HRF’s Weekly Financial Freedom Report #31

Ethiopia | Banking Reforms Pave Way for CBDC

Ethiopia’s Council of Ministers approved sweeping banking reforms that lay the groundwork for the introduction of a CBDC. While these reforms claim to expand financial inclusion and attract foreign investment, they risk centralizing financial control and surveillance in the hands of an authoritarian regime. Observers have noted that CBDCs can permit authoritarian regimes to gain micro-control over economic transactions. In addition to the increased surveillance that CBDCs will bring, Ethiopians will face a further erosion of financial freedom. Recently, the Ethiopian government secured a $3.5 billion IMF loan, leading to expectations of a devaluation of the local birr, while major restrictions exist on ways for Ethiopians to enter different currencies. These new financial hardships come on top of existing issues that Ethiopians already endure, such as frozen bank accounts, censored transactions, and Internet shutdowns.

Nigeria | New Value-Added Tax on Digital Asset Transaction Fees

KuCoin, a major cryptocurrency exchange in Nigeria, introduced a 7.5% value-added tax (VAT) on user transaction fees, despite Nigerian authorities having already banned the KuCoin website. Though officials have made no official announcement, according to HRF’s contacts in Nigeria, this could reflect new incoming regulations from the Nigerian regime. A tax imposed on third parties relating to transaction fees would increase overall end-user transaction costs and discourage the use of digital assets like Bitcoin. In a country where a significant portion of the population lacks financial services, inflation runs unchecked, and a CBDC is in the streets, Bitcoin is an escape for many Nigerians. Now authorities are making it more expensive to turn to digital, open-source, and censorship-resistant money.

Russia | Crackdown on Opposition Leaders

On July 4, imprisoned Russian opposition politician Vladimir Kara-Murza was transferred to a prison hospital. In 2022, he received a 25-year prison sentence for “treason” due to his outspoken criticism of Vladimir Putin and spent months in solitary confinement. While his current health conditions remain unknown, his local attorneys were able to briefly visit him at the prison hospital on Wednesday. In another move against the democratic opposition, Russian officials issued an arrest warrant for Yulia Navalnaya, widow of Alexei Navalny and new chair of HRF, for being part of an “extremist group.” Should she return to Russia, she would be arrested immediately. The crackdowns on opposition forces have become commonplace since the war in Ukraine began in February 2022. Russian law enforcement has targeted and arrested more than 20,000 individuals for expressing anti-war sentiments, even censoring their financial activities to silence them. This repressive political climate, coupled with financial repression against critics, is indicative of Putin’s desire to crush opposition, shape public discourse, and maintain complete control.

Tunisia | Police Arrest Presidential Candidate

Tunisian police arrested Lotfi Mraihi, the head of the opposition Republican Union Party and a declared candidate in the upcoming presidential election in Tunisia. Mraihi, a prominent critic of President Kais Saied, is accused of money laundering and opening international bank accounts without a license from the central bank. Saied’s regime is known to use the judiciary to track down and arrest his rivals ahead of this year’s elections in order to secure a second term. This isn’t the first time Saied has taken such drastic measures. In 2021, he staged a coup, dissolved the government, and began ruling by decree. Since taking office, Saied’s focus has been on consolidating his power rather than addressing the pressing economic and social challenges that Tunisians face. Every day, citizens have to rely on debt to cope with rising inflation and a slowing economy at the hands of a dictator, leaving many of them unable to dictate and secure their financial future.

Burma | Women Flee Conscription While Facing Economic Hardships

Amid ongoing political and economic turmoil, women in Burma fear the risk of military conscription, despite earlier promises of exemption. Many women are fleeing the country, exacerbating economic struggles. Unemployment among women is now soaring, poverty is increasing, and displaced women are becoming vulnerable to trafficking and exploitation. The combination of the ongoing conflict, the junta’s controversial conscription policies, and crackdowns on pro-democracy protests have created an environment of constant fear and uncertainty for women, girls, and LGBTQ+ citizens. On top of this, the military retains strict control over the banking system, at times restricting cash withdrawals in areas seized by resistant forces, perpetuating a cycle of financial and social instability.

Bahamas | Forces Banks to Provide CBDC Access

The Bahamas is pushing forward with plans mandating commercial banks to provide access to its central bank digital currency (CBDC), the Sand Dollar. Through this mandate, Central Bank Gov. John Rolle said he wants to boost the adoption and usage of the Sand Dollar, which was first launched in 2020 and currently accounts for less than 1% of the currency in circulation. The Bahamas was the first country in the world to issue a CBDC, highlighting the global desire for CBDCs among governments of all shapes and sizes. Despite efforts to force adoption, CBDCs have struggled to gain traction, including in dictatorships like China and Nigeria, due to usability issues, limited acceptance, and fears over government surveillance, censorship, and confiscation.