Blockchain technology remains in its earliest stages of development as far as the Middle East is concerned. However, governments and private organizations in the region are starting to leverage the technology to optimize their operations and improve processes.
Today, countries in the Middle East and North African (MENA) region are developing the foundations of legislation for blockchain projects, especially in outlining policies for blockchain-based contractual and financial transactions.
While blockchain technology remains in its most fundamental and developmental stages in the Middle East, governments and private organizations have been ramping up adoption. The technology is being used to improve administration, optimize financial services, and enhances business efficiency. We have examples of banks using the blockchain-based exchange systems with government support, and startups are getting funding for their blockchain-based ideas.
It is almost impossible to understand the cause of this blockchain renaissance. Middle Eastern Countries have done their best to be at the forefront of innovation, and supporting blockchain technology seems like the obvious way to get that done in the 21st-century world. While Western countries continue to grapple with the prospect of crypto and blockchain legalization, Middle Eastern countries have moved ahead.
Iran and Pakistan Legalize Mining
Crypto mining is one of the most pivotal aspects of the entire cryptocurrency industry. It is a surefire way of getting into the market, although it can be pretty cost-intensive. While many have continued to highlight the environmental impacts of mining, countries like Iran and Pakistan have been working round the clock to create fair environments for the activity to thrive.
Iran was the first to take the plunge, legalizing mining in July 2019. According to local reports, the government held a cabinet meeting, with President Hassan Rouhani declaring that mining should be recognized as an official industry. At the same time, individuals and companies looking to begin mining operations would need to get licenses from the Ministry of Industry, Mine, and Trade.
It made sense at the time. Electricity prices in Iran are relatively low, per statistics. Over a thousand entities have now applied to be part of Iran’s mining industry, capitalizing on cheap electricity. At the same time, Iran has enjoyed growing revenues. With the country suffering from U.S.-imposed economic sanctions, it is easy to see how much it needs the tax revenue.
Pakistan made a similar move last year, with an official announcement confirming that the Provincial Assembly in Khyber Pakhtunkhwa (KP) had voted to legalize mining. Khyber Pakhtunkhwa is one of the four major Pakistani provinces located in the country’s northern region. It is one of the forces behind the country’s development.
Sources claimed that the assembly had passed legislation showing commitment to embrace what it viewed as the future of financial development and money. Legislators believe that cryptocurrencies would eventually rise to usurp fiat currency, and the region needs to prepare itself for such a revolution.
Saudi Arabia and the UAE Bet on a CBDC
While other countries look to optimize their mining industries, Saudi Arabia and the United Arab Emirates are now working on the future of money - Central Bank Digital Currencies (CBDC). In January 2019, the two states collaborated to launch Project Aber - a proof of concept designed to improve knowledge of CBDCs and blockchain technology concepts.
The combined effort was a first of its kind. Last November, a report on the study noted that they had chosen the name “Aber” to symbolize the cross-border nature of the project. The project will use a digital currency backed with fiat money to force “greater consideration” of issues surrounding existing payment systems and security.
As the report concluded, a dual-issued CBDC is viable for cross-border payment and can also provide greater benefits over centralized payment systems when it comes to architectural resilience.
The next phase of Project Aber is still unknown. However, with the entire world moving towards CBDCs, it is definitely viable to see the asset launching in the next few years.
Bahrain’s Sharia-Compliant Crypto Exchange
Bahrain, another prominent nation in the Middle East, has made waves with crypto progress. In January 2021, CoinMENA, a local crypto exchange, announced that it had gotten an approval license from the Central Bank of Bahrain.
As the announcement confirmed, CoinMENA was awarded a “Crypto Assets Services Company License,” allowing it to operate as a regulated exchange and an offshore platform. With the exchange looking to roll its services out to the MENA countries, this license is a pretty significant deal. CoinMENA also has a certification from the Shariyah Review Bureau as a Sharia-compliant platform.
“We are permitted to allow customers who are residents in the above-mentioned countries to trade on CoinMENA, subject to them satisfying our due diligence procedures,” a spokesperson at CoinMENA explained.
CoinMENA eventually launched in March, with support for five cryptocurrencies - Bitcoin, Ether, XRP, Bitcoin Cash, and Litecoin. The exchange also supports several fiat assets, including the dollar, Bahraini dinar, Emirati dirham, Saudi riyal, and the Omani rial. With support for over-the-counter (OTC) trading, CoinMENA could prove to be a home for long-term crypto investors.
Where Does the Region Go?
For now, the only way is forward. The Middle East looks set to become a hub for financial development, and embracing crypto and blockchain is only the first step towards that objective. In a world where countries and regions appear to be developing their separate regulatory regimes, the Middle East has the opportunity to steal adoption and become an industry leader.
It also helps that the region’s approach is encompassing. From mining and farming to exchanges and even CBDC development, every aspect of the growing crypto space sees adoption in the Middle East. Over time, more significant development should lead to a boost in activity across the region, benefiting everyone involved.