The Current Status of Crypto Adoption in Côte d'Ivoire
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The financial system in Côte d'Ivoire is rapidly developing as more youths are embracing digital currencies and services. More than 1.5 million Ivorian adults use a mobile money account, indicating increased acceptance of digital financial services within everyday life.
This significant percentage of mobile users explains the increased attraction to cryptocurrencies as an alternative means to conventional banking.
Cote d'Ivoire's financial inclusion is hindered by several factors, as there are over 8 million unbanked adult population living in both rural and urban settings.
The use of cryptocurrencies comes in to bridge this gap as no third parties are required to facilitate transactions, enhancing the inclusivity of finances.
However, this situation has also been the same for other countries in Cote d'Ivoire, as there are no guidelines governing the operations of cryptocurrencies. Formal regulation aside, the adoption of cryptocurrency in the country of Cote d'Ivoire has greatly increased owing to the need for financial accessibility in the region where a majority of the citizens are unbanked.
In 2021, only 21% of Ivorians have access to any financial institution. However, access to cryptocurrencies will unlock more international trade, cross-border remittances, and investment opportunities than ever before.
More revealingly, the country is home to events that host popular cryptocurrency exchanges, which ease trading in digital assets. In view of the recent developments, experts predict future challenges regarding the use and acceptance of cryptocurrency in Côte d’Ivoire.
Crypto Law in Côte d'Ivoire
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As interest in cryptocurrency increases day by day in Côte d'Ivoire, there is still no legal and jurisprudence framework. However, one can highlight similar regulations concerning digital financial services and virtual currency use in the country.
Regulation has a critical bearing on the growth and adoption of digital finance services (DFS). Though specific Côte d'Ivoire legislation is yet to be handed down, the country's approach to the regulation of digital finance may presage future moves.
It's essential to highlight that the regional central bank within WAEMU, the BCEAO, has issued cautionary guidelines on the risks of cryptocurrency use. This body highlighted the possibility of fraudulent use, money laundering, and market volatility.
The key elements of the DFS regulatory framework for the development of financial services in Côte d'Ivoire revolve around the provision of electronic money to improve financial services. In theory, this principle could be applied in other cases, such as the regulation of virtual currencies, as well as operations with crypto exchanges and transactions involving other parties, such as wallet services and crypto agents.
“The BCEAO has the exclusive right to issue currency throughout the member States of the West African Monetary Union. It issues banknotes and coins that are legal tender and redeemable throughout the member States of the Union.” — The Central Bank of West African States (BCEAO)
For this reason, decisions made by this body are bound to make a significant difference within the entire union, thus affecting the financial outlook across the eight involved countries.
During the past couple of years, the BCEAO has kept a very conservative outlook toward digital currencies, something that consequently denied Côte d'Ivoire the ability to adopt and independently regulate cryptocurrencies.
In this regard, the position of BCEAO on digital currencies became particularly interesting in 2016 when rumors started to spread about the possible launch of a regional digital currency called eCFA—an official digital counterpart of the West African CFA franc (XOF), the common currency used in the WAEMU region.
Because the modern day is dominated by digital finances around the world, the launching of this digital currency has become very important in the WAEMU region due to increasing interest in CBCDs for what they might hold in financial inclusion and upgrading the payment system.
On April 17, 2017, BCEAO denied it was involved in the creation of the eCFA or planning to issue a regional digital currency. BCEAO explained that they were "not considering creating a digital currency in any of its member states"—distancing itself from the speculative reports previously emerging. This was disproved months after Senegal launched the eCFA.
On the part of the state, the Ivorian government has not initiated any process aimed at the regulation of cryptocurrencies. The government in power in Cote d'Ivoire has not ruled out the use of cryptocurrencies nor announced its prohibition.
Due to the silence with respect to their use, this places the cryptocurrency market in a difficult state. In addition, cryptocurrency is also not considered a legal tender, which means that as much as Ivoirians can buy and sell digital assets, they cannot use these in everyday transactions.
Taxation of Cryptocurrency in Côte d'Ivoire
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The concept of cryptocurrency taxation in Côte d'Ivoire is complex because the country does not have any legal tax regulations concerning digital currencies. Being a member of the WAEMU, regional policies and guidance from the BCEAO are primarily used for the country's financial regulation and cryptocurrency taxation.
While Côte d'Ivoire has implemented a sound system of taxation for DFS (e.g., mobile money), it has left the wider domain of cryptocurrencies largely unregulated. However, a review of the existing framework applicable in DFS taxation provides useful pointers on how future taxes related to cryptocurrency are likely to be constituted.
Côte d'Ivoire places an 18% value-added tax (VAT) levy on money transfer operations conducted by banking and non-banking institutions. In addition, there is a 10% tax levied on a wide range of banking services (excluding money transfer operations).
Adding to the long list of financial taxes, Côte d'Ivoire has also placed a 7.2% tax levy in January 2019 against companies using cell phones to conduct money transfer operations. This tax was further divided into 2% for rural digital development, 0.2% for cultural expenditures, 0.25% for fraud combat in the telecom industry, and 4.75% for general taxation.
