The Current Status of Crypto Adoption in Eswatini (Swaziland)
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In Southern Africa, there has been an increase in the level of acceptance of digital currencies. Crypto acceptance in Eswatini, formerly known as Swaziland, appears to be taking place in a rather slow manner.
Currently, there is no cryptocurrency policy or regulation in Eswatini. This means there is no law that recognizes cryptocurrencies as money and there are no laws governing crypto-related activities. This limitation poses a risk for firms and individual players who wish to use or incorporate cryptocurrencies into any monetary transactions.
An increasing proportion of the population in Eswatini is beginning to embrace the use of cryptocurrencies. Results in the 2023 Baseline Cryptocurrency Survey revealed that 88.1% of Eswatini's citizens are exposed to cryptocurrency, though a low proportion of them understand the many use cases of digital currencies.
By far, Bitcoin is the most popular and most owned virtual coin, and 49.4% of the participants were keen on investing in digital forms of money in the future, indicating that there is an appetite for such investments.
This increasing fascination is overshadowed by the strong perception of risks involved in dealing with cryptocurrencies. Surprisingly, approximately 55% of the respondents expressed their concern over the fluctuating state of crypto assets.
Looking at the current state of the cryptocurrency market in Eswatini, the appetite for future ownership is increasing. 49.4% of the respondents were willing to invest in cryptocurrencies in the near future, with most of this interest among young working males who earn less than E10,000.
Despite some attempts to enhance the payment system in the country, Eswatini remains a predominantly cash-based economy. M-Pesa and other similar banking plans have helped enhance financial access by offering banking services to those who do not have banks in remote regions.
The Central Bank of Eswatini (CBE) is at the forefront of such initiatives to investigate and experiment with digital currency. They developed the Digital Lilangeni, a Central Bank Digital Currency (CBDC), designed to change the payments sector for good.
The Bank conducts research on monetary, financial and economic matters and uses this information in policy formulation. The Bank, together with the government, is responsible for formulating and monitoring economic policies that are aimed at promoting economic growth, development, and ultimately improving the standard of living of the people of Eswatini.
The Digital Lilangeni is envisioned to be a safe and secure virtual currency issued by the government that could be used for online and offline purposes. Notably, the addition of the Digital Lilangeni is anticipated to accelerate the process of economic digitization by offering P2P services and facilitating B2C transactions.
Looking at the current trends in the world where the use of virtual currencies is expanding, sooner or later, the government of Eswatini might opt to put in place control mechanisms. Also, the Central Bank of Eswatini has indicated that they too are carrying out research on virtual currencies that could potentially lead to crypto regulation in the future.
Crypto Law In Eswatini (Swaziland)
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As there are no clear legal regulations around cryptocurrency in Eswatini, much effort has begun to concentrate on utilizing the available laws to encapsulate the emerging issues around digital currency.
The lack of laws for the legislation on blockchain technologies and currencies within the country has not hindered the authorities from expanding their regulatory framework in preparation for the vast upcoming activities in the decentralized financial ecosystem.
The Central Bank of Eswatini (CBE) and the Financial Services Regulatory Authority (FSRA) warned citizens against the investment of many such currencies due to their lack of regulation. Nevertheless, the CBE still believes that there is room for virtual currencies, as there are plans to enhance the development of safe and extensive digitized payment systems.
Cryptocurrencies and crypto assets/investments relate to digital currencies issued by private entities or individuals that use cryptography or sophisticated digital files as value representations. They do not exist physically and have no legal tender status in Eswatini.
As Eswatini is on the brink of the Fourth Industrial Revolution, political protests have become more rampant, which has led to tightening control over cyberspace.
The Eswatini government introduced fresh cyber legislation in 2022 to ease the political pressure and control; this included the Computer Crime and Cyber Crime Act, the Data Protection Act, and the Electronic Communications and Transactions Act.
Even if these laws seek to control the usage of the internet and ensure data privacy, they are bound to impact the current and future regulations of blockchain and cryptocurrencies in the nation.
For instance, the Computer Crime and Cyber Crime Act extends to crimes conducted with computing devices; however, there are concerns that it could impede digital criminal activities in several other industries, such as the financial services industry, that would offer cryptocurrency.
The Data Protection Act of 2022 governs the standards of collection, handling, and dissemination of personal information. This act will impact crypto exchange services and blockchain applications with identity check (KYC) procedures.
The Electronic Communications and Transactions Act of Eswatini 2022, for example, impacts the legal framework for cryptocurrencies by overseeing the control of e-signatures and e-contracts, which are integral to blockchain transactions.
Eswatini's legislative arrangement on anti-money laundering (AML) and counter-financing of terrorism (CFT) regulation also politically creates additional barriers for the introduction of decentralized cryptocurrency regulation. In 2011, Eswatini enacted the Money Laundering and Financing of Terrorism (Prevention) Act (MLTFP Act) and its amendments.
This Act proves that the nation is inventing new policies to catch up with international standards. Currently, there are no regulations explicitly governing the use of cryptocurrency; however, it is anticipated that any legislative framework concerning cryptocurrencies would be that which strengthens the current AML/CFT act.
Taxation of Cryptocurrency in Eswatini (Swaziland)
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Over the past few decades, all countries have experienced an ever-evolving digital world and new ways of carrying out business and trade, and so has Eswatini.
The provision of digital services has created several opportunities for many, if not all, citizens of Eswatini. On the other hand, it has posed quite complicated problems with regard to the existing taxation system. One of the most pressing concerns is the taxation of cryptocurrencies.
The tax body in Eswatini today is almost typical of that of most developing countries. This body has incorporated territoriality over the taxation of income that may not have any correlation with physical presence or tangible factors.
Local taxes such as value-added tax (VAT), corporate tax, income tax, or other similar taxes are levied within the jurisdiction of businesses or other economic activities where they have a physical presence.
Eswatini uses a source-based tax system of taxation. However, certain foreign income can be deemed to be earned in Eswatini.
However, these tax concepts fail to hold any validity in the context of ‘virtual currencies’ like cryptocurrencies that are invented, bought, and stored in the digital world without any tangible components.
In addition, the current international tax obligations and agreements of Eswatini do not consider cryptocurrency. This poses a challenge, especially since international crypto exchanges that facilitate trade for local individuals may not necessarily be required to file any reports of taxable activity to the tax administration in Eswatini, and therefore individuals can escape taxes on gains made.
Digital economy taxation measures are already being developed by the Ministry of Finance in Eswatini with assistance from other partners such as the UNDP and the South Centre Tax Initiative.
Factors Driving Crypto Adoption in Eswatini (Swaziland)
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According to the 2023 Eswatini Baseline Cryptocurrency Survey, youth aged 18-34 years account for the largest proportion of the respondents involved in the survey at 69.4%. The following are the top five factors that influence the adoption of cryptocurrency in Eswatini:
Relentless Desire for Financial Access
Most of the citizens of Eswatini are either unbanked or underbanked, with little to no banking services available to them. These people use cryptocurrencies to avoid the need of opening a bank account in their name in order to perform the basic financial transactions of sending, receiving, and storing money.
Swift Remittance Services
Like most of the African nations, Eswatini has significant dependence on the diaspora for remittance. Cryptocurrencies present a cheaper and more efficient means of sending money to one’s country, with less processing time and cost than normal remittance services.
Unending Economic Instability
In situations of hyperinflation, depression, or economic strife, it is always possible to hedge against the loss of value in the local currency with the help of cryptocurrencies. The convenience of the crypto market being easily accessible to them and the fact that it is not controlled by any central government is a contributing factor to crypto adoption.
Technological Improvements
Given the increase in internet access and the use of smart phones in Eswatini, there are an increasing number of people who are becoming computer literate and also opening up to the world of cryptocurrency. Availability of educational materials, access to cryptocurrency/blockchain services, and interest in the subject have increased the ease of adoption.
Trans-border Trade
There is a considerable amount of cross-border trade activity undertaken by Eswatini in the Southern Africa region. Cryptocurrencies ensure that transactions with their trading partners are done in a timely and efficient manner.
Challenges Facing Crypto Adoption in Eswatini (Swaziland)
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Even though 88.1% of the Eswatini citizens are aware of cryptocurrency, the level of ownership still remains low. The following are four factors that are limiting the use of cryptocurrency within Eswatini.
Uncertain Regulation
Like many nations in Africa, Eswatini does not have a distinct set of rules regarding cryptocurrencies. The lack of strong laws and guidelines can discourage prospective users and investors for fear of legal issues, fraud, or even government restrictions in the future.
Strain in Awareness and Education
There are few people in Eswatini who possess adequate knowledge on how cryptocurrencies and blockchain work. In the absence of appropriate education, the digital commodities may seem threatening to unaware citizens.
Infrastructural bottlenecks
While the internet penetration is on the rise, there are still some regions in Eswatini with no access to the internet and digital infrastructure. This limits the widespread acceptance, especially in the rural regions where, in most cases, people do not have the gadgets.
Instability and the Lack of Trust
People understand that cryptocurrencies come with a high price volatility. This renders them impractical in storing value for an average Eswatini who is looking for stable and risk-free financial solutions. In addition, fear of loss from possible scam deals and untrustworthy transactions contributes to cryptocurrency adoption challenges.
Potential Benefits of Crypto Adoption
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Cryptocurrency adoption in Eswatini (Swaziland) offers multiple benefits to the country in terms of its economy and financial systems. Below are some of the benefits that come with embracing cryptocurrencies in Eswatini:
Enhancing Financial Acceptance
Cryptocurrencies can also offer a source of funding to the unbanked population in Eswatini, ensuring easy, safe, and cheap transactions without a bank. This allows the segregated population to engage in the economy.
Reducing Remittance Costs
Embracing cryptocurrencies can help eliminate the high costs charged for transferring funds from one country to another, specifically in the cases of remittances to families in Eswatini from its overseas workers. This means more money reaching families, which can help stimulate the local economy and improve their lives.
Global Financial Empowerment
With the use of cryptocurrencies, people and companies in Eswatini will be able to connect to the world markets without the need to use any banks or other financial institutions. This may spur new forms of enterprises and promote business development and international trade.
Economic Depreciation Protection
To the citizens of Eswatini, cryptocurrencies are not only a means of payment, because they can also help safeguard or protect against erratic prices and adverse economies. People can now protect their financial resources from poor economic conditions by holding assets such as digital currency.
Conclusion
The use of cryptocurrencies is on the rise, and this is all thanks to the country’s technologically aware young population and entrepreneurial class. Eswatini must not only modernize its policies in order to improve the digital economy but also discourage any competition (both local or international players).
Rather than wait and react to global trends, the government is better served by seeking out and exploring the ways to regulate crypto within the country. This way, Eswatini would not be jeopardizing any future revenues from the industry while promoting the responsible usage of technology in business.
