Commercial – Crypto & NFTs
What are the biggest investment opportunities in digital – and how can clients decide on the best entry point for them?
With national plans and strategies such as Egypt’s Digital Transformation Vision (Digital Egypt), The Central Bank of Egypt’s (The CBE) FinTech and Innovation Strategy (The Fintech Strategy), and The Information and Communications Technology 2030 Strategy (The ICT 2030 Strategy) in place, Egypt is most certainly prioritizing digital transformation in a multitude of sectors and working to establish itself as an incubator for digital investments in the region.
Each of these strategies prioritize collaborations with the private sector. For instance, according to the CBE, it will continue to expand its international cooperation agreements with regulators and relevant stakeholders to enable joint work and knowledge sharing for implementation of the Fintech Strategy. Moreover, The CBE is studying the establishment of a Fintech Innovation Fund with the aims of increasing investments promoting emerging FinTech startups and supporting innovation in the banking and financial services sectors.
According to the Ministry of Communications and Information Technology, among the main pillars of building Digital Egypt is the development of Egypt’s digital infrastructure by putting a focus on further enhancing Egypt’s – already – “advanced international and national infrastructures”. The development plan focuses on four elements: expansion in international infrastructure outside Egypt, expansion in international infrastructure inside Egypt, expansion in Africa’s international network and expansion in establishing data centers.
Therefore, to ensure the implementation of these strategies, the Egyptian government has been involved in discussions regarding several collaborations with private investors and tech giants such as Lenovo, Huawei, Intel and Amazon Web Services [During the 42nd edition of GITEX Global held in October of this year, the Egyptian delegation met with representatives from each of the companies to discuss investment and cooperation opportunities in Egypt].
Egypt has been concluding several agreements to those ends as well, such as the agreement concluded between Atos and the Egyptian Government, represented by Egypt’s Information Technology Industry Development Agency (ITIDA) in 2021 which aims “to accelerate the development of the digital sector in Egypt and create new employment opportunities locally” according to ITIDA’s press release, and the agreement signed between Valeo Egypt and ITIDA “to foster innovation and research in digitization and Artificial Intelligence” according to ITIDA’s press release.
A notable investment opportunity for clients would be in digital infrastructure, as current governmental plans constitute a prime opportunity for investors wishing to enter into the Egyptian Market on a wide scale while also being one of the main actors in Egypt’s digital development strategies.
Crypto can be a volatile market: how do you advise your clients to mitigate risk when trading in digital currencies?
Egypt, as many countries around the world, did not issue a clear executive regulation when it comes to regulating or prohibiting the use of cryptocurrencies. Nevertheless, a new development in that regard has been introduced by Article 206 of the CBE No. 194/2020 for the year 2020 requires investors to obtain a license from the Board of Directors of the Central Bank of Egypt to issue, trade or promote cryptocurrencies or digital currency, or otherwise it is prohibited to have any transactions in this regards. The Central Bank is expected to issue a series of executive decisions to further regulate these licenses according to the Legal Counsel of the CBE. This opens the door for future possibilities of regulation and licensing, but not yet since no company thus far managed to get the cryptocurrency trading license.
However, when it comes to FinTech, Egypt is steadily moving towards its inclusion in its regulatory sphere by offering many exemptions to new investors, such as Article 201 of the Law No. 194 for the year 2020 temporarily exempts start-ups in financial technology from some licensing requirements according to the procedures stated by the CBE’s Board of Directors.
In order to mitigate risks, international business representatives should diversify their investment portfolio in general due to the international economic impacts, and shorten the term of their investment in each digital currency to avoid any risk brought on by long-term engagement, in addition not to volatile the market of digital currencies in Egypt, until it gets regulated.
How is your jurisdiction managing the legal challenges of NFTs: for instance, taxation on purchases, IP, ownership and theft?
Egyptian Law does not specifically address NFTs up to this point in time, and since they are not considered a “currency”, one could not legitimately expect that Article 206 of the CBE Law applies to NFTs.
Due to the absence of regulations that address NFTs in the Egyptian system, regulating their use and trade could be referred, for the time being, to existing regulations on trade and intellectual property. In fact, some Egyptian artists have already started using NFTs to share their art and maximize their profit.
An NFT creator can avoid copyright infringement by: using his/her own independent creation without reproducing another entity’s work, using content with no copyright associated to it, using content, which is already on the public domain with expired copyright, seeking a licence from the copyright owner associated to the content used, using licensed content by purchasing these from licensed digital libraries or collection societies, and ensuring that the licence extends to reproducing these images for NFT activities.
Many companies protect the visual appearance associated with their products through industrial designs protection, as well as technical features underlying these products through patents, in that regard, the current law No. 82 of 2002 regarding the Protection of Intellectual Property regulates the general conditions of patents and licenses.
During a round-table organised by the Egyptian Supreme Council of Culture, the issue of NFTs regulation has been raised. According to certain News and media talks, within the legal specialists and artists, were in consensus regarding NFT being a great opportunity for the preservation of art and culture, however, they also agreed that implementation would require the intervention of the Egyptian legislator to regulate all issues raised.