Algeria and cryptocurrencies: A review of the ban law and development scenarios

The Strict Legal Framework: From Total Ban to Complex Reality

Algeria has adopted a firm stance regarding the phenomenon of digital currencies, starting with a clear legislative approach that leaves no room for ambiguity. The Finance Law of 2018 settled the debate with an outright prohibition, with Article 117 explicitly stating: “Buying, selling, using, and holding virtual currencies are prohibited.” However, this legal text, despite its clarity, clashed with a more complex reality on the ground.

The Algerian government did not hesitate to justify this position, based on multiple concerns related to financial security and economic stability. Violators face severe penalties, including hefty fines and prison sentences, but the reality reveals a widening gap between the law and its enforcement, especially with the proliferation of unofficial dealings among youth and commercial circles.

Why Did Algeria Choose the Ban?

Algerian decisions stem from interconnected and escalating concerns. First, the sharp volatility of Bitcoin, Ethereum, and other major digital assets poses a threat to personal savings and Algerian economic stability. Decision-makers do not want their citizens to fall prey to price swings that could wipe out their capital within hours.

Second, illegal activities are a constant concern for authorities. Money laundering and terrorism financing find a fertile environment in digital currencies, especially given the difficulty in tracing transactions and identifying involved parties. In a sensitive geopolitical environment like Algeria, these fears are not unfounded.

Third, Algeria enforces strict centralized control over the Algerian dinar and international transfers, viewing digital currencies as a potential means for money laundering and circumventing this control. Managing the flow of foreign currencies is vital for economic stability policies.

Fourth, the lack of clear regulatory frameworks makes any attempt to regulate this sector challenging, and the easiest route is total prohibition until the global scene stabilizes.

Domestic and Global Pressures: Weaknesses of the Ban

However, this ban does not exist in a vacuum. There is a growing local demand from Algerian youth and tech workers who see the world rapidly moving toward acceptance of digital currencies. This popular pressure, though currently limited, will increase over time and may force the government to reconsider.

On the regional and global level, the picture is quite different. neighboring countries and others farther afield have chosen to regulate rather than ban, proving that this can be done without chaos. The UAE, Bahrain, and even some African nations have begun enacting regulations for digital currencies. This global trend could gradually exert pressure on Algerian decision-makers.

Moreover, blockchain technology, which underpins digital currencies, now has broad applications beyond currencies: smart contracts, digital certification, supply chain management. Algeria may eventually have to separate the technology from the currency itself, adopting the tech without the currencies.

Future Scenarios: From Continuation to Transformation

Scenario One: Continued Ban with Increased Strictness

In the near term, this remains the most likely option. Authorities will maintain their stance and may intensify oversight and penalties for violators. This provides short-term stability but may gradually lose effectiveness as clandestine use spreads.

Scenario Two: Gradual Transition Toward Regulation

As pressures mount and awareness grows, Algeria might establish legal frameworks to regulate digital currency trading under the supervision of the central bank and financial authorities. This scenario allows economic opportunities to be harnessed while maintaining oversight.

Scenario Three: Sovereign Digital Currency

The Algerian central bank could develop a sovereign digital currency directly controlled by it. This solution combines leveraging modern technology with maintaining full centralized control over the money supply.

Blockchain Without Digital Currencies: A Realistic Future

A more feasible middle ground may be to separate blockchain technology from digital currencies and apply it in sensitive areas:

• In the financial sector: improving the speed and security of international and local transfers without relying on private digital currencies
• In smart contracts: implementing them in government and commercial contracts to ensure transparency and efficiency
• In government documentation: using it for land records, identity registries, and official documents

Conclusion: Inevitable Evolution Versus Government Caution

Algeria stands at a crossroads. The criminalization of digital currency trading in Algeria was a proactive response to a global phenomenon, but questions are mounting. Can the ban remain effective? Is it reasonable to ignore global technological developments? How long before economic and international pressures force a reconsideration?

The Algerian government is justified in its caution, but history teaches us that complete resistance to technology rarely succeeds. It is likely that Algeria will take a middle path: regulation rather than outright ban, or developing local solutions such as sovereign digital currencies. The future will inevitably bring change, and the only questions are when and how.