The MENA Case for Bitcoin

In this article, we explore some of Bitcoin's use cases around the Middle East and North Africa. Learn what makes this region a monster untapped market and how your company can benefit

5/21/20247 min read

The Middle East and North Africa (MENA) region presents a unique opportunity for the adoption of Bitcoin. With its rich resources, strategic geopolitical position, and a young, tech-savvy population, the MENA region is poised to become a significant force in the global Bitcoin landscape. In this article, we will explore how Bitcoin can integrate into the regional economic and cultural fabric, and what makes this market a huge untapped opportunity for bitcoin companies.

Concentration of Wealth

The Middle East, particularly the Gulf region, is home to a significant amount of wealth and capital. The oil-rich nations of Saudi Arabia, United Arab Emirates, Qatar, and others have accumulated vast financial resources over the years. The sovereign wealth funds (SWFs) of these countries aim to diversify their economies and ensure long-term financial stability and growth. Their strategies are geared towards investing in innovation and technology, promoting environmental sustainability, forming strategic partnerships, and managing investment risks effectively.

Bitcoin perfectly suits all of these goals and strategies. It is a new asset class that offers high returns and acts as an inflation hedge, especially against currency devaluations. It aligns with broader strategies to embrace technological innovation and allows SWFs to tap into the growing digital economy. Early investments can also strategically position them as leaders in the space with influence over future developments and regulations. Moreover, such investments can appeal to younger, tech-savvy populations, supporting national strategies to modernize economies and attract younger talent.

Family offices and High Net Worth Individuals (HNWIs) are also on the rise. According to the "World Wealth Report 2022" by Capgemini, there are approximately 800,000 HNWIs in the Middle East, and the region is home to roughly 5,000 UHNWIs. These entities and individuals are characterized by diversified investment strategies that align with Islamic finance principles.

There are two ways forward: we can properly onboard this capital with education, self-custody, and key management, or it can all go to BlackRock's ETF.

Riba-Free Wealth and Investment

Bitcoin's unique characteristics align well with the principles of Islamic finance, which prohibits acts like profiting from lending and dealing with interest, known as Riba. Riba is explicitly prohibited in Islam, and Muslims face a constant dilemma as they attempt to grow and preserve their wealth in the fiat system and fractional-reserve banking.

Conventional investment options typically involve interest-bearing instruments, and Islamic finance products attempt to hide Riba behind complicated legal jargon. Moreover, fiat currency inflation erodes the value of savings over time, with many MENA countries experiencing complete currency collapse.

To preserve and grow their wealth while adhering to Islamic principles, Muslims often turn to owning real estate, investing in businesses, or speculating on the stock market. These avenues are subject to less inflationary pressures compared to local currencies. However, people are forced to constantly navigate financial markets and dedicate their time and effort to stay up to date with the market and their investments.

Economic Powerhouse

Let's take a quick tour of how Bitcoin can integrate into MENA and the most obvious use cases.

Energy Production and Flaring

Arab countries, particularly those in the Gulf Cooperation Council, contribute significantly to global energy production, accounting for approximately 30-35% of the world's oil and natural gas supply. However, gas flaring associated with this production is a major issue, with the Middle East and North Africa region contributing 38% of global flaring. To address this, Arab nations are implementing initiatives to reduce flaring, aligning with their climate goals and country visions, such as Saudi Arabia's Vision 2030 framework, which includes gas recovery programs. Oman is leading the way, and it's a matter of time before other countries follow suit.

Electricity Production

Bitcoin mining helps stabilize electricity loads by consistently consuming power, which smooths out fluctuations in demand across different seasons – a common issue in the Gulf climate that puts strain on the electricity grids. Additionally, the heat generated from mining can be repurposed for desalinating seawater, significantly lowering the costs of this energy-intensive process. The UAE has already started integrating Bitcoin mining to enhance the electric grid, and the benefits apply to all other Gulf countries that will soon have projects of their own.

