Current Economic Situation in Mauritania
Mauritania's economy has been showing resilience despite global economic challenges. The economic growth rate fell from 6.4% in 2022 to 3.4% in 2023, mainly due to a drop in industrial and fisheries production and lower public investment.
Inflation has also seen a significant decrease, falling from 9.6% in 2022 to 5% in 2023, thanks to tighter monetary policy and lower food prices.
The budget deficit has improved, going from 3.6% of GDP in 2022 to 2.3% in 2023, with tax revenue rising from 13.1% of GDP in 2022 to 14% in 2023. Public debt has been reduced from 52.4% of GDP in 2021 to an estimated 48% in 2023, following a debt restructuring agreement with Saudi Arabia.
As a result, the risk of debt distress has decreased from high to moderate in 2023. The current account deficit has improved from 14.7% of GDP in 2022 to 9.8% in 2023, due to the rising value of exports, particularly iron ore, and reduced imports of food and petroleum products.
On the social front, the extreme poverty rate increased from 5.4% in 2019 to 6.3% in 2022, and youth unemployment remains high at 24% in 2023.
However, the economic outlook remains positive, with real GDP growth projected at 4.2% in 2024 and 5.5% in 2025, driven by expected export receipts from gas production, which is scheduled to generate approximately $500 million in annual revenue over 2024–2051.
In this context, cryptocurrency could play a significant role in Mauritania's economic landscape.
The adoption of cryptocurrency could provide new financial opportunities and help reduce some of the economic challenges the country faces.
Crypto Adoption in Mauritania
As of now, cryptocurrency is not considered legal tender in Mauritania, meaning it isn’t officially recognized as a valid form of currency like the national currency, the Mauritanian Ouguiya (MRU).
The government and the Central Bank of Mauritania (CBM) have maintained a cautious approach towards cryptocurrencies, similar to many countries in the region, emphasizing the importance of stability in financial systems.
While the CBM has not explicitly banned the use or trade of cryptocurrencies, it has not introduced any specific regulations to govern their use either.
Concerns often highlighted include the volatility of crypto markets, their potential for enabling illicit transactions, and the risks they pose to users unfamiliar with digital asset security.
These concerns align with broader regional hesitations about integrating cryptocurrency into formal financial systems.
Efforts like the partnership between the CBM and Giesecke+Devrient to develop a Central Bank Digital Currency (CBDC) suggest that the government is exploring safer, more controlled ways of integrating digital finance into the economy.
However, this does not extend to decentralized cryptocurrencies like Bitcoin or Ethereum. Instead, Mauritanians using or trading crypto do so informally, often relying on global platforms that are not directly regulated within the country.
Crypto Laws in Mauritania
Key developments in Mauritania crypto law are:
Current Legal Landscape
Cryptocurrency remains in a legal gray area in Mauritania. The government has not established clear regulations to either endorse or ban the use of digital currencies.
While crypto transactions and investments are not explicitly illegal, they are also not officially recognized under Mauritanian law.
This lack of regulation leaves users without legal protection for disputes, scams, or losses associated with cryptocurrency dealings.
Government Stance
The Central Bank of Mauritania has expressed caution regarding the risks of cryptocurrencies, including concerns about fraud, market volatility, and illicit activities.
However, rather than imposing a strict ban, Mauritania seems to be adopting a "wait-and-see" approach, closely monitoring global trends and the regulatory practices of neighboring countries.
There have been no significant government initiatives to promote blockchain or crypto-related innovations.
Role of Financial Institutions
Mauritania’s financial institutions have yet to integrate cryptocurrencies into the formal banking system.
The absence of partnerships between banks and crypto platforms limits access for potential users.
This is partly due to the risk-averse nature of local banks and the unclear legal status of digital currencies.
Benefits of Cryptocurrency Integration in Mauritania
This section covers the potential benefits of integrating cryptocurrency into Mauritania's economy.
