The cryptocurrency market continues to grow despite its many ups and downs since when it was first created in 2009. With media coverage of major investments and big returns, the digital currency is making waves again. But while Asian countries like China, Korea, and Japan have long been part of the burgeoning market, the Middle East remains on the outside.
Adopting Cryptocurrency in the Middle East
While the trade of digital currencies is quickly growing across the globe, the adoption of cryptocurrency hasn’t been that progressive in the Middle East. Even with billions in financial investment funding groups located in areas like Dubai or Saudi Arabia, there is still apprehension among the Muslim communities to join this new market. These apprehensions are backed by societal and religious concerns regarding the nature of virtual currencies.
But there seems to be a change in that attitude this year. Several developments in the Middle East and Muslim communities around the globe indicate how much more open and prepared they are to adopt this new technology.
Debate of Halal vs Haram
Muslim communities steered away from cryptocurrencies in the early days due to the intangible nature of digital currencies. This intangibility has even led many leaders in Muslim communities to label crypto as “haram” (harmful).
To better understand where these thoughts are based on, we have to objectively look at cryptocurrency and its markets.
Many leaders of Muslim communities have considered crypto to be gambling due to its great volatility. It was also considered a speculative instrument due to its intangible properties. And even if some cryptocurrencies like Bitcoin were tied to physical commodities, this principle was still questionable and could be refuted on some level.
With this ruling on cryptocurrency, the Middle East remained on the sidelines while other major markets across the globe began embracing crypto.
In early 2018, there appeared to be a shift in this kind of thinking. The Turkish Directorate of Religious Affairs made a declaration in April of this year that digital currencies are not compatible with Shariah law, but they can be used as a mode of payment.
With that new ruling, cryptocurrencies were now considered as acceptable networks to transfer payments, but it was still prohibited to use crypto as a speculative instrument.
Around this time, Bitcoin had a significant rebound, leaving many to speculate that this was because of the massive increase of brand-new adopters in major Muslim communities across the globe.
It isn’t certain if this new ruling is what really caused the rebound. But there are certainly big changes in how the Middle East is adopting cryptocurrency.
Huge Middle East Markets
There is a large population of Muslims in the Middle East and in other parts of the world, and many experts believe that this population can be a big driving force in the cryptocurrency market. And as the Middle East becomes more open to adopting digital currency, some even say that the Muslim community can be as significant as other major Asian markets like Korea and Japan.
The top three sectors in the Middle East which can greatly benefit from cryptocurrency are:
Many people from the Middle East have family members who are living overseas, and these relatives send back money home. Additionally, there are many Asian workers in the Middle East who send money to their families in their home countries. Because of this, the Middle East is considered to be the biggest market for incoming and outgoing financial transfers.
Thus, crypto is perfect for this use because it allows the low-cost transfer of funds to anyone worldwide, minus an in-between censoring party.
Cryptocurrencies are perfect for assimilation with online shopping and to replace older systems with various mistakes like Paypal. E-commerce will remain a large growing sector over the years, and it will keep on replacing the more traditional brick and mortar stores. While there are many online commercial transactions which use cash on delivery types of exchanges in the Middle East, crypto can make this a more reliable system where there is an avoidance of pullbacks and fraud.
However, there is a need to establish much better payment networks, especially after the Bitcoin disaster in 2017. In that year, numerous merchants withdrew their support for Bitcoin and other major digital currencies due to the unexpected rise in transaction fees and times.
There are many people in the Arab regions who do not have any kind of banking account. This is the perfect opportunity for cryptocurrencies.
Even without a bank account, many people in the Middle East have smartphones and can easily use their devices to conduct international and local financial exchanges through the online payment networks of crypto.
Tangible Crypto Assets on the Rise
Many cryptocurrency experts agree that in order for mass adoption of digital currencies, crypto should be backed by real world assets. However, some investors tend to disagree with this recommendation since it will help to tame the wild volatility — a feature which has made cryptocurrency valuable from a trading point of view.
One piece of strong evidence for the need for tangible crypto assets is the event of 2017 when many merchants dropped their support for Bitcoin and other virtual currencies.
Gold or Oil and other Real World Assets
The concept is that while a lot of cryptocurrencies are just backed by white papers and their network, crypto that is backed by real world assets like gold or oil will be tied to a certain price as the volatility in gold, for example, is a lot less than crypto in its existing state.
The majority of these coins mean to be stablecoins, cryptocurrencies that are fixed to a specific dollar amount. The flow of these stablecoins is constricted by the issuing parties that upkeep the network. This is to ensure it holds its dollar peg.
Because the value of these tokens is reliable and also because the cost structure is consistent, these pose a far better option to Bitcoin and others for merchant adoption.
Gold Backed Stablecoins
In the course of history, gold has proven to be the greatest store of value. It has remained stable with exceptions during periods of economic crisis. Gold also has much less volatility as compared to currencies, stocks, and other assets.
It is no surprise then that many up and coming cryptocurrencies are backed by gold. These upcoming gold backed stablecoins will theoretically remain stable in price well as be a much better solution for merchant adoption around the world.
It can be difficult for merchants to rely on a currency which multiplies in value by the thousands in one year but then loses ninety percent of its value in another year. Despite its potential, many merchants just can’t see the feasibility of using cryptocurrency in its current volatile state.
Cryptocurrencies Without Volatility
Stablecoins are the solution for the worldwide merchant adoption of crypto for several reasons. You can use them with online wallets and for transactions anywhere in the world. Stablecoins can’t be censored and are fast and cheap. Plus, they provide the functionality of traditional cryptocurrencies without the volatility which affects other virtual currencies.
Gold backed cryptocurrencies can help Muslim communities get into crypto and help them to understand it more. Gold is permitted by Islamic law.
Additionally, the Middle East is no stranger to gold — some of the oldest gold markets in the world are located in this region. Dubai, Egypt, Iran, and Saudi Arabia are some of the biggest producers and market places for gold bars, gold coins, gold jewelry, and other gold assets.
As the Middle East become more open to adopting gold backed stablecoins, it can push for the spread of the worldwide adoption for this cryptocurrency.
Kinesis is a new stablecoin platform that will release several currencies backed by gold and silver reserves. The Kinesis platform will soon be one of the biggest competitors for all cryptocurrencies.
The Kinesis currencies are KAU which is backed on a 1 to 1 basis by grams of gold and KAG which is similarly backed by silver reserves. Kinesis plans to have a general altcoin exchange to be one of the main market places for their currencies.
Kinesis also plans to have several exchanges that cater to the minting process of these currencies. Like traditional cryptocurrencies, Kinesis minting will replace any sort of mining. With minting, you will, in essence, create your own crypto by depositing USD, other main cryptocurrencies like Bitcoin, or other fiat currencies and then turn them into KAU or KAG.
These newly created cryptocurrencies will then be visible on the blockchain ledger, thus, providing transparency for all Kinesis users. This ensures that the number of KAU and KAG tokens never exceed the amount of gold and silver in reserves.
Going into 2019, Kinesis will be one of the biggest stablecoin leaders.
The Appeal of Kinesis to Middle Eastern Investors
Gold backed cryptocurrencies like Kinesis will be the first in these regions as both a currency of e-commerce and merchants and as a new investment class. Kinesis appeals to the Middle Eastern merchants who can adopt Kinesis for payment solutions, as well as to investors in the region who are already well familiar with gold products.
Currently, we are being restricted to using banks for international transfers. But with new infrastructure being laid worldwide, and with cryptocurrency and blockchain, we are coming closer to having an instant worldwide network for everyone to use in this fast approaching new era of global transactions.