The crypto market has been in turmoil in recent weeks. According to research, Bitcoin experienced its worst quarter in a decade. It fell 56.27%, surpassing its previous record of a loss of 40.37% in Q1 2021.
Zawya spoke with Talal Tabbaa, CEO and co-founder of CoinMENA, a regulated cryptocurrency exchange under the Central Bank of Bahrain, to discuss the outlook for cryptocurrencies.
A number of cryptocurrency exchanges are setting up bases in the Middle East, making the region a hub for crypto trading. What is the reason behind it?
I think there are a couple of primary driving factors: regulation and demographics. The Central Bank of Bahrain was the first in the region to issue onshore licenses for digital asset exchanges, which is why we at CoinMENA set up our headquarters in Bahrain.
In addition, the UAE earlier this year established the Virtual Asset Regulatory Authority (VARA), a new entity specifically set up to regulate virtual and crypto assets. This regulatory clarity is critical for founders and investors looking to gain exposure to this emerging asset class.
The second factor is demographics. The MENA region has one of the youngest demographics in the world, making them more likely to adopt new technologies quickly. We saw this with the adoption of the Internet and smartphones, where the region has among the highest adoption rates. So as a founder, this market offers many opportunities.
What sets CoinMENA apart from other crypto exchanges in the GCC/Middle East?
Our goal from day one was to be the easiest and safest way for regional investors to move from fiat to crypto and crypto to fiat. We achieved this by developing strong relationships with local regulators and banks.
Many of the international stock exchanges that operate in the region do so without a license. This means that users face problems when they want to withdraw their money to their bank accounts. Due to our stable banking relationships in the region, we are able to process user deposits and withdrawals within 24 hours on most days.
Second, we focus a lot on content, especially in Arabic. Crypto is a new technology and there is a lot of misinformation and confusion about it in the mainstream press. We see it as our responsibility to develop informative and educational content about our sector to raise market understanding of crypto in the region.
We were the first exchange in the region to develop a weekly newsletter and [launch a] podcast called Kalam Crypto and we are building a new “Learning” section on our website that will have the largest collection of crypto essays in Arabic. We plan to release it very soon.
What is your take on the current crypto crash? Where is the cryptocurrency market headed next?
This is nothing new for crypto; it goes through bull and bear cycles every four years. It’s a little different this time due to the macroeconomic conditions affecting all asset classes, including crypto.
For example, we have blue chip stocks this year such as Netflix down over 70 percent, Facebook (META) is down over 50 percent, TESLA and Amazon [are] down around 40 percent. Crypto is still in the early stages of adoption. Less than 4 percent of the world owns crypto, which is the same number of Internet users in the late 90s.
I fully expect this number to rise significantly over the next decade. To answer your question, in the short term it is difficult to say whether the worst is behind us because the market is going through difficult macro conditions with the US Federal Reserve raising interest rates to try to curb inflation.
In the long term, however, I see crypto as the future of finance, and I expect the next decade to continue to see more mainstream adoption.
What skill sets do you think will be critical for crypto businesses to succeed in the region? What are the most difficult skills to find in this sector?
We need all kinds of skills in crypto, from technical, to creative, to sales and marketing. We are seeing a worldwide trend where talent is flowing from traditional finance and technology to crypto.
It makes sense because crypto is the future of finance and will eventually attract the best talent across all disciplines. One of the hardest skills to find in the region is technology roles and developers.
How would you describe the participation of private and institutional investors from the Middle East in the crypto asset space over the years?
We’ve seen a huge increase in both, particularly during the run-up to the bull market to the end of 2021 and Q1 2022. This echoes my point about regulatory clarity from the first question.
Both private and institutional investors want to feel secure and know that they can exit and liquidate their positions at any time. Operating in a region of regulatory clarity allows investors to allocate capital to digital assets and be comfortable knowing that they can easily move their money to and from the old financial world to the crypto world.
Warren Buffett once described Bitcoin as a “real bubble” and said that cryptocurrencies have no real value. How would you react to that?
With all due respect to Mr. Warren Buffet, he is one of the best investors in history, but on crypto I think he is wrong. A bubble involves a cycle of boom and bust, and then it’s over. Like the tulip mania.
Bitcoin has survived eight separate 50-percent-plus moves without any bailouts, and each time the price has returned to set new all-time highs. If we look at bitcoin’s price over the last decade, the trend is clearly up and to the right.
Even with the current price decline back to the 20K range, bitcoin remains the best asset class in the world over the past decade. By his own admission, Buffet says investing in technology is not his forte.
He famously admitted it was a mistake [that] he continued investments in companies such as Google and Amazon. I think it’s clear where I stand on bitcoin. I consider it digital gold or real estate and eventually every asset manager in the world will have exposure to bitcoin in one way or another.
(Writing by Sunil S; Editing by Seban Scaria)
