In recent years, the Arab world, encompassing the Middle East and North Africa (MENA), has emerged as a dynamic player in the global arena of digital transformation, thanks primarily to its significant strides in blockchain technology. This shift marks a new chapter in a region historically known for its rich natural resources and cultural heritage. As we uncover this fascinating landscape, we’ll explore how blockchain technology and cryptocurrencies are shaping a new digital future in the Arab world.
The Arabic Pioneers
Saudi Arabia’s Innovative Leap
To begin, Saudi Arabia, traditionally known for its vast oil wealth, is now making a bold foray into the world of digital innovation. The Saudi Arabian Monetary Authority (SAMA), the kingdom’s central bank, is at the forefront of this transformation. In June 2020, SAMA employed blockchain technology to inject a part of an SR50 billion ($13.3 billion) liquidity package into the banking sector. This initiative is part of the Kingdom’s broader Vision for 2030, which aims to diversify the economy beyond oil and modernise public and financial services through innovative technologies.
SAMA is among the pioneering central banks in the region to experiment with blockchain technology for money transfers. This move is a significant step towards keeping in step with the global trends of other central banks. The authority has launched several initiatives to develop Fintech in the Kingdom, including the Fintech Saudi Initiative in cooperation with the Capital Market Authority (CMA), the introduction of the SAMA Regulatory Sandbox, and an array of digital banking services and payments.
In 2019, the Saudi British Bank (SABB) and HSBC executed a trade transaction involving a shipment of homogenised aluminium billets from Bahrain to Saudi Arabia using blockchain technology. The Saudi Customs Authority also experimented with the technology in early 2019 to facilitate cross-border trade. These developments are driven by Vision 2030’s goal to accelerate economic diversification and modernisation through the adoption of new digital technologies.
Dubai’s Trailblazing ArabianChain Technology
Dubai has been a beacon of innovation in the Arab blockchain domain with the creation of ArabianChain Technology. This Dubai-based venture is developing what may be the Arab world’s first open-source, public blockchain, mirroring the foundational technologies of cryptocurrencies like Bitcoin and Ethereum. ArabianChain’s platform invites software developers from the Arabian Peninsula, North Africa, and beyond to collaborate on building applications for industries such as financial services, real estate, healthcare, and logistics.
ArabianChain has also created DubaiCoin-DBIX, a potential superstar of Arabic cryptocurrencies. DBIX aims to provide a secure and economical means to conduct payments and asset transfers and can represent shares in a company, votes in elections, or the identity of a person or asset. The decentralised nature of the blockchain promises to cut expenses, improve data security and reduce costs associated with large, centralised databases prone to hacking. This initiative also includes practical applications like reducing the cost of remitting funds for foreign workers and helping governments store and administer land titles and medical records more efficiently.
In fact, banks in the Middle East are exploring how blockchain might transform their approaches to trading, settling, investment, and capital assets management.
In October, Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai’s crown prince, unveiled an ambitious plan to make Dubai a world leader in blockchain, encouraging government departments to exploit the technology. This commitment to blockchain is seen as a significant step towards digital transformation in the Arab world.
ArabianChain is also an active participant in Dubai’s Digital Islamic Economy initiative and is recognised under the Dubai Silicon Oasis Authority. The company’s blockchain is modelled on Ethereum, which speeds up the development of its suite of blockchain-related features. ArabianChain’s CEO, Mohammed Alsehli, emphasises the flexibility of using Ethereum to develop customised applications for the region in areas such as education and Islamic banking. They also promote a specialised software called Thuraya, which allows developers to write smart contracts that execute themselves on the blockchain, accessible in Arabic, English, and French, signalling ambitions beyond the Middle East.
These initiatives in Dubai, as well as the earlier mentioned ones in Saudi Arabia, illustrate the significant strides being made in the Arab world towards embracing and innovating in blockchain technology. With a focus on economic diversification, modernisation of financial systems and the development of a digital economy, the region is not only adopting but also actively shaping the future of blockchain and cryptocurrency technologies.
