In this Op-Ed, Ahmed Jacob Aly, CTO of INVAO explores the cryptocurrency and blockchain adoption in the Middle East and foresee a great opportunity for the region to become a global leader in innovation in blockchain-based technologies.
We have reached a pivotal point in the blockchain and cryptocurrency industry. Global volatility in the cryptocurrency market was insufficient in deterring large financial and corporate players from staking their claims. In the aftermath of recent uncertainty, investors have become increasingly aware that purchasing and using digital currency is a financial decision not to be taken lightly. Without a doubt, cryptocurrency is real, powerful, and has enormous potential to impact tangible wealth. Similarly, we have proven that blockchain technology can, and will, provide solutions to seemingly limitless real world problems and cement its place in everyday life.
A number of significant events in 2018 turned international attention to the MENA region in regards to blockchain technology and cryptocurrency developments. Amongst these is the Emirates Blockchain Strategy 2021 launched in the UAE in April of last year, aiming to switch almost 50% of government transactions onto the blockchain. If it is successful, the UAE will save an estimated 77 million work hours annually and Dh11 billion in transaction costs. In March 2018, the small island nation of Bahrain, in the Arabian Peninsula, issued a regulatory sandbox for cryptocurrencies where they conducted further research into four crypto exchanges. The MENA region’s blockchain industry ended 2018 on another positive note, with December’s announcement by Egypt’s Central Bank that it is studying the possibility of issuing a state-backed digital currency.
Despite these positive movements, the Middle East has had its fair share of difficulties and setbacks with cryptocurrency adoption, with certain countries having banned crypto-trading completely. For example, in Kuwait, regulators essentially banned institutional traders from working with cryptocurrencies in late 2017. In August 2018, the Saudi Arabian Monetary Authority made it illegal to trade bitcoin in the kingdom. Although it is not illegal to own cryptocurrencies in the UAE, they can’t be used as legal tender according to the Dubai Gold & Commodities Exchange (DGCX).
Entering 2019, the MENA region takes with it a recognition of blockchain technology’s potential to revolutionise economies, business environments, citizens’ quality of life, government operations, and beyond – but also a hesitance to fully embrace the emerging technology. Stemming perhaps from negative associations between cryptocurrencies and criminal activity, or between blockchain technology and borderless information sharing —not something universally accepted in the Middle East— the region appears not to have let go of fears that will inhibit it from moving forward. While capable of taking a global lead, with a skilled technology workforce and a number of emerging innovation hubs available to support growth, whether or not it reaches this full potential is yet to be determined.
The future of blockchain and crypto in the region will be defined by the willingness of the individual nations to implement comprehensive regulations to facilitate the growth of a mature industry and legitimate business. Fears tied to criminal associations can be undone by providing the industry with clear, transparent laws and by educating participating populations on the matter. In other blockchain hubs around the world, smaller nations have led this growth, proving themselves to be the fastest acting in creating burgeoning industries by being smaller and more agile. It is entirely possible that the Middle East will follow this path, with nations such as Bahrain leading the charge forward and surpassing many larger, economically powerful countries in progressiveness and adaptability.
On the other hand, significant central banks in the Middle East have also shown a certain level of support for cryptocurrency adoption, proving that the region’s larger and more economically powerful nations are coming into the fold. With many of these countries on a mission to reduce dependency on natural resources, such as oil, crypto and blockchain technology, the prospect of becoming a key geography for both, is evermore appealing. This, amongst other factors, may have contributed to the announcement in late 2018 that Saudi Arabia will be developing its own national cryptocurrency in 2019 to be used by banks. Meanwhile in the UAE, the central bank has said that they have already begun to design state-backed cryptocurrency.
There is a growing hunger for the advancements that blockchain technology will bring to the Middle east. In 2019, the region not only has the opportunity to become a global leader in innovation in this space, but also to pave the way for regulation to benefit all parties, solve social and everyday problems, and improve the economy of each individual nation. The first ten years of blockchain technology and cryptocurrency, from 2008 to 2018, laid a promising foundation for the rise of the MENA region, which is now ideally positioned to use its vast resources, skilled international workforce, and drive for innovation to propel it forward into a blockchain-based future.
(Ahmed Jacob Aly is the CTO of INVAO)