Current Economic Situation in Tunisia
Source: International Republican Institute
The above poll, dated 2017, still represents the state of Tunisia’s economy today. On the Global Innovation Index 2024 ranking, Tunisia comes 81st out of 133 countries in the world and 14th of 18 Northern African and West Asian economies.
As with several other countries, Tunisia’s economy was negatively affected by the COVID-19 pandemic which forced countries to shut down. Even after the world pandemic, Tunisia faced its own national stumbling block. Commenting on this, the World Bank noted that “the Tunisian economy in 2023 was still below its pre-Covid level, marking one of the slowest recoveries in the Middle East and North African region.” This slow recovery was traced to the low agricultural produce caused by drought. The drought-induced economic decline came after the 2.6% growth rate of 2022.
This Northern African country has now sought innovative ways to tackle its climate challenges by leading investments in energy and water. One of the most recent efforts towards this was the fund opened to empower nine communities to mitigate the challenge. There are 350 communities in Tunisia, which means that the process of choosing only nine communities is highly competitive. The United Nations Capital Development Fund (UNCDF) writes on the project:
LoCAL-Tunisia provides municipalities and communities with the means to implement concrete climate resilience and sustainable development measures with UNCDF oversight and technical support. The standard approach consolidates performance and strengthens local planning and project ownership on climate action to the benefit of citizens.
The urgency of this project is directly linked to the effects of the climate crisis on agriculture, which has been a vital pillar of the Tunisian economy. While this is relevant, diversification is a major strategy adopted by well-developed countries and Tunisia may benefit from this too. The technology sector currently contributes over $232.9m to the economy and is poised to do more with adequate government backing.
Crypto Law in Tunisia
Source: Ledger Insights
Tunisia’s economy operates under the provisions of the Central Bank of Tunisia (or Banque Centrale de Tunisie) and the precepts of Islamic Law. Perhaps, due to the dual authority of the BCT and Islamic Law, it is more difficult for citizens to go against the prohibition of cryptocurrency.
In 2018, the Central Bank and the Islamic Law governing Tunisians published a statement criminalizing trading in crypto and other digital currencies not recognized by the government. Unlike in other countries where the crypto adoption rate continues to rise despite the prohibition, Tunisia has implemented considerably extreme measures to enforce citizens’ compliance.
One such extreme instance was the arrest of a 17-year-old boy for carrying out a crypto transaction, which drew local and international attention. In sharp contrast to reality, the Minister of Economy (as of 2021), Ali Kooli, spoke to the media with enthusiasm to decriminalize cryptocurrency to prevent the repetition of such arrests. His public enthusiasm brings to mind the speech given by the Central Bank governor, Marouane el Abassi, at the 2020 Crypto Conference organized by Switzerland. The BCT governor said:
We are convinced that restraining a technology at its beginnings would be a mistake. … The Central Bank of Tunisia has opted for the strategic choice of positioning itself as a facilitator with the Tunisian innovation ecosystem.”
Also, there were reports in 2019 that Tunisia was set to launch its own national digital currency, the E-Dinar. The government was however quick to refute these claims in a press statement.
The recurrence of promise statements and the grave silence that follows begs the question, “Why is the Tunisian government internally hesitant to integrate decentralized finance into its financial sector?”
Current State of Crypto Adoption in Tunisia
Source: Statistica
The adoption rate of cryptocurrency in Tunisia is considerably low as it sits between 4% to 5% of the country’s population. The basis of this assertion is the Tunisian numbers. Tunisia’s current population, according to Worldometer, is 12,277,109, and the number of youths in the labour force ranges from around 3.5 million people. Therefore, only an average of 550,000 Tunisians out of a youth population of 3.5 million are interacting with cryptocurrencies.
A correlation perhaps exists between the low crypto adoption rate in Tunisia, the country’s high unemployment rate of 16%, and the under exploration of the technology sector. As of 2022, there were only 113,000 jobs available in the technology sector. This is a contrast to the agricultural sector which employs over 1.7 million Tunisians. Fewer employment opportunities in the technology sector could be responsible for the lack of attraction to the sector, where the blockchain industry falls. Meanwhile, boundless opportunities lie in this space.
Aside from simplifying the trading and holding of cryptocurrencies for individual users, the blockchain sector has become a key employer of labor in the world today. Web3 has climbed the ladder to be one of the highest-paying sectors today. Sources say that blockchain developers earn a competitive salary of between $150,000 to $175,000 yearly. This is recurrently possible because its barrier to entry is more considerate of hands-on skills than formal education.
Therefore, in addition to its efforts to tackle climate change for increased agricultural production, Tunisia’s economy is likely to witness exponential growth if channels for employment in the blockchain industry are opened. By supporting the inflow of labour into the blockchain sector, the Tunisian government can position itself as a new tax generation source.
However, it is important to praise the efforts of the small number of Tunisians who are still transacting in virtual currencies and successfully evading the government’s attention. The blockchain industry in Tunisia is expected to generate a revenue of $11.9 million come 2025, with an average of $23.4 per holder or trader. This projected revenue means progress for Tunisia when compared to the United States which has a more enabling environment for adoption and yet averages $101.80 per user.
Factors Affecting Adoption of Crypto in Tunisia
Source: Sigma AIBC
Government Regulation
The most prominent factors affecting the adoption of crypto in Tunisia are the stringent restrictions imposed by the government and Islamic Law. The arrest of the Tunisian teenager, for instance, would have succeeded in discouraging other teens or youth who might have been grooming an interest in blockchain. The parameters of the prohibition are not clearly defined thereby making users anxious about navigating uncharted waters.
Political Instability
Corruption and political instability are other factors that have affected the adoption of crypto in Tunisia. Decentralized finance makes it easier for large sums of money to be moved around anonymously, creating an enabling system for financial crimes.
Tunisia is not the only African country that has retained its stand on crypto despite the sector’s potential to be a game changer for the economy. Other countries like Egypt, Ghana, Sierra Leone, Algeria, and Morocco, amongst others, have also banned crypto. Still, their basis for this prohibition is not entirely unfounded. Therefore, as a country that has struggled with corruption, money laundering, and terrorism financing, the ease of committing these crimes through DeFi is valid grounds to prohibit it.
Utility
Another factor affecting crypto adoption in Tunisia is the presence of utility-driven projects. There are a number of decentralized finance projects providing solutions to various user problems. Some of them include:
- VFunder: Established in 2020, this platform helps creatives access funds for their projects by connecting them with suitable partners. VFunder also empowers creatives with marketing skills to help them thrive in their industry.
- No Phobos: No Phobos brings focus to the arts by building a platform where AI assists users to create their own art including NFTs and their favorite anime or game characters.
- Hydro E-Blocks: This innovation is one that can be highly relevant for Tunisia’s plan to combat its climate crisis. Hydro E-Blocks uses blockchain technology to track the emissions of carbon dioxide during industrial processes.
The services and solutions provided by these startups are both creative and timely. Users may therefore be inclined to look into blockchain to access these opportunities.
Conclusion
Tunisia’s mistrust for the blockchain industry is logical, but should not be allowed to hinder tangible progress. Amidst the tight measures, the number of crypto users in Tunisia is projected to cross 525k by 2025 and produce an annual revenue of $11.9m.
Several projects and startups built on blockchain are springing up, signaling an interest in technical depth as opposed to simple trading and currency exchange. By integrating and collaborating with credible blockchain companies, Tunisia could find a solution to its climate, political, and economic challenges. Releasing the official digital currency, the E-Dinar, would present Tunisia as a technology-inclined country ready for investors even beyond the technology sector.