Jumping across the Red Sea, Egypt's government has made significant investments in expanding its electricity production capacity by building new power generation stations. While this initiative has successfully increased the country's electricity production capacity, it has also led to a substantial accumulation of national debt, as the projects were primarily financed through international loans. Moreover, a considerable portion of this extra capacity remains unused, leading the government to seek exporting energy to international markets in exchange for US dollars. The country aims to export 3GW of electricity to Europe via a submarine cable connecting Egypt to Cyprus and Greece. Bitcoin mining is an ideal customer for the unused production capacity that can help alleviate the economic pressures.

Geographic Significance

Adopting Bitcoin in key MENA countries has the potential to create significant ripple effects. For a start, Gulf economies are interconnected, and adoption in one country will push the others. Moreover, other Muslim nations like Indonesia and Malaysia, along with Arab countries, may be encouraged to follow suit. Strong economic ties within the region will act as a tailwind for Bitcoin adoption. One news headline I am looking forward to is Egypt announcing that Suez Canal fees are now payable in Bitcoin and watching how global maritime shipping transitions to satoshis. It's all a matter of time.

Populations of many Arab countries face a mix of slow incumbent financial systems, international political sanctions, denial of service from global financial platforms, local financial repression, capital controls, and currency collapses. Infamous examples include the Lebanese Lira collapse, the Sudanese Pound devaluation, and Bitcoin's Omega candle against the Egyptian Pound. It's not unusual to find several Arab countries among those not supported by financial services businesses.

This has pushed towards two trends. The first is the skyrocketing trend of Fintech startups attempting to solve these problems, each with its own closed network and software, all competing to re-invent the same wheel. The second is an increasing move towards owning and using cryptocurrencies. Bitcoin fixes these problems at scale, and Bitcoin companies are in a prime position to offer the best solutions on an open, permissionless network.

Remittances

Remittances from GCC countries to other Arab nations are a lifeline for millions of families and a significant economic asset for the recipient countries. Countries like Egypt, Jordan, Lebanon, Palestine, and Yemen are among the largest beneficiaries. These funds play a critical role in supporting economic stability, but they also offer an opportunity for money transmitters to extract high fees, something that Bitcoin is already disrupting in other countries.

For instance, Egypt is one of the largest recipients of remittances in the world. In recent years, remittance inflows have consistently exceeded $20 billion annually, constituting about 8-10% of GDP, according to reports from the World Bank and the Central Bank of Egypt. The majority of remittances to Egypt come from the diaspora in Gulf countries. These transfers have to go through banks, money transfer services, delays, and scrutiny, lower-than-market currency exchange rates, before finally making it to the recipient. Bitcoin fixes this.

Inflation and Capital Controls

As of recent data, the Arab world has a significant youth population. Approximately 60% of the population in Arab countries is under the age of 30. This demographic is tech-savvy, ambitious, and isn't afraid to take risks and build the future they aspire to.

A quick look at the startup scene in MENA can give you an idea of the potential of this demographic. A prominent example is Careem, founded in 2012 in Dubai, which has grown into a leading ride-hailing service in the Middle East, North Africa, and South Asia, and was acquired by Uber in 2019. Another standout is Souq.com, which became the largest e-commerce platform in the Arab world and was acquired by Amazon in 2017. PayTabs from Saudi Arabia offers payment processing solutions and has expanded across multiple markets. Swvl, an Egypt-born startup, provides tech-enabled mass transit solutions and has expanded its services to multiple countries before ringing the NASDAQ bell in 2022.

Powered by Youth

The Middle East is a monster untapped market primed for the entry of Bitcoin companies. As the Arab world continues to explore the potential of Bitcoin, it is crucial to prioritize education and effective communication.

We started bitcoinarabic.org to bridge the language gap and spread Bitcoin education. Our library now stands as one of the biggest non-English libraries focused on Bitcoin. We are starting Bitcoin Arabic for Corporations to help companies enter the market.

As native Bitcoiners, we will ensure your message resonates with your target audience. Get in touch, and let's onboard populations.

What's Next?

Top photo by Muhammad Shoaib on Unsplash

Half of the top SWFs in the world speak Arabic (swfinstitute)

Bitcoin presents a unique opportunity to engage in a financial revolution that aligns with Islamic values and principles. This opportunity could make Bitcoin an attractive option for the Muslim world, driving adoption across the Middle East and the broader Muslim community.

It has already begun (Forbes)

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