The Current Status of Crypto Adoption in Benin
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Cryptocurrencies have taken off in many ways in Benin, and this is due to factors like restricted access to traditional banking services and a strong desire for financial inclusion. Since 3.6 million of the adult population of Benin does not have access to banking solutions, most people tend to seek other solutions like cryptocurrencies that offer easier and decentralized ways of storing and transferring money.
The widespread use of mobile technology is another factor driving adoption: with 83% of Beninese people owning a phone, many have progressively begun to use cryptocurrencies for cross-border payments and as a means of protecting their values. Digital wallets have made it possible for people to send and receive money without using traditional banks, which is a crucial option in a nation where bank infrastructure is still scarce.
However, precise data on cryptocurrency ownership in Benin is not as easily accessible as it is, for example, in other African countries such as Nigeria, where crypto ownership is estimated to be around 46%. Even so, available data does reveal that adoption rates are rising gradually as improved access to digital financial tools and mobile internet becomes available. As crypto usage spreads, the government is taking steps to establish some level of regulation for safe use.
Crypto Law in Benin
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Cryptocurrency regulation in Benin is at the developmental and experimental stage, with credible strides to bring the policy up to international financial standards. Benin is collaborating with ECOWAS and other members of the West African Economic and Monetary Union to create policies that ensure all virtual assets adhere to local, national, and international financial laws.
Being a member state, Benin adheres to ECOWAS regional drives toward harmonization of cryptocurrency regulations within the West African sub-region and also sets out directives to curb the possibility of fraud and money laundering .
Benin passed Law No. 2024-0 on February 20, 2024, following the WAEMU's directive on anti-money laundering and financing terrorism. This law focused on Virtual Asset Service Providers (VASPs) and regulated their activities in the country. In light of the law, it has been mandated that prospective VASPs shall obtain preliminary approval or preliminary authorization from relevant authorities before providing services in Benin to ensure they meet certain qualifications on transparency, security, and adherence to AML/CFT laws.
Law No. 2024-01 is one of the many initiatives by the Beninese government concerning the use of cryptocurrency for fraud, money laundering, and terrorism financing risks. By imposing strict regulatory policies, Benin plans to protect its citizens against the risks that come with virtual assets while assuring interested parties of a secure environment to trade and invest in cryptocurrencies.
Likewise, the Ministry of Economy and Finance has also been quite vocal in warning all citizens about unregulated cryptocurrency investments. Through a public statement, the Ministry warned against fraudsters masquerading as cryptocurrency trading experts who promise people that investing their savings in highly volatile virtual assets would yield very impressive returns. Besides that, the Ministry has reiterated that though cryptocurrencies are an innovation, they cannot replace the traditional currency nor be used legally as a means of payment in the Benin Republic.
Being a member of the West African Economic and Monetary Union, legal tender in Benin is still the CFA franc (FCFA), and any promotion of cryptocurrencies as a substitute for traditional money is considered illegal. As such, Law No. 2024-01 expresses Benin's commitment to maintaining the financial integrity of the WAEMU while exploring the possible benefits of the digital economy.
Taxation of Cryptocurrency in Benin
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The General Tax Code in Benin serves as the primary regulation for cryptocurrency taxes, as it is classified as intangible property. While other legal frameworks are being developed, this tax regulation focuses on the transaction's income and capital gains. This means that cryptocurrencies are subject to both capital gains and income taxes in Benin and all parties. In addition, it's important to maintain accurate records of all cryptocurrency transactions.
Crypto enthusiasts in Benin are required to comply with the tax regulations and to carry out accurate tax reporting, such individuals must keep accurate books and records of all purchases and sales. Although Benin's recently implemented VAT tax code (Article 224 of GTC; Tax Administration Note of 2023) targets cross-border digital services. This may also apply to services related to cryptocurrencies offered through e-commerce platforms. Nonresident platforms providing such services to consumers in Benin may be required to pay VAT, especially in Business-to-Consumer (B2C) transactions.
For failure to comply with the application of tax regulations on cryptocurrencies, penalties involve fines and the noncompliant entity being listed publicly.
