New BTC Fund – Good News for Crypto in the Middle East
The Middle East’s first Bitcoin Fund has been listed on Dubai’s Nasdaq. 3iQ Corp, the Canadian digital asset company behind The Bitcoin Fund, has added this to Dubai’s exchanges with the aim of raising $200 million in offerings and increasing trading at all times.
This is the first crypto-investment company to be publicly traded in the Middle East, making it a huge sign of adoption within the region. The Middle East is often forgotten in the crypto industry, but this could soon change as some areas have been warming to blockchain technology quite recently.
Is the Middle East Crypto-Friendly?
Some countries in the Middle East certainly appear to be open to crypto, such as Dubai (UAE). Not only has The Bitcoin Fund been publicly listed here, but just one month ago Dubai’s financial regulators issued their first official license to a crypto exchange.
Earlier in the year, The Kingdom of Bahrain, the 5th wealthiest Middle Eastern country issued a “Crypto Assets Services Company License” to CoinMENA, a new exchange – a rare achievement. This is a sign that the country is looking to ease its restrictions.
Libya has also recently seen positive news regarding cryptocurrency, as its low energy costs have led to a sizeable Bitcoin mining community. This community is likely to continue growing, considering how many miners are dispersing from China (the original hub for mining) due to a recent crackdown.
However, overall adoption is still slow in the Middle East, and there are many Arab countries that have taken a negative stance towards the technology. For instance, Qatar, the richest Middle Eastern Country, has advised people to avoid cryptocurrency due to its volatility and speculative nature.
The Central Bank of Kuwait has also cautioned its citizens from handling cryptocurrency, arguing that it is not the same as real money. Iran, too, has taken an anti-crypto stance by outlawing its own blockchain association.
Cryptocurrency and Sharia Law
Like with many countries around the world, legal regulations can restrict crypto adoption. However, in the Middle East, this topic becomes more complex as it also becomes a religious question.
Sharia compliance is important to some Arab countries. For instance, Bahrain’s most recently approved exchange, CoinMENA, not only needed approval from Bahrain’s Central Bank, but also from the Shariyah Review Bureau.
This begs the question of why cryptocurrency would be considered non-compliant with Sharia Law in the first place. Like any legal and theological system, Sharia Law is applied and interpreted differently in different countries, and is ever-evolving and changing. While the Qur’an and The Sunnah are primary sources of Sharia Law, different legal scholars will look to other texts, and interpret certain passages differently from others.
Despite Sharia compliance being important to some regions and individuals, there is very little scholarly opinion on the topic of crypto. However, we can make a reasonable assessment as to why some would question its permissibility.
For starters, Islamic law holds that only objects with intrinsic value can be traded. If something has intrinsic value, then it has value in-and-of-itself, or in other words its value does not derive from another thing. This is because if something is traded that has value deriving from something else, then it will be traded on interest, or riba.
Broadly speaking, riba is the act of accumulating or losing wealth by buying and selling things at prices that are not indicative of the thing itself. This also means that under Islamic law you cannot demand interest on a loan, or engage in futures trading (an increasingly popular activity among Bitcoin investors) as they do not have intrinsic value.
This might be the thorn that holds cryptocurrency back in the Middle East. If crypto is seen as having no intrinsic value, then traders will be engaging in riba. Incidentally, this is what Qatar means when they warn of crypto’s speculative nature. However, many cryptocurrencies actually do have intrinsic value compared to fiat, it is just not as obvious.
Cryptocurrency and Intrinisic Value
It is easier to notice the intrinsic value of cryptocurrencies when looking at the underlying technology: decentralized blockchains. The fact that data and knowledge is distributed in a permissionless, and borderless way is a huge thing as it allows people to communicate, share resources, and pass information with ease. It has intrinsic value because it provides a utility, similar to how commodities like oil have intrinsic value due to being able to power machinery.
Decentralized blockchain technology is important first and foremost because it allows people to connect, and connectivity is a necessary element of the human experience. Considering how decentralized blockchains need some form of payment system to keep them secure and free of exploitative hacks, this gives (most) cryptocurrencies intrinsic value.
To see this in its rawest sense, consider how the Ethereum blockchain gave a Chinese sexual assault survivor a voice by preserving her words and distributing them through the network – prior to this she was being censored by the government. Communication goes hand-in-hand with connectivity, and as the only speaking animals in the known world, communication is paramount to our well-being.
This is likely the biggest hurdle that crypto faces from a Sharia perspective. However, considering how Sharia-based countries like Bahrain and Dubai are becoming more crypto-friendly, we might soon see other Arab countries warming up to the idea of them. As demand for crypto increases, and scholars take a closer look at how the technology works, expect the Middle East to change its tune on crypto in the future.
Do you think we will see a wave of cryptourrency adoption in the Middle East? Let us know in the comments!