What does Facebook’s cryptocurrency mean for the Middle East?
Facebook has announced its own cryptocurrency called ‘Libra’, which is set to be used from 2020 onwards
At the moment though, the majority of Middle Eastern countries do not accept a cryptocurrency legal framework, nor wish to explore blockchain on state level, so is there anything to be excited about?
The UAE is one of the few countries that has said previously it would develop and integrate the use of cryptocurrencies, though it hasn’t exactly been smooth sailing
Facebook and 27 other partner companies have formally announced there’s a plan to launch a cryptocurrency called ‘Libra’ in 2020. It is hoped that the' Libra' could become the standard digital currency around the world and even rival the dollar. Though in a place like the Middle East, that’s had a rocky relationship with digital currencies, does any of this really matter?
There’s something you need to get your head around first and that's the term ‘blockchain’. We’ve found this handy summary to help understand the word: “A blockchain is, in the simplest of terms, a time-stamped series of immutable record of data that is managed by cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain).”
It’s essentially a list of economic transactions online that are incorruptible, it’s a new way of handling transactions, moving around ‘blocks’ of transactional information from one party to another but without any kind of fee.
This new style of transaction is something the UAE is very on board with. Back in 2016, Dubai launched a city-wide ‘Blockchain Strategy’ with the aim of becoming the first blockchain powered city by 2020. Not only this but back in 2018, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler and Prime Minister of Dubai announced a 2021 ‘Blockchain Strategy’ for the UAE government.
The proposed strategy aims to have 50% of federal transaction being conducted by blockchain by 2021. This push would make the Emirates paperless with its visa applications, bill payments and license renewals.
Considering then that ‘Libra’ is “powered by blockchain”, it seems like good news.
“Today we’re sharing plans for Calibra, a newly formed Facebook subsidiary whose goal is to provide financial services that will let people access and participate in the Libra network,” Facebook said in a statement posted to its website. “The first product Calibra will introduce is a digital wallet for Libra, a new global currency powered by blockchain technology. The wallet will be available in Messenger, WhatsApp and as a standalone app—and we expect to launch in 2020.”
However being down with using blockchain transactions isn’t all you need to welcome ‘Libra’ into your lives, you also need to be down with using digital currencies. This is where the UAE runs into some problems.
Back in 2017, the Central Bank Governor Mubarak Rashid al-Mansouri issued a public warning against using digital currencies as a means of exchange. He went on to outline the currencies serve as fuel for money laundering and other illegal activity.
“The risks of trading in digital currencies have clearly appeared when the prices of digital currency fell sharply after some countries announced a ban on using initial coin offerings.” He further explained.
So the UAE wants to adopt blockchain but it isn’t sure if it wants to adopt virtual currencies due to its inherent unpredictability and connection to anonymous illegal activity.
There’s a far less confusing and complex issue facing the introduction of 'Libra' to the Middle East. Cash is king. People in Middle Eastern countries like using cash and sometimes gold to swap goods and services, unlike other developed areas, out here, it’s far more common to carry around cash and also quite common to see some things like taxis not accept card.
Even if ‘Libra’ made its way to the UAE, and that’s questionable, people may not even like to use it, sure ‘Libra’ could maybe rival the dollar but it won’t rival the dirham.
Not just this but other Middle Eastern countries outright refuse to use both blockchain transactional methods and digital currencies. Places like Lebanon, Kuwait, Jordan and Iraq all feel strongly against moving away from traditional methods. Moreover, places like Cyprus, Egypt and Saudi Arabia are okay with adopting blockchain eventually but not digital currencies.
So the UAE might jump on board with ‘Libra’ one day but for a pretty big chunk of the Middle East, it’s looking like Facebook’s colossal reach won’t go that far just yet.