From crypto winter to crypto spring: The challenges and opportunities for cryptocurrency in MENA

On June 28, the Atlantic Council’s empowerME Initiative, in collaboration with ABANA, convened a virtual event to discuss the risks, challenges and opportunities of the Middle East and North Africa (MENA) cryptocurrency landscape, as well as the effects of recent cryptocurrency crashes. The event included opening comments from the series One FinTech Investment Banking Specialist in Blockchain & DeFi Protocols Anthony Hussain. Atlantic Council Senior Advisor to the President and CEO and Non-Resident Senior Fellow Michael Greenwald moderated a panel discussion with Circle CSO & Head of Global Policy Dante Disparte; MidChains COO Craig Lund; and Oliver Wyman Financial Services Partner Gokce Ozcan.

This was the fourth and final webinar in a joint series to shed light on the changing financial technology (Fintech) landscape in the MENA region, identify challenges and opportunities and explore policy recommendations.

The main points from the discussion are summarized below.

Challenges in today’s cryptocurrency landscape:

• Dante Disparte emphasized that “not all digital assets are created equal.” While the convergence between traditional forms of banking and technology offers many growth opportunities for economic actors in the region, governments and central banks in MENA must attract responsible actors and divert bad actors in order to “break traditional business models and begin to anchor business models of the future.”
• Craig Lund warned that unregulated platforms put out defective coins without any proper due diligence just to generate transactions. As a result, he expects to see pressure from companies to regulate their platforms to avoid regression. It will be crucial to balance the removal of bad players without over-regulating platforms and reducing consumer choice.
• Gokce Ozcan highlighted that the recent volatility in the cryptocurrency markets has created great concern in MENA. While regional governments question their commitments and investments in digital assets, Ozcan argued that the downturn is in fact “an opportunity for the region to separate the good from the bad,” and adjust current policies accordingly. Disparte agreed, quoting Bank of England Sir Jon Cunliffe, saying that the companies that survive the current cryptocurrency will “be the amazons of the future.”

Humanitarian implications of digital currencies:

• Ozcan added that this technology is used to improve society, especially with reference to human rights. For example, in the wake of global conflicts, NFTs can be used as a means to promote humanitarian aid and human rights instead of just making money.

Opportunities for cryptocurrency:

• Disparte explained that innovative digital financial services rewrite the traditional development manual in MENA, especially in countries such as Egypt, where a large percentage of the population is on the edge of the formal economy. By taking advantage of diaspora populations for low interest payments and providing digital wallets to thousands of individuals around the world, a new era of financial mobility is upon us.
• Disparte emphasized Israel’s experimentation with Ethereum as an example of the bridge that digital currency can serve between conservative government institutions and technological innovation. By incorporating cryptocurrencies into its central bank, Israel has developed “transparent networks designed to improve compliance with economic crime.” He explained that activating this type of network throughout MENA could result in “exponential gains in financial inclusion and integrity.”
• Lund emphasized that the UAE has opened the doors to new businesses and diversified the technology sector through a combination of regulatory frameworks and the strengthening of financial centers in free zones. Lund highlighted license exchange programs as critical measures to turn an unregulated industry into a regulatory industry, and to engage “global actors entering the region and seeking to cooperate with other regulatory bodies and prisons.”
• Lund articulated that there is hope in the region to create a better future through economic growth and innovation. Ozcan agreed, calling the region’s genuine interest in innovation and being a leader in the cryptocurrency market “its greatest asset.”

Recommendations to stakeholders:

• Disparte explained that “historically, the regulatory and political conversation about cryptocurrency has been fear-based and risk-based, as opposed to activation-based.” He advised governments, civil society and private industry stakeholders to take conscious action together rooted in this new framework. MENA governments may consider following the Abu Dhabi model: developing a strategy that is unique to your region, taking advantage of your distinct advantages in terms of talent and opportunities, and “stand out as a beacon in a sea of ​​regulatory and political uncertainty. insecurity.”
• Ozcan argued that cryptocurrencies can be exploited by politically turbulent countries to better integrate with global markets. In this sense, countries that commit to building technologies from the outset are more likely to reap greater returns than if they were to wait for “more traditional institutional capabilities to be built”. In Ozcan’s view, cryptocurrency acts as the major equalizer in international finance, promising market inclusion for countries willing to make the investment.

Alexandra Kaiss is a Young Global Professional with Middle East programs at the Atlantic Council. follow her @alexandrakaiss.

Further reading

Thu March 10, 2022

Fintech opens new doors in MENA for inclusive finance

MENASource
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Allison Holle

On March 1, the Atlantic Council’s empowerME Initiative, in collaboration with ABANA, held a virtual event to discuss the possibilities for inclusive financing that the financial technology sector (Fintech) presents to the people of the Middle East and North Africa (MENA).