The next wave of crypto adoption in the Middle East is likely to come from citizens in unstable countries facing crucial inflation like Iran and Lebanon. While some countries continue to restrict crypto trading and mining, digital transformation in the Middle East has proceeded at a rapid pace. Nimrod Lehavi, the founder of Simplex and a board member of the Israeli Bitcoin Association, shared his thoughts regarding the future of cryptocurrency in the region.
Even as certain governments remain openly hostile to Bitcoin and other digital assets, enthusiasm among authorities and citizens is spreading, from Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel.
Although most blockchain startups are settling in crypto-friendly countries like the UAE, the next wave of crypto adoption is likely to come from citizens in unstable autocracies, which are suffering from crushing inflation, such as Iran and Lebanon, thinks Nimrod Lehavi.
As an example for wider crypto adoption in such countries, he cites Turkey, where around one in five citizens owns cryptocurrency. Sakir Ercan Gul, the Deputy Minister of Treasury and Finance, will unveil in October a new legal framework for digital assets to protect retail investors and tackle money laundering.
By Lehavi’s words, despite the Turkish government in May released a law banning the use of digital assets for payment, crypto usage in the country has increased 11-fold in the last year, a consequence of the Turkish lira’s falling value against the dollar.
Now, Turkey has the fastest inflation in all of Europe and the 13th highest inflation rate worldwide; therefore, Turks are escaping into stablecoins and deflationary assets like Bitcoin, which allow them to retain their purchase power and transact on the international market, Lehavi notes.
Meanwhile, Lehavi also concerning Iran’s economic outlook as stark, with inflation running at over 40% and the cost of everyday goods (rice, meat, oil) skyrocketing, which ushes citizens into desperate poverty, while U.S. sanctions have compounded the matter by hitting government coffers hard.
In these harsh conditions, a rampant crypto mining industry has emerged because of low electricity prices. Two years ago, Iran recognized Bitcoin mining and established a licensing system that forced miners to pay a higher tariff for electricity consumption, as well miners must sell their mined Bitcoins to the central bank. As a result, mining in the country now accounts for around 5% of all Bitcoin mining worldwide.
Following several blackouts earlier this year, President Hassan Rouhani ordered all such operations to cease until Sept. 22. While mining is a highly specialized endeavor, Iranians on the ground increasingly see cryptocurrency as both a hedge against the devaluation of the rial and a means of overcoming crippling international embargoes, claims Nimrod Lehavi.
Although many crypto services remain off-limits to ordinary Iranians due to geo-blocking, the use of virtual private networks offers a gateway to a panoply of financial tools beyond the government’s purview, particularly those related to lending and borrowing. In addition to facilitating citizens’ escape from crushing inflation and crippling sanctions, cryptocurrency permits them to send and receive money faster and cheaper than ever before.
According to Lehavi, that is especially relevant in Lebanon, where up to 15 million citizens have fled the war-torn country, leaving an economic crisis in their wake. Arabian Business discussed how Lebanese citizens are starting to embrace cryptocurrency, with busy peer-to-peer (P2P) trade taking place over encrypted messaging platforms like Telegram and WhatsApp. While the local currency is depressed and acquiring greenbacks is prohibitively expensive, that outcome is logical.
Regarding crypto adoption in Latin America, Lehavi pointed the role of oppressive rules. Snuffing out interest in banking alternatives is an entirely futile mission – even in nations governed by autocratic leaders. While banks invariably bend to the will of strongmen, blocking withdrawals, freezing funds, and closing accounts, decentralized cryptocurrencies cannot be appropriated by any oppressive state.
Finally, Lehavi concludes that although sanctions and know-your-customer rules make the process of purchasing crypto more difficult, people in the Middle East are increasingly finding a way to do this.
While the UAE, as expected, will continue leading the way from a government and regulatory standpoint, but away from the trading floors and showy skyscrapers, the next wave of users will be common people.