Factors Driving Crypto Adoption in Benin
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Statistics predict that there will be 196,500 crypto users in Benin in 2025, demonstrating the country's growing interest in cryptocurrencies. This is commendable despite Benin's average revenue per user being just US$8.8. Factors affecting Benin's adoption of cryptocurrencies include:
Financial Inclusion
The biggest force behind the adoption of cryptocurrencies in Benin is achieving greater financial inclusion. A large population is underbanked or unbanked in Benin, indicating an inability to access any form of financial services officially. Blockchain technology as well as cryptocurrency provides a barrier-free alternative to traditional banking systems.
Cross-border payments and remittances
Just like other developing nations, Benin is heavily dependent on remittances from its diaspora community. With traditional remittance channels, these transactions are typically affected by high transaction costs and stressful withdrawal processes. Meanwhile, with cryptocurrency, transactions can be done more quickly and affordably as the lack of middlemen lowers costs, making them very feasible for Beninese families and businesses.
Rising Digital Literacy
Another factor is Benin's growing usage of mobile phones and increased digital literacy. Due to the growth in the use of mobile wallets and other mobile-centric financial services, the majority of people now find digital financial management to be more comfortable. Beninese are more inclined to adopt cryptocurrencies and use them for their day-to-day activities.
Economic Instability
Benin experiences economic instability, which can affect access to banking solutions and the value of its currency. The decentralization of cryptocurrencies makes them immune to external pressures that cause local currency devaluation.
Challenges Facing Crypto Adoption in Benin
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Benin is still far away from using cryptocurrencies, despite crypto's popularity all over the world. Crypto usage in Benin is still quite low, despite Benin's 106% mobile phone ownership and 33% internet access, and here's why:
Possible Security Concerns
The entire cryptocurrency ecosystem in Benin still suffers numerous security issues, even though cryptocurrency transactions themselves are safe. The potential for cyber threats, phishing schemes, hacking incidents, and vulnerabilities in smart contracts makes many prospective users in Benin wary of using cryptocurrencies.
Uncertain Government Policies
In Benin, the legal framework surrounding virtual currencies is still complex despite their increasing global appeal. Lack of clarity in regulation diminishes further crypto adoption as users are aware of no rule concurrence and the risks associated with that.
Barriers to Use Entry
Only those who are tech-aware or have the time to learn blockchain technology can use cryptocurrencies in Benin. The average person must possess basic to intermediate knowledge to benefit from cryptocurrency in everyday transactions. Moreover, this mode of payment is also not accepted by many retailers.
Volatility
The adoption of cryptocurrencies can be traced to the extreme volatility of cryptocurrency. Like many other developing nations, the lack of government regulatory policies and the decentralized nature limits usage. This factor further justifies why Beninese are less likely to adopt crypto.
Potential Benefits of Crypto Adoption in Benin
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Below are some possible benefits of cryptocurrency adoption in Benin:
Saving Opportunities
Cryptocurrencies allow Beninese to save their funds, which is particularly helpful in areas where the traditional banking system is inaccessible. They are assured that their resources are safe from problems like digital failures, corruption, and low liquidity that traditional banks suffer from.
Faster cross-border remittances
For families and individuals who depend wholly or partially on cross-border remittances, cryptocurrency simplifies the process of receiving funds. Unlike traditional remittances that require high transaction fees and are also slow in processing huge amounts of money, families can enjoy the opposite with crypto transactions.
Financial Liberty
Decentralization positions cryptocurrency as the solution to achieving total financial liberty. Beninese can access digital tools free from government control, as no central organization can control a coin's worth, flow, or transaction volume.
Access to Diverse Investment
Since its first public adoption in 2009, cryptocurrency has exceedingly outperformed other forms of investment and increased investors' returns. Beninese can get access to a wide range of crypto coins and assets to invest in. There is also an in-depth analysis, documenting how each coin has fared over the past few years. This makes cryptocurrency an attractive choice for those interested in investing in other assets.
Conclusion
Cryptocurrency provides a starting point for broader financial inclusion as dependence on traditional bank solutions reduces. This equally provides a chance for cross-border transactions to be performed faster and at a cheaper rate, benefiting Benin's developing population of mobile and internet users.
Benin must continue to focus on the right actions to improve crypto adoption, even though various hindrances exist. For Benin to join the rest of the world, they must focus on making the public and merchants more aware of the advantages and risks of cryptocurrencies.
