COVID-19 massively accelerated the extent to which GCC markets were exposed to crypto-currencies, particularly in the UAE, which for a number of months saw elements of the global crypto-community descend on Dubai. Beginning in 2015, GCC States such as the UAE, Bahrain, Qatar and Saudi Arabia have demonstrated advanced regulatory and policy innovation in the FinTech space. Now GCC states stand at a cross-roads.
On the one hand, the UAE, Bahrain and increasingly Saudi Arabia want to position their countries for a potential shift in the global balance of financial power, towards decentralized networks, and away from the 1944 Bretton Woods financial order.
On the other hand, Central Banks in these countries are anxious to retain control over monetary supply and control. These competing impulses explain the mixed signals and complex regulatory environments which are emerging, as well as emerging cross-border case studies in Central Bank Digital Currencies, such as “project Aber” between Saudi Arabia, and the UAE.
- UAE: In April, UAE Minister of Economy, Abdulla Bin Touq Al Marri, declared that cryptocurrencies and asset tokenization will become key to plans for the country to double its economy in 10 years.At a recent Digital Mining Summit, UAE based Phoenix Technology Consultants signed a $650 million order for crypto mining rigs, one of the largest purchases on record.
- Bahrain: During the first half of 2021, the first crypto-asset service provider licensed by the Central Bank of Bahrain announced more than $1 billion in trading, with the Rain platform witnessing a twenty fold increase in growth over the first six months of 2021, compared to 2020
- In January of this year, Bahrain approved a Shariah-compliant crypto-currency exchange, with a view to increasing the participation of other Muslim countries
- Saudi Arabia: the mega-project of NEOM is exploring new digital currencies and metaverse enabled token based markets
- ‘Project Aber’ between the UAE and Saudi Arabia stands out as a globally important case study, and is almost as significant as China’s “digital yuan.” Announced in January 2019, Project Aber was an effort by the UAE and Saudi Arabian Central Banks to establish a “proof of concept” designed to “contribute to the body of knowledge in CBDC and Distributed Ledger Technologies" (DLT)