How will Bitcoin be used in the Middle East?

Though blockchain technology is arguably in its nascent stages across most of the Middle East, governments in the region are beginning to leverage the technology to streamline public services, enhance security in their central banking systems and even provide a higher level of care for at-risk communities such as refugees.

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MENA governments are now setting into place a foundation of legislation for blockchain-based projects, most notably outlining policy for blockchain-based financial and contractual transactions. With the support of governments across the region, banks are developing blockchain-powered exchange systems and blockchain startups are popping up with innovative blockchain solutions.

Blockchain is a distributed ledger technology (DLT) in which a growing list of records -- blocks -- are timestamped and linked using cryptography. The peer-to-peer (P2P) nature of blockchain allows data to be stored globally on thousands of servers, making it almost impossible to tamper with.

Although blockchain first became known as the underlying technology for bitcoin, its applications go beyond cryptocurrency, particularly within markets that require transactional trust between two or more parties. That's the case, for example, in the food industry or, more generally, in supply chains, where blockchain technology can offer transparency regarding product provenance, its production and distribution.

Stablecoin volatility

In regions with volatile currencies and scant access to dollars, demand for stablecoins is up.

According to a bitcoin trader in Iran, who asked to remain anonymous for safety, plummeting oil prices haven’t increased local demand for bitcoin. This is partially due to government efforts to promote the local stock market. Yet, as the dollar exchange rate fluctuates and paper bills become scarce, Tether stablecoins (USDT) sell for more than a dollar’s worth of Iranian rials.

“The government is trying to push financial market demands into Tehran stock exchange to avoid increasing demands in currency or gold markets,” the anonymous Iranian trader said. “Local [crypto] exchanges changed [USDT] rates artificially to get more profit, also demand was so high compared to the low supply of USDT in peer-to-peer exchanges.”

The most desirable aspect of the stablecoin isn’t any stability mechanism or collateral, it’s simply the network effects. After all, the reason many of these users turn to cryptocurrency is because they want a global asset, regardless of whether that takes the form of paper bills or software.

Dapps

The Middle East is also one of the few regions where decentralized applications (dapps) that aren’t focused on gambling are still attracting routine users.

Dmail founder Mohamed Abdou, whose Egyptian team built a privacy-centric email service using Blockstack, said the dapp now has 15,000 active monthly users. As such, Dmail raised a $500,000 seed round in April, an amount which goes much further in Cairo than Silicon Valley.