Sudan
The Current Status of Crypto Adoption in Sudan
Sudan's stance toward cryptocurrency is indefinite and largely restrictive, driven by ongoing economic uncertainty, financial sanctions, and political instability. Despite the potential for blockchain technology to facilitate cross-border remittances and humanitarian support, the lack of an authoritative legal framework has kept crypto adoption in a precarious position of legality.
The Central Bank of Sudan (CBOS) has particularly banned the use of cryptocurrencies, citing concerns over financial crimes, hacking attacks, excessive volatility, and a lack of legal coverage. As the Sudanese Pound has continued to lose its value, having fallen by more than a third since the October 2021 military coup, the citizens view crypto as a hedge against inflation.
“Sudan adopted a group of arrangements on the legal and institutional levels in addition to the coordination and cooperation with the international community like Financial Action Task Force (FATF), Middle East & North Africa Financial Action Task Force (MENAFATF) and the International Monetary Fund.”
Yet, the government's restrictive approach, along with restricted access to banking infrastructure, poses substantial obstacles to mass adoption.
Sudan's regulatory gap goes beyond prohibition. While countries that have prohibited cryptocurrency have done so by criminalizing its use, Sudan has not criminalized the use of cryptocurrency, but also not provided any legal remedy to the users.
This leaves crypto transactions in a state of uncertainty subject to government oppression or abuse. Additionally, the country does not have anti-money laundering (AML) and know-your-customer (KYC) rules for crypto exchanges, so it is not simple to create legitimate trading platforms.
Despite these difficulties, blockchain financial innovations can offer Sudanese people a lifeline, particularly to those displaced by conflict. The World Food Programme already demonstrated how one can use the blockchain to distribute aid efficiently in that it distributed cash grants to over 10,000 refugees in Jordan.
When 1.3 million were driven out of homes and do not have easy access to bank accounts within the country, one can use blockchain to bypass those traditional financial problems and provide someone with direct assistance.
However, much remains to be done. Internet penetration in Sudan is extremely low—only 28.7% of the population had access before the war, and the number dwindled to a pathetic 2% afterwards. Without a robust infrastructure, the benefits of blockchain-based financial systems are out of the reach of most Sudanese.
“According to the African Development Bank, Sudan’s real gross domestic product (GDP) is estimated to have shrunk by 8.4% in 2020.4 The COVID-19 pandemic has contributed to subdued economic activity in the country affecting trade, travel, the price of commodities and financial flows. Economic growth has also been affected by reduced private investment. The financial literacy gap remains, as well, with most citizens unaware of how cryptocurrencies and blockchain technology work.” — 2007 Electronic Transactions Act
Crypto Law In Sudan
Source: Pexels
Sudan's policy of law concerning cryptocurrency is quite restrictive, as the Central Bank of Sudan (CBOS) maintains that cryptocurrency is not considered legal tender as aforementioned. However, unlike countries that have definitive bans or licensing regulatory mechanisms in place.
“The CBOS also warned against using crypto because of legal concerns, saying that the assets are "not classified as money or even private money and property in accordance with the legislation and regulations in force in the country.” — CoinDesk
Sudan has no legislative legislation for governing cryptocurrencies and thus the industry is operating within a state of legal uncertainty. Instead of these existing laws of money, anti-money laundering (AML) measures, as well as foreign exchange policies, which govern cryptocurrency indirectly.
Although Sudan does not have crypto regulations, there exist financial regulations which discourage cryptocurrency practice. Sudan is strict on its foreign exchange legislation that punishes the unauthorized exchanging of currencies.
The Foreign Exchange Regulation Act of 2017 prohibits unlicensed foreign exchange trades, and violators are given heavy punishments in the form of imprisonment.
Since cryptocurrencies are being used as a hedge against a depreciating Sudanese pound, law enforcers have also taken steps towards prohibiting informal foreign currency exchange networks using cryptocurrency as an intermediary foreign currency.
Furthermore, Sudan has incorporated international Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) standards, enacted under the Anti-Money Laundering and Counter-Terrorism Financing Act (2014).
The regulation mandates traceable financial transactions following Know Your Customer (KYC) principles. Since most of the crypto transactions are outside the mainstream banking system and lack centralized supervision, they are classified as non-compliant with Sudanese AML rules.
The 2007 Electronic Transactions Act governs online payment and digital transactions in Sudan but never references blockchain or cryptocurrencies. This outdated framework denies Sudan laws to regulate crypto exchanges, blockchain companies, or decentralized finance platforms.
The absence of legislation focused on crypto suggests that industry firms lack legal protections and cannot get registered with Sudanese banks.
Despite the restrictive environment, no legislation directly forbids individual possession or peer-to-peer (P2P) crypto buying and selling. This has led to low usage, with the majority of Sudanese people using VPNs, stablecoins, and off-grid P2P networks to acquire digital money. However, in the absence of regulatory safeguards, users risk fraud, scams, and legal risks.
Taxation of Cryptocurrency in Sudan
Source: Pexels
Sudan has no direct tax law for cryptocurrency, and crypto transactions thus fall into a financial and legal grey area. Though some states classify cryptocurrencies as taxable assets, Sudan's restrictive policy—backed by the Central Bank's warnings against using cryptocurrencies—has not allowed any well-structured tax regime for digital assets to come into force.
