Current Economic Situation in Burundi
Source: World Bank Data
With a population of 13.2 million people (2023), 50.3% of whom are women and 41.5% young people under 15, Burundi is one of the most densely populated countries in the world with a GDP of 262.17 US dollars recorded in 2023.
Currently, the Burundian franc (BIF ), exchanges at 2,861 BIF per USD. A fitting conversion for a country classified as a low-income economy and with 80% of its population employed in the agricultural sector.
Reports show that Burundi's economic growth is modest but faces several challenges. A recent study shows that economic growth accelerated to 2.7% in 2023, up from 1.8% in 2022, a growth brought about by favorable rainfall and increased government investment. However, growth is expected to slow to 2.2% in 2024, as persistent fuel and foreign exchange shortages continue to weigh on the economy.
Crypto Law in Burundi
Source: Grok
Cryptocurrency and its trading are banned in Burundi, with the Bank of the Republic of Burundi, under then-president Pierre Nkurunziza, issuing a statement.
A snippet from the statement read “ Since virtual currencies or cryptocurrencies are not regulated and are not issued or guaranteed by any Government or Central Bank, these currencies do not have legal tender in the territory of Burundi.”
Regarding penalties that could be faced by defaulters, Alfred Nyobewumusi, a director at the central bank’s micro-finance department, said: “Strong measures could be taken against all those who will not respect this decision.”
Current State of Adoption in Burundi
There is a global increase in the adoption of cryptocurrency. And despite the setback currently faced as a result of the ban on cryptocurrency, Burundi is not immune to this trend, as digital currencies gain popularity as an alternative to traditional financial systems, offering increased financial inclusion for all.
With pre-ban analysis showing that the crypto ecosystem was beginning to gather steam, the effect of the ban was really profound.
Activities are still being carried out using cryptocurrencies though, as research projects a significant revenue growth, reaching US$51,100 by 2024. Looking ahead, the number of users in the Burundian cryptocurrency market is expected to grow significantly, reaching 30,520 users by 2025. And the user penetration rate, which stands at 0.22% in 2024, is expected to double to 0.44% by 2025.
Source: Statista
It is hoped that the government listens to the increasing pleas from its citizens to lift the ban, as it offers them the opportunity to be more financially inclusive.
Challenges to Crypto Adoption
Source: Grok
The 2019 ban was enacted as a result of complaints from the citizens regarding lost cryptocurrency through fraudulent crypto schemes, this led to the government clarifying that cryptocurrency was not a legal financial asset in the country hence it could not assist in recovering funds lost through such transactions.
This response partly prompted the government’s decision to ban cryptocurrency activities to prevent further financial losses among citizens. Current challenges to adoption include:
Government Ban on Cryptocurrency Trading
The most obvious challenge faced remains the government ban. This creates an atmosphere of uncertainty and illegality around the sector, making it difficult to engage with. With the ban covering every aspect of crypto trading and promotion of digital currencies, this has had a direct impact on individuals and businesses that had begun to venture into this new financial frontier, leaving them with limited options and raising concerns about the future of financial innovation in Burundi.
Security Concerns And Fraud Risks
These concerns were one of the initial reasons leading to the government ban, as the Burundian government sought to curtail the risk associated with the trading of crypto assets.
This though should not be a valid enough reason to cause the complete ban of cryptocurrency, as regulations and proper awareness could be set in place to mitigate these concerns.
Lack Of Proper Public Awareness
Another major factor challenging the adoption of cryptocurrency in Burundi is the lack of proper public awareness. This is evident in the fact that most citizens have no idea of how cryptocurrency works and what regulations surround it.
With the government's ban on crypto, it is also not possible to have mainstream awareness campaigns.
Economic Instability
The economy of Burundi is focused mainly on agriculture, with agriculture making up 32.9% of their GDP, and 89% of their labour force by occupation. According to the International Monetary Fund (IMF), Burundi’s economic performance since 2000 has been “highly unstable with a tendentially decreasing GDP growth rate.”
While circumstances like this often push countries to search for viable alternatives for economic growth such as the adoption of cryptocurrency, it has in the case of the Burundians, made their access to it more difficult and inadvertently slowed down chances of adoption.
Potential Benefits of Crypto Adoption
Source: Grok
As seen in other countries where Cryptocurrency has been fully or even partly adopted, the pros of crypto adoption far outweigh the cons. And for an economy as fragile as the one in Burundi, it offers citizens an avenue to better their lives.
Other potential benefits include:
- Financial Inclusion: As a result of the unstable economy many traditional banks are either closed or unreliable, as a result, cryptocurrencies could provide an alternative method for financial transactions. This is important for people without full access to traditional banking services.
- Economic Stability: Cryptocurrencies can act as a hedge against the volatility of the local currency and economic instability. People can store their wealth in digital assets that are less susceptible to local economic issues.
- Entrepreneurship and Innovation: The adoption of cryptocurrencies can spur innovation and entrepreneurship. For instance, local businesses can engage in global trade more easily, and new tech startups can emerge, leveraging blockchain technology.
- Humanitarian Aid: Cryptocurrencies can also streamline the distribution of humanitarian aid, ensuring that funds reach those in need without the risk of corruption or mismanagement.
Factors That Could Drive Adoption
As seen above, the adoption of cryptocurrency greatly opens up several opportunities to the average citizen of Burundi, and as such active participation should be encouraged. Below are some factors that could aid in Burundi's adoption of cryptocurrency.
- Infrastructure Development: The more infrastructurally advanced a society becomes, the more open it is to innovation. With an increase in infrastructural amenities like reliable internet connection, steady power, and so forth, the citizens of Burundi would be better enabled to participate in the crypto ecosystem.
- Digital Literacy Programs: One of the adoption challenges is the fear of fraud and theft. Creating educational programs to sensitize the public about blockchain technology, cryptocurrency, and financial management would help build trust and confidence in crypto use and, in the process, aid adoption.
- Clear Regulations: A major push for adoption would be the Burundian government establishing clear, supportive regulations that protect consumers while encouraging active participation. As we have seen, a lack of regulation or an overly strict approach could slow down adoption.
- Lower Transaction Costs: Cryptocurrency can reduce the cost of remittances, which is critical for Burundi’s large diaspora community. Remittances contribute significantly to the economy, and offering low-fee, fast cross-border crypto payments would be a key incentive.
- Blockchain Solutions for Governance and Transparency: A part of the Burundian revenue comes from external aid and humanitarian bodies. The government could leverage blockchain for transparency in public finance management and governance, boosting adoption through public-sector use cases.
Conclusion
While Burundi's cryptocurrency ban has undoubtedly impacted the ecosystem, it hasn't halted progress entirely. Though engagement levels have yet to return to what they were before the ban, there is clear potential for growth.
The ban, though well-intentioned, restricts many Burundians from accessing the financial inclusion that crypto offers. A more balanced approach—through regulatory frameworks and educational campaigns—could unlock these opportunities while mitigating risks.
Burundi already has the foundation for a thriving crypto community. With the right support and policies, the future looks promising for crypto enthusiasts in the country.
