Banking on Bitcoin: Cryptocurrency’s Growth in the Gulf
Despite fears of a ‘Bitcoin bubble’, the cryptocurrency is gaining traction in the Gulf, where a handful of operators are promoting the low cost and relative security of virtual transactions. Among them are exchange houses, who are looking to bitcoin to help reverse a decline in global remittances.
The new offshoot, Bitcoin Cash, is built on a new version of blockchain technology that promises faster transactions, via an eight megabyte ‘block’ versus the original Bitcoin’s one megabyte. This means it can charge lower fees to customers moving money via its platform. Traders were excited. Bitcoin Cash surged 40 percent in a single day on Friday August 18, to hit $655, and although it fell 20 percent the following Monday it remains up about 110 percent since its launch at the start of the month. Meanwhile, the original Bitcoin is still strong, trading at more than $4,000 after hitting an all-time high of $4,522 the same Friday, with a market value of $70bn. It is the second biggest digital currency by market capitalisation, behind Ethereum and above Bitcoin Cash.
In the Gulf, the Bitcoin trading boom has had less of an impact as the industry remains underdeveloped. However, experts claim investor enthusiasm in the US could shine a useful spotlight on a virtual money transfer system still struggling to reach the mainstream. Bitcoin is a virtual currency that allows users to exchange online credits for goods and services for a minimal fee. The blockchain technology behind it is a public and transparent ledger of all Bitcoin transactions. With the GCC accounting for a substantial proportion of global remittances, foreign exchange houses are big business and many say incorporating Bitcoin-enabling technology would be commercially advantageous, as it would help them to cut costs and provide better services to customers. Other exchange houses in the GCC are viewing Bitcoin as an important development. UAE Exchange invested in two blockchain-based companies, Loyyal and Bankchain, in the first half of 2017 and is in talks with a third – a firm statement of its confidence in the nascent technology.
The industry is certainly growing, with new global players entering the market almost every week. A system called Litecoin has recently been touted as the future “digital gold” and is apparently a useful solution for small, day-to-day payments, or micro-transactions. Some experts predict it could even gain global momentum as a non-correlated asset class.
Meanwhile, BitOasis’ Doudin claims to have seen increasing interest from a range of parties, including governments, regulators, free zones — Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have both developed fintech frameworks — banks and customers, and predicts that “over the next two years the space will mature”.