Nevertheless, existing tax laws regarding foreign exchange, business income, and anti-money laundering (AML) indirectly affect crypto-based transactions.
Furthermore, the Sudan tax law is ambiguous in recognizing cryptocurrency as an asset, a currency, or taxed product. Compared to traditional tax bases such as stocks, land ownership, or business profits, crypto trades are not covered under existing capital gains tax, VAT, or tax income legislations.
This means that those who use, hold, or trade in crypto are under no obligation legally to report a loss or a gain for purposes of taxation.
In addition, exchanges and crypto businesses do not attract taxation under current regulations and those that mine (assuming there is some mining carried out) lack a formalized tax burden, as mining falls outside the regulating system.
But this non-taxation is not synonymous with legality. The absence of crypto tax legislation stems from the overall government approach of deterring its usage, rather than an explicit intention to embrace crypto investment.
Although Sudan does not indirectly tax crypto, total taxation provisions over business income and investment can technically be utilized to tax crypto profits should the authorities want to do so.
For example, should the company receive payment in the form of crypto, in principle, the government could tax the transaction according to prevailing corporate income taxation. Also, if an individual earns crypto through freelancing or web services, it may count as personal income tax, but it will not be enforced because there are no regulations.
Factors Driving Crypto Adoption in Sudan
Source: Pexels
Sudan is among the nations that have experienced significant economic and political challenges and has seen growing interest in cryptocurrencies as a potential solution to financial volatility and limited access to traditional banking. Some factors contributing to crypto adoption in Sudan include:
Hyperinflation and Currency Devaluation
Sudan's inflation reached 138.81% in 2022, pushing individuals to seek alternative financial resources. Cryptocurrencies like Bitcoin and stablecoins (e.g., USDT) as a store of value that allows Sudanese save and even recover their possessions.
Foreign Remittances
Remittances are a key source of living for the majority of Sudanese families but expensive and time-consuming via traditional channels. Remittances to Sudan stood at $3 billion in 2022. Crypto serves as a faster and cheaper way to send money, with fees between as low as 1%.
Youth and Tech-Savvy Population
Over 60% of Sudan's population is below the age of 25, and internet penetration is on the rise, at 35% in 2023. This figure shows Cuba has a young population that is increasingly becoming tech-savvy and open to emerging technologies.
Censorship-Resistant Financial System
The Sudanese state tightly controls the financial system and limits access to the global economy, which limits the financial liberty of many Sudanese. Cryptocurrencies enable individuals to interact with the global economy without interference by the government.
Challenges Facing Crypto Adoption in Sudan
Source: Pexels
Despite such immense benefits, there are obstacles hindering mass crypto adoption in Sudan. The following are eight key challenges:
Regulatory Uncertainty
The government in Sudan has failed to devise a clear regulatory platform for cryptocurrencies. The lack of certainty on regulations keeps users and companies away from broad use.
Economic Instability and Inflation
Sudan inflation was devaluing the Sudanese pound and making citizens question other assets, such as crypto. Incessant economic instability and rampant inflation render citizens reluctant to believe and adopt emerging financial technologies like cryptocurrencies.
Cash and Traditional Systems Dependence
Over 80% of all transactions are in cash in Sudan, and digital wallets and cryptocurrency are not yet familiar to the majority of its populace. This further proves that a majority of the population relies highly on cash and traditional financial systems, thus unable to shift towards digital assets.
Geopolitical Isolation and Limited Global Integration
Geopolitical isolation and limited global integration of Sudan restrict exposure to foreign crypto platforms and services. The country is currently 171st out of 190 countries in the World Bank's Ease of Doing Business Index (2020), a ranking that reflects its limited access to global markets and financial systems.
Potential Benefits of Crypto Adoption
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Crypto adoption in Sudan possesses numerous possible advantages that could transform the economic and financial landscape of the nation. The following are some potential benefits:
Financial Inclusion
Less than 30% of Sudanese adults have access to formal financial institutions. With decentralized finance platforms and cryptocurrency wallets, the unbanked population can access loans, savings, and other services.
Faster Cross-Border Payments
Cross-border bank transfers can take 3-5 business days, while crypto transactions are typically settled in minutes to hours. This is particularly helpful for Sudanese who receive remittances from family members abroad.
Transparency and Less Corruption
Sudan is 170th out of 180 countries in Transparency International's Corruption Perceptions Index (2023), which means it is highly corrupt. Blockchain's immutable record can improve financial transactions and government transparency.
Humanitarian Aid and Crisis Response
During the COVID-19 pandemic, crypto donations were made globally to fund relief efforts. In Sudan, crypto can help ease the delivery of aid and fund social programs with the guarantee that funds reach quickly and transparently.
Conclusion
Overall, experts believe that Sudan's policy towards cryptocurrency will probably depend on two factors: economic need and international pressure. If economic isolation continues because of sanctions and devaluation of the local currency, the government might be compelled to rethink its hardline policy towards digital assets.
Likewise, global institutions promoting blockchain-based humanitarian assistance might urge more transparent regulatory guidelines to enable secure and legal crypto transactions. Meanwhile, Sudan remains a nation in which the promise of cryptocurrency is as much a hope as it is a question of legal uncertainty.
