets may lose value.
However, certain cryptocurrencies, especially stablecoins, can offer a more stable alternative. This flexibility can also be highly valuable for aid organizations and the government, helping them respond to crises more quickly and effectively.
Opportunities for Government Revenue through Regulation
By developing a regulatory framework around cryptocurrency, the Samoan government could potentially earn revenue through crypto taxes. They can also gain revenue through licensing fees associated with digital currency activities.
For example, exchanges and crypto businesses operating in Samoa could contribute to government revenue, which can then be reinvested into public services or infrastructure. Thoughtful regulation could help Samoa create a safe, structured environment for crypto transactions.
Increased Financial Literacy and Technological Skills
Another benefit of crypto adoption in Samoa is that it could encourage more people to learn about digital finance and blockchain technology. This, in turn, would drive up levels of financial literacy and technology skills among the population, especially the younger ones.
Educational programs and initiatives focused on blockchain and digital assets could equip Samoans with skills that are increasingly valuable in the global economy.
Access to Global Markets
By adopting cryptocurrency, Samoan businesses could access global markets more easily. Small businesses and artisans in Samoa could use cryptocurrency as a way to accept payments from international customers.
This can also open up new revenue streams and increase Samoa’s visibility in the global marketplace. Small and medium-sized enterprises (SMEs) in Samoa could expand their customer base by leveraging cryptocurrencies to reach overseas customers.
Improved Financial Inclusion
Samoa has a significant population that lacks access to traditional banking services, especially in rural areas. Cryptocurrency could enable financial inclusion by allowing people to make transactions and store assets without needing a bank account.
With mobile devices and internet connectivity, individuals could participate in the digital economy, manage savings, and engage in secure financial transactions. For Samoans living in remote areas, cryptocurrency could also provide an alternative to the conventional banking system.
Conclusion
Cryptocurrency in Samoa remains unregulated, with the Central Bank cautioning the public about the risks associated with digital currencies. Additionally, significant challenges to crypto adoption in Samoa such as regulatory uncertainty and scams persist.
However, as the world increasingly moves toward digital currencies, there are potential benefits for Samoa. These benefits include increased financial inclusion and new economic opportunities.
For crypto to gain traction in Samoa, the government has to establish regulatory frameworks and enhance public understanding to ensure safe adoption. While the country remains cautious, the future of crypto adoption in Samoa will depend on balancing innovation with safeguarding its economy and people.
