Egypt -- Travel Rule Implementation Regulatory Overview

Egypt's stance on virtual assets (VAs) and virtual asset service providers (VASPs) is generally restrictive, which directly impacts the implementation of the FATF Travel Rule. While Egypt, as a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), is committed to upholding FATF standards, the specific implementation of the Travel Rule for VASPs has not occurred in the way seen in jurisdictions with established crypto regulatory frameworks.

Here's a breakdown:

Status of FATF Travel Rule Implementation in Egypt

1. Whether Adopted & Effective Date:

• Not explicitly adopted or effective for licensed VASPs. Egypt's primary legal framework, Law No. 194 of 2020 (the Central Bank and Banking Sector Law), effectively prohibits the issuance, trading, or promotion of cryptocurrencies and other virtual assets without a specific license from the Central Bank of Egypt (CBE).
• Article 206 of Law No. 194 of 2020 states: "It is prohibited to issue, trade, or promote cryptocurrencies or deal in them or create or operate platforms for their trading without obtaining a license from the Board of Directors of the Central Bank in accordance with the rules and procedures specified thereby."
• As of now, the CBE has not issued a comprehensive licensing framework for VASPs to operate exchanges or provide other virtual asset services. Therefore, a legally operating VASP sector that would be subject to Travel Rule implementation does not exist in practice.

2. Threshold Amounts:

• Not defined. Since there is no operational licensing framework for VASPs, specific threshold amounts for the Travel Rule (which typically apply to transactions exceeding a certain value, e.g., $1,000/€1,000) have not been established for virtual asset transfers in Egypt.

3. Which VASPs are Covered:

• Hypothetically, all VASPs would be covered if a licensing framework were established. However, due to the prohibitive nature of the current law, there are no legally recognized VASPs operating in Egypt that would be required to implement the Travel Rule. The law aims to prevent their operation without prior CBE authorization.

4. Technical Implementation Requirements:

• Not specified. Given the absence of a licensing regime and Travel Rule adoption for VAs, there are no technical implementation requirements (e.g., use of specific messaging protocols like TRISA, OpenVASP, etc.) mandated for VASPs in Egypt.

5. Penalties for Non-Compliance:

Penalties for non-compliance are severe and relate primarily to the unauthorized dealing in or promotion of virtual assets, rather than the non-adherence to the Travel Rule specifically.

• Article 217 of Law No. 194 of 2020 stipulates:

  • "Anyone who violates the provisions of Article (206) of this Law shall be punished by imprisonment for a period of not less than three years and not exceeding ten years, and a fine of not less than one million Egyptian pounds and not exceeding ten million Egyptian pounds, or one of these two penalties."
  • This penalty applies to anyone who issues, trades, promotes, or deals in cryptocurrencies, or creates/operates platforms for their trading without the required license from the CBE.

• General AML/CFT Legislation: Egypt also has broader anti-money laundering and combating terrorist financing legislation (e.g., Law No. 80 of 2002 regarding Anti-Money Laundering, as amended), which carries its own penalties for financial institutions that fail to implement AML/CFT controls. If a licensed financial institution were to engage with virtual assets in an unauthorized manner, or if a future licensed VASP failed to comply with any future AML/CFT requirements (including the Travel Rule), they would be subject to these general AML/CFT penalties as well, in addition to the specific penalties under the Banking Law for unauthorized activities.

References:

• Law No. 194 of 2020 (Central Bank and Banking Sector Law):
  • While a direct English translation from an official Egyptian government website can be challenging to find, the law is widely referenced in legal analyses concerning cryptocurrency in Egypt. You can typically find Arabic versions on the Egyptian Parliament's website or other legal databases.
  • Reference Point: Focus on Article 206 (prohibition without license) and Article 217 (penalties).
• FATF Recommendation 16 (Wire Transfers) and its application to Virtual Assets (the "Travel Rule"):
  • You can find the full FATF Guidance on Virtual Assets and VASPs, which includes the Travel Rule, on the official FATF website.
  • URL: https://www.fatf-gafi.org/publications/fatfrecommendations/guidance-virtual-assets-and-vasps.html
• Central Bank of Egypt (CBE) Official Website:
  • The CBE is the regulatory authority in charge. Any future licensing framework or guidance would be published here.
  • URL: https://www.cbe.org.eg/ (While specific English legal texts are often hard to navigate, this is the primary source of regulatory information).

In summary, Egypt's current regulatory approach largely precludes the formal implementation of the FATF Travel Rule for VASPs because the legal operation of VASPs themselves is effectively prohibited without a specific, yet-to-be-issued, license from the Central Bank of Egypt. The existing penalties are severe and target unauthorized virtual asset activities.