The Key Role of Arabic Cryptocurrencies
Cryptocurrencies are increasingly becoming a vital aspect of the Arabic blockchain landscape. A notable development in this arena is Project Aber, a collaborative initiative between the Saudi and Emirati central banks. This project explores using a dual-issued digital currency for cross-border payments, which aims to reduce costs and transfer times for commercial banks. This initiative marks a significant step towards embracing Central Bank Digital Currencies (CBDCs) in the region.
Despite some hesitancy from Arab central banks, particularly about finance regulations and trustworthy sources, to fully adopt and regulate cryptocurrencies, the public interest in digital currencies is growing. In fact, the Middle East and North Africa have emerged as the world’s fastest-growing cryptocurrency markets. A study by Chainalysis revealed a 48% increase in the volume of crypto received in the region in the year leading up to June 2022, reaching $566 billion.
This growth, while from a smaller base compared to other regions, signifies a rapidly rising adoption rate. Turkey, Morocco and Egypt, the last of which leads the Arab world with over 1.8 million cryptocurrency users, are among the top 30 countries in Chainalysis’ 2022 Global Crypto Adoption Index, highlighting the region’s growing prominence in the global crypto landscape.
AbjaDAO: Simplifying Blockchain for the Arabic-Speaking World
A major barrier to these initiatives can be understanding blockchain technology, particularly when faced with complex technical jargon. Thankfully, AbjaDAO, the first Arabic glossary for blockchain terms, addresses this challenge by translating and defining blockchain and cryptocurrency terms into Arabic. The project aims to end the distraction of translating blockchain terminologies and improve search engine performance.
The first edition of the glossary, which took a year to develop in cooperation with entities like Arabs In Blockchain, offers translations and definitions of 600 terms. This resource is essential for governments, academics and media organisations as they adapt to the increasing use of blockchain technology. By providing a unified reference, AbjaDAO significantly aids individuals in educating themselves in the blockchain field, streamlining the learning process and making blockchain more accessible to Arabic speakers.
Looking to the Future of The Arabic Blockchain & Cryptocurrency Market
As the Arabic blockchain and cryptocurrency market continues to evolve, several key trends and developments indicate a promising future, despite existing challenges like regulatory clarity, cybersecurity, and public acceptance.
Youth Demographic & Economic Drivers
A significant driver of this growth is the region’s demographic profile. Approximately 55% of the MENA population is below the age of 30, a tech-savvy and innovation-friendly demographic that is more receptive to technological and financial innovations like cryptocurrencies. The region is also experiencing a social and economic transformation, with many countries grappling with income inequality and high youth unemployment. These factors are driving the population towards alternative financial instruments like cryptocurrencies and blockchain technology.
Government & Business Initiatives
Then there’s a growing awareness and adoption of blockchain and decentralised technology in the region. Businesses and governments are exploring blockchain’s benefits to streamline processes, increase transparency, and reduce costs. Countries like Turkey, Morocco, and the UAE are making significant strides in this direction. For instance, Morocco’s central bank is drafting a crypto law to regulate and protect individuals from trading risks. Such initiatives are not only enhancing the region’s economic position but also positioning it as a leader in blockchain and crypto innovation.
Global Market Trends & Regional Impact
The global crypto market is projected to grow at a compound annual growth rate (CAGR) of 11.9% over the next seven years, potentially reaching a market value of $12.1 billion by 2030. This global growth trajectory is expected to significantly impact the MENA region, particularly the Gulf countries, which have shown an eagerness to welcome crypto and blockchain entrepreneurs. The UAE, for example, offers a 0% tax on cryptocurrency profits, which has led to a surge in new crypto and blockchain startups. The region’s overall IT spending is also expected to grow, further fuelling investments in evolving digital asset technologies like blockchain.
Concluding Outlook
In closing, the MENA region is set to become a truly leading market for digital assets. As regulatory frameworks evolve and embrace a fully digital and decentralised economy, we can expect more blockchain and crypto-based businesses to establish their presence in the region.
This growth, supported by government initiatives, private sector innovation, and a young, tech-savvy population, indicates that the Arabic blockchain and cryptocurrency market is not only adopting new technologies but is also shaping them to fit its unique economic and cultural context. The future looks bright for blockchain and cryptocurrency in the Arab world, with the potential to inspire similar developments in other regions.