Egypt -- Custody Regulations Regulatory Overview

Egypt's regulatory approach to cryptocurrencies and digital assets has been largely restrictive, focusing on prohibition rather than establishing a comprehensive regulatory framework for private digital assets. The primary legislation governing this area is the Central Bank and Banking Sector Law No. 194 of 2020.

Here's a breakdown of the situation regarding custody regulations:

Overarching Regulatory Stance

The Central Bank and Banking Sector Law No. 194 of 2020 effectively prohibits the issuance, trading, or promotion of cryptocurrencies and other digital assets (defined as "crypto assets") without a specific license from the Central Bank of Egypt (CBE). As of now, the CBE has not issued any such licenses for private cryptocurrency activities, making most related activities illegal.

Reference:

• Central Bank and Banking Sector Law No. 194 of 2020, Article 206
  • This article states: "It is prohibited to issue cryptocurrencies, trade them, or promote them, or establish or operate platforms for their exchange or conduct activities related to them without obtaining a license from the Board of Directors of the Central Bank in accordance with the rules and conditions specified thereby."
  • While a direct official English translation URL of the full law from a government source might be difficult to pin down, its content is widely referenced by legal firms and news outlets covering Egyptian financial regulations. You can typically find references and summaries by searching "Egypt Law 194 of 2020 crypto."
  • Central Bank of Egypt (CBE) Official Website: https://www.cbe.org.eg/ (While not linking to the specific article, this is the main authority).

Given this prohibitory stance, specific custody regulations for private cryptocurrencies as understood in more crypto-friendly jurisdictions are largely non-existent.

Specific Custody Regulation Aspects:

1. Custodial License Requirements:

   • For private cryptocurrencies: No specific custodial license framework exists. Instead, Article 206 of Law No. 194 of 2020 broadly prohibits activities related to cryptocurrencies, including trading and potentially custody, without a CBE license. Since no such licenses have been issued for private crypto activities, operating a crypto custody service for private cryptocurrencies would likely be considered illegal.
   • For a potential future Central Bank Digital Currency (CBDC): If Egypt were to issue a CBDC, its custody would fall under the CBE's purview and existing banking laws, likely managed by the CBE itself or licensed commercial banks.

2. Segregation of Client Assets Rules:

   • Non-existent for private crypto custody: As there is no legal framework permitting private crypto custody services, there are no specific rules regarding the segregation of client assets for such services.
   • General banking principles (applicable if licensed entities were to hold digital assets): In the traditional banking sector, client funds are strictly segregated from institutional assets. If a licensed entity were to hold digital assets (e.g., a CBDC), these traditional principles of segregation would likely apply, derived from the Central Bank and Banking Sector Law and related CBE regulations.

3. Insurance/Bonding Requirements:

   • Non-existent for private crypto custody: Due to the prohibitory nature of the existing laws, there are no specific insurance or bonding requirements for cryptocurrency custody.
   • General financial institution requirements: Licensed financial institutions in Egypt are subject to capital adequacy requirements and, in the case of banks, participate in the Deposit Insurance Fund. However, these do not specifically extend to covering private cryptocurrency holdings.

4. Cold Storage Mandates:

   • Non-existent: There are no specific mandates or regulations in Egypt requiring crypto custodians (which are not legally recognized for private crypto) to utilize cold storage for digital assets.

5. Qualified Custodian Definitions:

   • Non-existent for private crypto custody: Egyptian law does not define "qualified custodian" in the context of cryptocurrencies.
   • General financial institution definition: For traditional assets, a "qualified custodian" would typically refer to a financial institution (like a bank or a licensed brokerage firm) that is regulated by the Central Bank of Egypt (CBE) or the Financial Regulatory Authority (FRA).
   • Financial Regulatory Authority (FRA) Official Website: https://fra.gov.eg/ (Regulates non-banking financial markets, but does not currently regulate private crypto custody).

6. Pending Custody Legislation:

   • As of the latest information, there is no specific pending legislation in Egypt that would establish a framework for cryptocurrency custody services for private digital assets.
   • The Egyptian government and CBE have, however, expressed interest in exploring the potential for a Central Bank Digital Currency (CBDC). Any such initiative would likely involve the CBE establishing its own custody rules for that specific digital currency, rather than regulating private crypto custodians.
   • Egypt is a member of the Financial Action Task Force (FATF), and the FATF Recommendations (specifically Recommendation 15 and its Interpretive Note) call for countries to regulate Virtual Asset Service Providers (VASPs), which include custodians. While Egypt has taken steps to enhance its AML/CFT framework, its current approach to private cryptocurrencies largely bypasses directly regulating VASPs by prohibiting many of their activities. Future pressure from FATF could potentially lead to a re-evaluation, but no specific custody legislation is currently on the horizon.

Summary:

Egypt's current legal framework effectively prohibits most activities related to private cryptocurrencies, including the operation of custodial services, by requiring a CBE license that has not been issued. Consequently, specific regulations regarding licensing, asset segregation, insurance, cold storage, or qualified custodian definitions for private crypto custody do not exist. While a CBDC might prompt specific custody rules for that particular digital currency in the future, the environment for independent crypto custodians remains highly restrictive.