Notably, the government has prevented passing any such taxes on to the consumer, hence making it entirely borne by the service providers themselves.
The fact that no legal framework has been set out leaves doubt as to how the government may ultimately tax the transactions of cryptocurrencies. We can only speculate on possible approaches the Ivorian government might make once formal regulations on cryptocurrencies are set based on the current DFS tax policies.
Factors Driving Crypto Adoption in Côte d'Ivoire
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While the status of Bitcoin is yet to be properly defined in Ivory Coast, over 800,000 Ivorians are predicted to become active crypto users. Some of the driving forces responsible for this progress include:
High Need for Financial Inclusion
The strong demand for financial inclusion is a major factor influencing the growth of cryptocurrency adoption within Côte d’Ivoire. Cryptocurrencies serve as an alternative option that will provide financial inclusion, allowing people to process transactions.
High International Remittances and Cross-Border Transactions
Money coming in from Ivorian expats has accounted for almost ten percent of the country's GDP for the past couple of years. The downside of receiving such financial relief lies in the archaic remittance services of traditional banks. Cryptocurrencies offer a quicker and cheaper way to send money back home, reducing time and costs.
Increased Technological Improvement
As per the data provided by the Telecommunications/ICT Regulatory Authority of West Africa in the year 2020, mobile phone penetration is said to have hit around 137.6% in Côte d'Ivoire. This suggests that, nowadays, many can purchase and trade digital assets because of mobile phones and better access to the internet.
Growing Awareness and Acceptance of Digital Financial Tools
These past years have helped raise awareness and increase acceptance of cryptocurrencies within Côte d'Ivoire. Social media, online forums, and community events played a major role in increasingly publicizing the benefits and potentials of digital currencies. With increased awareness, more people get attracted by what cryptocurrencies can offer; hence the increased popularity.
Possible Investment Opportunities
As global interest in cryptocurrencies surges, many Ivoirians look at digital assets as a viable point of investment. With the right knowledge of crypto trading, both younger and older generations would be willing to adopt digital assets over traditional ones.
Challenges Facing Crypto Adoption in Côte d'Ivoire
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In many other developing nations, including Côte d’Ivoire, the adoption of cryptocurrency is limited due to other internal factors. The following are some of the major challenges associated with the large-scale adoption of cryptocurrency in Côte d’Ivoire.
Absence of Government Regulations
The lack of a particular structure and proper regulation remains one of the major hindrances to cryptocurrency penetration in Cote d’Ivoire. In the absence of clear regulations outlining any policies, this activity becomes problematic for businesses and individuals wanting to engage in or invest in virtual currency.
Infrastructural Constraints
While there are positive reports about mobile and digital connectivity in Côte d'Ivoire, there are still many infrastructure-related challenges in the rural zones. On the upside, the high internet penetration level in Côte d'Ivoire gives room for enormous growth in the years to come.
Low Financial Literacy
Financial literacy is another severe challenge to the mainstream practices of cryptocurrencies in Côte d'Ivoire. The majority still lack basic knowledge about how crypto works, the risks involved, and how to securely store them. Furthermore, speculation in cryptocurrencies creates a situation in which many would not want to involve themselves with digital currencies.
Cybersecurity Concerns
Exposure to cybercrime and fraud in crypto is relatively high, which becomes even more worrisome in Côte d'Ivoire. The lack of regulation around cryptocurrencies exposes users to no protection when theft or fraud occurs.
Potential Benefits of Crypto Adoption in Côte d'Ivoire
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As Côte d'Ivoire struggles to find ways towards economic innovation, a wide array of potential benefits come with the adoption of cryptocurrencies. Below are the key potential benefits of wide crypto adoption in Côte d'Ivoire:
Cheaper remittance costs, faster transactions
Using cryptocurrency for remittances can significantly reduce the money transfer costs in Côte d'Ivoire, both for the transferor and transferee. It will also aid the financial stability of a great number of Ivoirians who rely on remittances for their families’ upkeep.
Promoting Trade across Borders
Crypto provides businesses the opportunity to eliminate the strict regulations of conventional financial authorities on international transfers. With this, they can save time and costs associated with international transfers. This will be most advantageous to those SMEs who wish to expand their market beyond the shores of the country.
Economic Empowerment and Business Incubation
Cryptocurrencies open up new frontiers of economic activity for the citizens of Côte d’Ivoire and their associated corporate entities. The very reason that encourages cryptocurrency is its decentralization, which allows creative entrepreneurs to develop and run Dapps built on blockchain technology.
Enhanced Openness and Safety
Cryptocurrencies will enhance the level of transparency in financial transactions, making fraud and corruption difficult. The use of blockchain technology enables the tracking of the movement of money in real-time, thus enhancing risk management and building trust among the users.
Conclusion
Côte d'Ivoire has reached a critical point in its journey toward embracing cryptocurrency. Without clear-cut guidelines, infrastructural concerns and cybersecurity issues will keep users and possible investors from adopting cryptocurrencies.
If Côte d'Ivoire, in coordination with regional organizations such as WAEMU and ECOWAS, could think through a holistic framework that would address these challenges via regulation and education, the country might just place itself at the forefront of the digital financial revolution currently sweeping West Africa.