1. Enhanced Financial Inclusion
Mauritania has a high percentage of unbanked citizens, particularly in rural areas, where access to traditional banking services is limited. Cryptocurrencies can provide an alternative financial infrastructure that does not rely on banks.
For example, crypto platforms could facilitate peer-to-peer transactions, could allow small traders and farmers to conduct business without needing bank accounts.
Mobile wallets, enabled by blockchain, could become a vital tool for these communities, enabling them to receive payments securely and efficiently.
By using simple mobile devices, even those without smartphones can potentially access cryptocurrency solutions through SMS-based systems, as seen in some East African countries.
2. Cost-Efficient Remittance Transfers
Mauritanians working abroad send significant remittances back home, which form a crucial part of household income for many families.
Currently, traditional remittance services like Western Union charge fees that can range from 7% to 10% of the transaction value, according to the World Bank.
Cryptocurrencies could significantly reduce these costs. For example, a $100 remittance via Bitcoin or stablecoins could cost under $1 in transaction fees, depending on network traffic.
Also, settlement times are often faster and completed in minutes compared to days for conventional banking channels. This would allow families to receive funds more quickly during emergencies or for daily expenses.
3. Economic Diversification
Mauritania’s economy is heavily dependent on mining (especially iron ore) and agriculture. Blockchain and cryptocurrency-related industries could introduce new opportunities, such as fintech startups, blockchain-based supply chain solutions, and smart contracts for exports.
For instance, blockchain could track iron ore shipments from extraction to export, ensuring transparency and reducing inefficiencies. This can boost investor confidence and attract international trade partners.
Cryptocurrencies can also create new avenues for local entrepreneurship, such as crypto exchanges or blockchain consultancies tailored to Mauritania’s unique needs.
4. Increased Transparency and Security
Corruption and mismanagement of public funds are long-standing issues in Mauritania. Blockchain technology, with its immutable ledger system, can help mitigate these problems by ensuring transparent record-keeping.
For example, government aid programs could use blockchain to ensure that funds reach intended beneficiaries directly, bypassing intermediaries.
Also, decentralized finance (DeFi) platforms could provide a secure method for citizens to access loans or savings, which are less prone to fraud due to the public nature of blockchain records.
5. Pioneering Digital Finance with a CBDC
Mauritania’s partnership with Giesecke+Devrient to develop a Central Bank Digital Currency (CBDC) reflects its efforts to modernize its financial infrastructure.
A digital Ouguiya could complement traditional banking by offering a secure and regulated alternative to cryptocurrencies, making digital finance more mainstream.
A CBDC could enable faster payments between citizens, businesses, and the government. For instance, tax collections could become more efficient, as payments would be instant and trackable.
Also, by introducing a CBDC, Mauritania could integrate more easily with global digital finance networks, boosting trade and investment
Challenges of Cryptocurrency Integration in Mauritania
This section covers the challenges of integrating cryptocurrency into Mauritania's economy.
1. Lack of Regulatory Framework
Mauritania currently lacks specific regulations for cryptocurrencies. This creates legal uncertainty, discouraging businesses and individuals from adopting crypto.
For example, without clear tax guidelines, users may fear potential penalties or legal issues related to undeclared crypto earnings.
Regulatory ambiguity also leaves room for scams or fraudulent schemes. Governments in other African nations, such as Nigeria, have faced similar issues, which were only mitigated after introducing clearer policies.
2. Limited Digital Literacy
Many Mauritanians are unfamiliar with digital tools and financial technologies. This lack of awareness could lead to misuse or vulnerability to scams, particularly in rural areas where education levels are lower.
Programs focused on teaching blockchain basics, such as those implemented in Rwanda and Kenya, could serve as examples for Mauritania.
Training workshops for small business owners and educational campaigns on social media could help bridge the knowledge gap.
3. Energy Constraints
Cryptocurrency mining, particularly for energy-intensive coins like Bitcoin, is unsuitable for Mauritania’s limited energy infrastructure. The country already struggles with reliable electricity access, especially in rural areas.
