Population: 102 million

Wealth in domestic bank deposits: 310 billion USD (July 2023)

Offshore expatriated wealth: 15.1 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: N/A

Crypto adoption (% of population): 3.3 million (3%)

TLDR

Egypt maintains strict controls on foreign exchange and access to foreign securities. Recently the government has slowly loosened some restrictions, but policies remain restrictive. Cryptocurrencies face outright bans despite growing adoption. The business climate has strengths like a large domestic market but is hampered by bureaucracy, underdeveloped capital markets, and foreign exchange hurdles. The government has shown interest in embracing digital finance and blockchain technology, which could enable further economic reforms. But the regulatory and monetary policy environment is likely to remain cautious and interventionist as Egypt balances maintaining economic protections while trying to attract investment.

Exchange controls

Egypt has historically maintained strict foreign exchange controls, but has been gradually liberalizing its regulations. Law No. 88/2003 allows individuals and businesses to hold foreign currency accounts locally and transfer funds abroad, subject to oversight by the Central Bank of Egypt (CBE). All foreign currency transactions must go through licensed banks and foreign exchange bureaus.

In 2022, some banks tightened limits on foreign currency withdrawals from local accounts in response to dollar scarcity. The CBE has let the Egyptian Pound gradually depreciate and is seeking financing from the IMF, which recommends more exchange rate flexibility. This points to a continued gradual relaxation of controls.

Distribution rules for foreign investment products

The Egyptian Financial Supervisory Authority (EFSA) oversees the marketing and sale of foreign securities to investors in Egypt. Egyptian licensed brokerage and portfolio management companies are permitted to trade in foreign securities on behalf of their foreign clients who are not residing in Egypt, provided they obtain a special license from EFSA. However, these Egyptian companies face restrictions when dealing in foreign securities for their own interests or on behalf of local Egyptian clients and foreign clients living in Egypt.

If Egyptian brokers engage in trading foreign securities for local investors, they must maintain a separate registry for recording all transactions made for their non-resident foreign clients. This registry must include evidence that the purchases were settled using offshore sources of funds. Essentially, EFSA seeks to prohibit Egyptian brokers from helping local investors purchase foreign securities abroad as a means of circumventing local capital controls.

The direct marketing of foreign securities to the Egyptian public by any unlicensed entity is prohibited and considered a criminal offense. EFSA is reluctant to expressly permit licensed banks and financial firms to market foreign securities due to concerns about approving the financial soundness of foreign instruments.

Recently, EFSA introduced new rules allowing the transfer of foreign securities owned by Egyptians from the Egyptian Stock Exchange to overseas exchanges for sale. This aims to enable Egyptian investors holding foreign stocks to take advantage of cheaper prices on foreign exchanges. However, the proceeds from sales on foreign exchanges can only be transferred back into Egypt for purchasing other stocks, not withdrawn as cash, within strict time limits. This balances access for investors with controls on capital outflows.

Qualified investors

No information

Cryptocurrency regulation

Egypt has adopted a stringent stance against cryptocurrencies through a series of warnings and prohibitions from regulators. The Central Bank of Egypt (CBE) has repeatedly warned about the high risks of cryptocurrency trading, emphasizing that cryptocurrencies are not legal tender nor officially backed. A major Islamic religious ruling in 2018 prohibited cryptocurrency transactions under Islamic law.

The CBE and Banking Sector Law enacted in 2020 essentially prohibited the creation, trading, or promotion of cryptocurrencies without acquiring a license. Violations can lead to hefty fines and imprisonment. This law also laid down regulatory guidelines for digital banking and defined key terms like cryptocurrency and electronic money.

Despite the restrictive stance of regulators, cryptocurrency adoption is growing among Egyptians seeking alternative investments. Approximately 3% of the population, or 3.32 million people, are estimated to own cryptocurrency. Cryptocurrency trading volumes on exchanges like CEX.IO have surged over 400% in recent years.

The government recognizes the need to digitize finance and facilitate remittances. The new banking laws reflect an interest in developing a more inclusive digital financial system. While the regulatory environment remains nascent, with a score of 28.5 out of 100 on the blockchain regulatory assessment, there is growing acknowledgment of the potential benefits of digital currencies and blockchain technology. It remains to be seen how restrictive policies will evolve.