DUBAI, UAE — The march towards crypto adoption is relatively slow in the Middle East today compared to the West, especially in the US, UK, and Australia.
While the governments of these latter nations have established clear laws and policies governing cryptocurrency trading in their countries, the situation is very different in the Middle East. Not all Middle Eastern nations have clearly declared the status of cryptocurrency trading within their country.
While some Middle East countries, such as the UAE, Bahrain, Oman, and Turkey, have made a clear policy on crypto trading within the country, approving them as digital assets, other countries, such as Iraq, Jordan, Kuwait, and Qatar, have prohibited all forms of cryptocurrency transactions within the country. Hence, based on the need for more government clarity on the status of crypto trading within some Middle East countries, most citizens tend to hold back from diving into cryptocurrency trading.
Benefits of using digital currencies
According to Daniel Takieddine, CEO of MENA BDSwiss, one of the leading financial institutions specializing in Forex/CFDs trading, the adoption of digital currencies can help open new business segments as the use of these assets increases with time.
It also facilitates accessing new markets and reaching a broader customer base, which can help drive growth and increase revenue. As such, companies can provide other payment methods for customers using digital currencies to buy products and services. However, their use is currently relatively minimal in the region.
Moreover, aside from their use as an investment asset, digital currencies have seen significant success as a means of international payments and remittances.
Digital currencies are increasingly being used to transfer funds from developed countries such as the United States and the United Arab Emirates to developing countries such as Africa, Latin America, India, and others.
However, the digital currency market had a challenging year in 2022. Significant cryptocurrencies were down more than 50 percent from their all-time highs in late 2021, indicating a hazy future and a drop in investment and deals in this world.
“Digital currencies, particularly in the region, are facing multiple challenges at the moment due to several factors,” says Takieddine.
“Monetary policy tightening has strongly affected investors’ confidence, and the current trend could lead to even higher interest rates albeit with softer increases than before,” he mentioned.
Another factor fueling risk aversion is the slowing global economy, in addition to the notable failures that the market has recorded, which have affected investors’ perception of the market and highlighted the need for regulation.
Regulations required
According to Takieddine, the digital currencies market needs laws and regulations like what is already present for banks and other financial institutions to create a sense of security and reliability in light of the recent failures.
“A proper legal framework and regulatory oversight could help attract individuals and businesses and compel them to start using digital currencies,” he mentioned, adding that the development of digital currencies issued by central banks could appeal to many users. At the same time, initiatives like those actioned by the UAE could help other countries in the region to develop the local ecosystem and allow ordinary companies and individuals to use digital currencies more efficiently. For example, the UAE’s advanced legal framework has helped attract investors and companies interested in or operating in the digital currencies sector and institutions and individuals looking for a more welcoming environment. As a result, many investors, executives, and employees have moved there.