The development of crypto and Web3 in the Arab world

The development of crypto and Web3 in the Arab world

Despite the current FTX crisis, digital asset markets, crypto, Web3, DeFi, central bank digital currencies (CBDCs) and stablecoins are shaking up decades-old financial protocols. Unlike most other parts of the world, it is central banks in the Middle East and North Africa (MENA) that drive the development of these technologies. Here they lead, regulate and exercise excessive power in determining government policy. Central bankers usually have long terms of office and nothing happens unless they approve.

Central banks also act as the operative arms of public fiscal policy. They take the lead in accelerating, regulating, limiting, or otherwise shaping any kind of technological change that might affect the region’s economy.

There is another twist. