Crypto Law in Madagascar
As of now, Madagascar has not established specific laws or regulations to govern cryptocurrency. The country’s central bank, the Banky Foiben’i Madagasikara (BFM), has not issued guidance on crypto beyond a general warning to the public.
In a recent statement, BFM cautioned citizens about the risks associated with digital assets, citing potential issues like fraud and market volatility.
However, it has not placed an outright ban on trading or holding cryptocurrencies. This means that, while crypto is not illegal in Madagascar, it remains unregulated, and users must proceed cautiously due to the lack of consumer protections and legal clarity.
Madagascar's financial and technological infrastructure is still growing, with a focus on traditional banking and mobile money rather than crypto innovations.
Although the BFM has explored creating a digital currency version of the national currency, the Ariary (e-Ariary), this development is still in early discussions and unrelated to decentralized cryptocurrencies like Bitcoin.
With rising global interest in crypto regulations, Madagascar may eventually consider a framework to manage digital currencies, but for now, no regulatory structure is in place.
For local crypto users, staying updated on global trends is important, as Madagascar may adopt similar policies in the future if digital assets become more mainstream in the country​.
Although cryptocurrency is not explicitly prohibited in Madagascar, the absence of regulatory frameworks leaves users without safeguards. This uncertainty makes some people wary of adopting cryptocurrencies.
Current State of Crypto Adoption in Madagascar
Cryptocurrency adoption in Madagascar is still in its early stages, with limited government support and low public involvement. The country has not developed specific regulations for cryptocurrency, leaving it in a "gray area" where digital assets are neither fully accepted nor explicitly banned. While people can trade or hold cryptocurrencies, the lack of legal recognition means they do so without formal protections, which has made many hesitant to engage.
Despite these challenges, some tech-savvy individuals and small businesses are starting to explore cryptocurrency for investment and savings. They are drawn by its potential to support global remittances and act as a financial alternative in a country with limited access to traditional banking services. Retail crypto payments are emerging but remain modest, with most transactions under 1,000 Malagasy Ariary (MGA).
Crypto engagement is still relatively low, with about 3.14% of the population involved in transactions as of 2023, a number expected to grow to 3.86% by 2028. Approximately 356,559 people, or 1.18% of the population, own cryptocurrency. While these figures indicate slow progress, they also highlight an interest in leveraging cryptocurrency to address financial challenges.
However, obstacles like low internet penetration, limited digital literacy, and the lack of a regulatory framework slow down broader adoption. Cryptocurrencies are legal for use in Madagascar, but they are not recognized as legal tender, leaving users without formal oversight or protections.
Madagascar’s cautious stance mirrors a broader trend in the region, where governments are observing crypto growth without fully embracing or regulating it. While this approach minimizes risks, it also slows the integration of cryptocurrency into everyday financial life.
Madagascar's cryptocurrency market is relatively small compared to larger markets like the United States, which is projected to have a revenue of US$23.22 billion in 2024
Cryptocurrency Usage Across Sectors in Madagascar
In Madagascar, cryptocurrency usage is still growing but shows potential across various sectors. While traditional financial services have struggled to reach rural areas, digital financial tools are opening doors for sectors like e-commerce, agriculture, and even tourism to explore cryptocurrency as a payment option.
Here’s a look at some specific examples of how different sectors are engaging with or could benefit from digital currencies.
1. E-commerce and Small Businesses
E-commerce is gradually gaining traction in Madagascar, supported by local online marketplaces and delivery services. Cryptocurrencies could offer new advantages for cross-border transactions, enabling small Malagasy businesses to connect directly with international customers.
This approach could help them avoid high costs from currency conversions and traditional bank fees, making it more feasible for small businesses to export goods to global markets.
2. Tourism
Tourism is an important part of Madagascar’s economy. Accepting cryptocurrency payments could make Madagascar a more accessible destination for tech-savvy international tourists, as it allows direct, borderless transactions without concerns about exchange rates.
This could be especially attractive in rural areas where traditional banking infrastructure is lacking, potentially helping local tour operators and hotels.
3. Agriculture and Supply Chains
In agriculture, which is central to Madagascar’s economy, blockchain technology has the potential to improve transparency and traceability across supply chains.
Using cryptocurrency as a form of payment within these networks could also help farmers and small producers receive fairer payments directly, improving financial access in areas underserved by banks. Digital wallets and blockchain records can enhance trust and efficiency between farmers and buyers.
4. Financial Inclusion
Microfinance and fintech services are growing rapidly, thanks in part to World Bank-supported projects promoting digital financial services. Cryptocurrency could further enhance microloans and digital accounts, providing people with decentralized, accessible financial services even in areas with limited internet infrastructure.
Fintech solutions are beginning to offer tools that may, in the future, include crypto-compatible services to empower unbanked populations in Madagascar.
5. Remittances and Cross-Border Transactions
Madagascar has a significant diaspora, and remittances are an essential income source for many families. Cryptocurrencies can make sending money home faster and less expensive compared to traditional remittance services.
If adopted more widely, they could reduce transaction fees and delays, directly benefiting Malagasy families reliant on remittance income.
The Cryptocurrencies market in Madagascar is projected to grow by 11.34% (2024-2028) resulting in a market volume of US$1838.00 thousand in 2028.
Benefits of Cryptocurrency Integration in Madagascar
Integrating cryptocurrency in Madagascar could offer new financial opportunities for people without access to traditional banking. Some of the benefits of crypto adoption in Madagascar are as follows;
1. Improved Financial Inclusion
Cryptocurrencies can open up financial services for many people in Madagascar, especially those without access to traditional banking. By using mobile wallets and cryptocurrencies, people can store, send, and receive money digitally, which is important for those in rural areas without physical banks. This can help increase financial participation and ease everyday transactions.
2. Faster and Cheaper Remittances
Madagascar has a significant number of people who work abroad and send money home. Traditional remittance services can be slow and costly, but using cryptocurrency could make these transfers almost instant and lower fees. This would allow families to receive more of the money sent to them, improving their economic situation.
3. Economic Opportunities for Businesses
Businesses in Madagascar could benefit by accepting cryptocurrency payments, especially from international customers. This could make it easier for them to reach a global market, supporting local economies and encouraging growth. Digital payments through cryptocurrency are also secure and reduce dependency on cash transactions, which can be vulnerable to theft.
4. Environmental and Sustainable Initiatives
Madagascar could use the environmental benefits of certain cryptocurrencies and blockchain technologies by focusing on energy-efficient systems. With its rich biodiversity, Madagascar could explore green blockchain solutions that align with conservation efforts, promoting a more sustainable approach to tech development.
5. Enhanced Transparency and Reduced Corruption
Blockchain technology, the underlying tech for cryptocurrencies, offers transparency by making transactions trackable and secure.
For Madagascar, this could improve trust in digital financial systems and reduce corruption. With transparent records, funds can be monitored in real-time, which could be beneficial in areas like government funding and non-profit work.
Cryptocurrency could be a smart way for Malagasy people to protect their savings from the ups and downs of the economy. It might be a safer bet than traditional money, helping you keep your hard-earned cash stable.
Challenges of Cryptocurrency Integration in Madagascar
Cryptocurrency adoption in Madagascar faces significant hurdles due to factors that range from infrastructure to regulatory challenges. Below are five key challenges that affect the integration of cryptocurrency in the country.
1. Limited Internet and Digital Access
Access to reliable internet and digital devices is limited in Madagascar, where only around a third of the population has regular access to electricity.
Many rural areas, which comprise about 63% of the population, have limited internet connectivity, making cryptocurrency transactions difficult for many people. This lack of access to technology hinders broader digital finance adoption, including crypto.
2. Low Financial Literacy
Madagascar's financial literacy rates remain low, especially in rural areas where banking services are scarce. Understanding cryptocurrency requires a basic knowledge of financial services, which many people lack.
Without foundational knowledge about finance, potential users may find it challenging to understand how crypto works, leading to low trust and hesitance in adopting digital assets​.
3. Unclear Legal Framework
Madagascar does not yet have clear regulations for cryptocurrency. The Central Bank has issued warnings about crypto's risks but has not set up a regulatory framework to guide its use. This lack of regulation can make users and businesses cautious, as they are unsure about the legal implications.
Moreover, without proper laws, crypto transactions lack protection, leaving users vulnerable to fraud​.
4. High Volatility and Security Concerns
The volatility of cryptocurrency prices poses a risk for people in Madagascar, where incomes are often low and unpredictable. Sudden drops in value can lead to significant financial losses for individuals who might already be in precarious financial situations.
Also, the decentralized and sometimes anonymous nature of cryptocurrency can make it harder to trace or recover funds in cases of fraud​.
5. Limited Support for Digital Payments
Despite the growth of mobile money in Madagascar, other digital payment infrastructure remains underdeveloped.
Without an established system for managing and converting digital currencies easily, businesses and consumers are unlikely to adopt cryptocurrency for everyday transactions. This lack of support for seamless digital payments further limits the practical uses of cryptocurrency in the country
Future Prospects and Trends for Cryptocurrency Adoption in Madagascar
Here are some key prospects and trends for crypto in Madagascar:
Growing Interest in Peer-to-Peer (P2P) Transactions
One of the likely trends in Madagascar's crypto future is the growth of peer-to-peer (P2P) platforms. In other emerging markets, P2P has grown rapidly because it allows people without access to banks to trade directly.
This trend may also be appealing in Madagascar, where banking infrastructure is limited and financial inclusion remains low. Using P2P platforms could enable more people to send and receive money, make payments, and even save, which could drive adoption further.
Potential Rise of Stablecoins for Payments
Given the economic pressures and inflation in many parts of Africa, including Madagascar, stablecoins have significant appeal. These are cryptocurrencies that maintain a stable value, often tied to the U.S. dollar or other major currencies.
Stablecoins could become popular for day-to-day payments, and this trend could develop as access to crypto-friendly apps and services grows by offering a way to store money in a more stable form than local currency
Integration with Small Business and Local Economy
Small businesses in Madagascar may find crypto useful for cross-border trade, especially if local payment options are limited.
For example, entrepreneurs who sell crafts, textiles, or other goods online could benefit from accepting crypto payments to attract international customers. This could improve cash flow and offer greater stability, helping small businesses manage risks and expenses associated with currency fluctuations.
Increasing Awareness and Education on Crypto
A key factor for growth in Madagascar’s crypto adoption will be education. As more people gain access to the internet, there is potential for greater awareness of crypto and its uses. Campaigns by local crypto advocates and platforms to educate the population on using crypto safely and effectively could lead to more informed users and encourage responsible adoption.
Potential Regulatory Developments
To encourage responsible and widespread crypto usage, Madagascar may also consider more specific regulatory frameworks. Neighboring countries in Africa have already started examining ways to balance security and innovation in crypto.
Madagascar could follow suit to promote safe crypto transactions, which might support public trust in crypto and attract foreign interest or investment in the sector.
Conclusion
Cryptocurrency adoption in Madagascar is still in its early stages, marked by growing interest but held back by limited digital infrastructure, low internet penetration, and a general lack of awareness.
Although some locals are examining crypto for remittances and small-scale trading, broader adoption is challenging without reliable access to online services and a stronger understanding of digital assets.
For crypto to grow in Madagascar, improving internet accessibility and digital literacy will be essential steps, along with establishing clear regulatory guidelines. These steps could help build trust, encourage safe usage, and provide more opportunities for Malagasy people to benefit from cryptocurrency.
