Are digital currencies reshaping gulf markets? - Analysis

Are digital currencies reshaping gulf markets? - Analysis
Saudi Arabia and UAE may soon issue a new blockchain-based digital currency

By: Mahmoud Gamal

Dubai - Mubasher: Global interest in digital currencies seems to be accelerating as bitcoin surges to new highs almost every single day, leading to more investors being attracted to cryptocurrencies, including in the countries of the Gulf Cooperation Council (GCC).

The Central Bank of the UAE governor recently revealed that his country is cooperating with Saudi Arabia to issue a blockchain-based digital currency that would be accepted in cross-border transactions between the two countries.

Mubarak Al Mansouri has noted that the UAE-Saudi digital currency would be used among banks, not by individual consumers, in order to make transactions more efficient.

Moreover, the Emirati ministry of finance recently expressed real consideration of regulating trading virtual currencies.

This comes as digital currencies are seemingly reshaping the scene in the finance world.

Governments around the globe, including in the GCC have been thinking about ways to cope with the new crypto revolution, leading to the governor of the Saudi Arabian Monetary Authority (SAMA) forecasting that in the coming age banknotes will no longer exist, as it will be replaced by digital currencies, noting that Saudi regulatory authorities are studying how to make it used in banking transactions first.

It worth noting that although the appeal of bitcoin is increasing, several warnings were sound by many central banks and experts regarding a potentially dangerous asset bubble, as the digital currency is still rarely used to purchase actual goods or services, making it almost entirely a vehicle for speculation.

Economic expert Mohamed Mahdy told Mubasher that officials comments in the Arabian Gulf countries regarding digital currencies trading come as a prompt response to the revolution that has taken the world by storm.

If UAE and Saudi Arabia do in fact launch a new digital currency, it will be a new leap forward for the field, as the biggest two gulf economies will be officially entering the world of cryptocurrencies, added Mahdy.

According to the expert, recent data showed that investments from gulf countries in bitcoin trading amounted to around $12 billion.

Analysts have noticed that some investments migrated from the region’s capital markets, especially Kuwait, the UAE, and Saudi Arabia, in order to seek higher profits from bitcoin.

Unofficial records showed that in Kuwait alone, more than 12,000 investors are now investing nearly $1 billion in the cryptocurrency.

Experts noted that the rising digital currencies will surely lead gulf countries to further acknowledge the change in order to cope with modern economic developments.

However, a period of testing and assessment is seemingly essential to the success of the transformation, before making the best use of the digital currencies advantages, such as the supposedly easier security and transfer.

Translated by: Moslem Ali