The Middle East’s banks and financial regulators have been slower to adopt bitcoin than Europe and the United States. The crypto market in the Middle East was still in its infancy prior to the outbreak. However, after two years of rapid development, 2022 will be the year when the growing excitement about cryptocurrency’s potential converts into industry leadership.
Rising signals are seen throughout the Middle East that cryptocurrencies are moving from a nascent concept to an everyday part of life during the last 12 months. BitOasis, CoinMENA, and Yoshi Markets are among the bitcoin exchanges that have raised funds. The recent news out of Bahrain about Rain, the region’s first Sharia-compliant cryptocurrency network, is one of the clearest signals that crypto is about to take off.
Al Waha partner funds VentureSouq and Middle East Venture Partners, as well as 500 Startups, backed the exchange, which raised $110 million in a Series B investment led by Kleiner Perkins and Paradigm, the world’s largest crypto fund. The round is one of the largest in the Middle East and North Africa for any business, and it sets the tone for what’s to come in the region’s crypto industry.
Bahrain, in particular, is already a fintech leader in the GCC region. In fact, the industry is growing at a 30 percent compound annual growth rate. Flexible regulatory frameworks and rapid digital transformation, as well as a high desire for financial sector innovation, are among the reasons leading to the region’s emergence as a fintech powerhouse, where technologies like open banking and bitcoin may thrive.
As countries acknowledge and begin to push the shift to digital transactions, cryptocurrency is attracting greater investment and support from traditional businesses in the Middle East financial system. The current restrictions encourage the formation of crypto clusters, which could have a snowball effect on the use of digital currencies.
The government of the United Arab Emirates has set up a separate crypto zone at the Dubai World Trade Centre (DWTC) where cryptocurrencies and other virtual assets are controlled. Binance also struck a contract to build a new industry cluster dedicated to digital innovation and cryptocurrencies in the UAE, while FTX Exchange, one of the world’s largest exchanges, was recently awarded a licence to operate in the UAE. The exchange was also recognised by Bahrain’s national bank, marking the first regulatory approval for a Binance firm in the Middle East.
Saudi Arabia is pitching itself as a potential centre for emerging cryptocurrencies as part of a campaign to embrace digital transactions as part of its efforts to diversify the economy. Last year, the Saudi Arabian Monetary Agency (SAMA) declared that it would introduce an open banking policy, resulting in enhanced competition and openness in financial transaction data.