The past year and a half has seen the slow but steady march of bitcoin across the financial landscape, gaining market share and investor interest with each passing month. Yet, in the Middle East, digital currency remains a fringe prospect in the eyes of the region’s financial players.
A small group of startups and entrepreneurs are hoping to change this mindset with a new array of bitcoin platforms and tools that could deliver much-needed financial resources to an area where only 20% of the population has access to banking services. Before this can happen, however, cultural and technological challenges must be overcome.
Tarik Kaddoumi, co-founder of bitcoin retail payments service Umbrellab, told CoinDesk that he sees bitcoin's success in the region arising from the financial barriers that currently exist, saying:
In conversations with CoinDesk, the two entrepreneurs agreed that the soil is fertile in the Middle East for bitcoin to rise to prominence.
ArabNet Digital Summit
El Achkar told CoinDesk that many participants expressed great interest in bitcoin at ArabNet. He noted that roughly half of the crowd was familiar with digital currencies, and that the bitcoin panel received a large number of questions both during the discussion and afterward.
On the other hand, he suggested that members of the tech community are still researching bitcoin and haven't made up their minds about the technology, a fact that was on display at ArabNet:
Kaddoumi added that bitcoin remains in its "infancy" in the Middle East, and that more outreach is needed before conference attendees in the tech world – and the broader public – embrace digital currencies.
The path to bitcoin adoption
Both Kaddoumi and El Achkar are focused on the payments ecosystem in the Middle East, and both told CoinDesk that this area of finance represents one of the possible gateways for bitcoin adoption in the region.
Notably, most e-commerce transactions are cash-on-delivery (COD), meaning that consumers pay for goods upon receipt. According to El Achkar, this payment method accounts for roughly 80% of e-commerce sales in the Middle East:
Kaddoumi sees this as a reflection of the region’s large underbanked or unbanked population. Unable to access credit or banking services, most rely on cash as a means of payment. Bitcoin, he said, presents an "immediate solution" that enables merchants in the Middle East to gain access to revenue faster than traditional methods.
Opportunity for fintech startups
According to El Achkar, the Middle East is a challenging environment for fintech companies. He said that operational costs keep startups at bay, a problem that is exacerbated by the fragmented nature of the region’s market.
Digital currency, he continued, could make the environment more amenable for fintech startups, saying:
El Achkar cautioned that, by and large, the tech community in the Middle East is still wary of bitcoin. Calling them "fairly skeptical on average", he nonetheless declared that businesses in the ecosystem are actively exploring bitcoin. The question remains whether or not tech companies in the Middle East embrace the digital currency.
El Achkar explained:
Bitcoin in Islamic banking
Banks worldwide have begun to look at bitcoin and the possible integration of its underlying technology. While no bank in the Middle East has expressed openness in this regard, Kaddoumi sees bitcoin fitting into the broader institution of Islamic banking, which presents several key differences from Western-style banking.
is founded on key principles established in the Qur’an, most notably the abolishment of charging and receiving interest on loans. Additionally, investments made by Islamic banks must meet certain ethical and moral thresholds, with an emphasis on sound risk assessment and societal benefit.
Kaddoumi said that Umbrellab is conducting a study to see exactly how bitcoin fits into this system, consulting with legal and Islamic banking experts.
Education key to bitcoin's future
For Kaddoumi and El Achkar, as well as other bitcoin entrepreneurs in the Middle East, education and outreach remain top priorities. This includes appearances at events like ArabDigital, building contacts at other tech startups and reaching out to the region’s merchants and consumers.
From a technological standpoint, this process also means educating the populace about bitcoin tools like wallets and exchanges. Kaddoumi remarked that "lack of knowledge and skepticism are still the two main factors standing in the way of increased adoption".
Additionally, El Achkar suggested that cultural distrust surrounding online payments could be assuaged with the broad integration if bitcoin, saying:
Bitcoin, it seems, may come to play a prominent role in the Middle East, but only time will tell if long-standing cultural barriers and a lack of technological integration keeps digital currency from becoming more deeply rooted in the region.
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