Middle East Fintech Future 2023
Conflicting forces combine to accelerate blockchain development
The Middle East's blockchain market is characterized by a fascinating dual dynamic that sets it apart. On one side, cryptocurrency is gaining significant traction in certain countries across the region, particularly among users seeking alternative financial avenues in the face of authoritarian regimes, economic sanctions, and rampant inflation. The appeal of crypto in this context is evident, as it establishes itself as a resilient and accessible financial solution. Conversely, some governments in the region are proactively shaping innovative regulatory frameworks to revitalize and modernize their financial markets, envisioning the Middle East as a legitimate hub for the flourishing crypto industry.
Countries like Abu Dhabi, UAE, and Bahrain exemplify this proactive approach by actively embracing blockchain technology, collaborating with crypto companies, and developing regulatory frameworks that foster technological advancements. Saudi Arabia, initially hesitant towards blockchain adoption, is gradually shifting towards a more favourable stance, acknowledging the potential benefits.
The genesis of meaningful interest in blockchain adoption in Gulf states dates back to 2016. During this period, Bahrain focused on evaluating the legal implications of blockchain and constructing necessary supervisory frameworks within financial services. Simultaneously, the UAE delved into exploring current and future applications of blockchain across government, commercial, and financial services. By 2018, the UAE took a significant leap with the launch of the Emirates Blockchain Strategy 2021, envisioning the transfer of 50% of government transactions to blockchain by 2021. Dubai's government established the Global Blockchain Council in 2016, dedicated to researching blockchain applications and transaction systems, resulting in the creation of specialized firms in blockchain platform design, smart contracts development, digital asset exchanges, and digital document transfers.
The UAE has emerged as a global leader in blockchain innovation since the initiation of the Emirates Blockchain Strategy. Notably, the UAE Central Bank has announced plans to introduce its central bank digital currency (CBDC). Saudi Arabia, under the Saudi Vision 2030 national program, has also been an early adopter, integrating blockchain technology into the country's development plans. While the rise of cryptocurrencies in the region has been seen as a positive evolution by many, not everyone shares this sentiment. The UN Trade and Development Body (UNCTAD) has advocated for measures to control cryptocurrencies in developing nations, emphasizing their instability and the potential social risks and costs they pose. According to UNCTAD, the benefits of cryptocurrencies are overshadowed by the threats they pose to financial stability, domestic resource mobilization, and the security of monetary systems.
The Middle East's blockchain landscape offers a distinctive and promising opportunity. Cryptocurrencies have gained popularity in the region for contextual reasons, while governments in countries such as the UAE, Bahrain, and Saudi Arabia actively promote blockchain technology with forward-thinking regulatory frameworks. The region's strategic location, burgeoning digital economy, and supportive regulatory environment position it as an attractive destination for blockchain firms and investors. With a tech-savvy population, advanced digital infrastructure, and government backing, the Middle East is poised for further advancements in blockchain adoption. As the market continues to evolve, it has the potential to become a prominent player in the global blockchain landscape, attracting increased investment and fostering innovation.
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