Investing in renewable energy sources, such as solar or wind, could mitigate this issue. Mauritania’s vast desert landscapes make it ideal for solar farms, which could not only support crypto mining but also boost overall energy availability.
4. Volatility and Financial Instability
Cryptocurrency values are highly volatile. A sudden drop in Bitcoin’s price could lead to financial losses for users, particularly those new to the technology.
For instance, if a farmer uses Bitcoin for savings and the value drops by 30% overnight, it could jeopardize their financial security.
To address this, stablecoins like USDC or DAI, which are pegged to fiat currencies, could be promoted. However, these still require regulatory oversight to ensure consumer protection.
5. Risk of Illicit Activities
Cryptocurrencies’ decentralized nature makes them attractive for illegal activities like money laundering or terrorism financing.
Without robust Know Your Customer (KYC) and Anti-Money Laundering (AML) policies, Mauritania could face increased risks.
Collaborating with international organizations like the Financial Action Task Force (FATF) could help Mauritania implement best practices. Additionally, monitoring crypto exchanges operating within the country would be crucial to mitigate misuse.
Future Prospects and Trends for Cryptocurrency Adoption in Mauritania
The future of cryptocurrency in Mauritania presents promising opportunities, here’s a detailed look at potential trends and prospects:
1. Rising Global Crypto Adoption as a Model
Globally, cryptocurrency adoption is on the rise, with projections suggesting that over 8% of the world’s population will use digital currencies by 2025. This trend is driven by institutional investment and increasing mainstream acceptance, particularly in emerging economies.
Mauritania, sharing similar characteristics with other developing countries, could experience a similar trajectory as its population gains awareness of crypto as a tool for financial inclusion and investment
2. Potential Use of Cryptocurrency to Improve Financial Inclusion
Mauritania faces significant challenges with financial inclusion, with many rural populations lacking access to traditional banking.
Cryptocurrencies could serve as an alternative financial solution by offering decentralized and easily accessible financial services.
Initiatives in countries like Kenya and Nigeria, where mobile-based crypto platforms have bridged financial gaps, could inspire similar developments in Mauritania
3. Integration of Cryptocurrency in Key Sectors
Mauritania’s reliance on natural resources, such as iron ore and gas exports, could see blockchain and cryptocurrency technology being used for supply chain tracking and secure, low-cost cross-border transactions.
These applications could streamline trade processes and reduce dependency on traditional financial intermediaries
4. Regulatory Progress as a Catalyst
Although Mauritania currently lacks formal regulation for cryptocurrencies, there is growing awareness among policymakers about the need to engage with this emerging technology.
Neighboring countries' regulatory developments, such as Nigeria’s eNaira and the Central African Republic’s legal adoption of Bitcoin, may encourage Mauritania to establish clearer frameworks, fostering confidence among users and investors
5. Influence of Emerging Technologies
The potential introduction of Central Bank Digital Currencies (CBDCs) in West Africa could significantly impact Mauritania’s crypto landscape. CBDCs might coexist with decentralized cryptocurrencies, creating a hybrid ecosystem that accommodates both traditional and innovative financial instruments
6. Youth-Driven Innovation
With a large percentage of its population under 30, Mauritania is well-positioned to benefit from a tech-savvy generation. Crypto education initiatives and entrepreneurial ventures in fintech could harness this demographic dividend, driving adoption and innovation.
Conclusion
Crypto adoption in Mauritania offers an opportunity to improve financial inclusion and boost industries like remittances and trade, but success depends on addressing critical gaps.
Clear regulations are necessary to protect users from risks such as fraud and volatility, while public education can empower citizens to make informed decisions about digital assets.
At the same time, investment in infrastructure, such as internet access and digital tools, is important to support widespread adoption.
Mauritania can harness the potential of cryptocurrencies while minimizing associated challenges by taking these steps.
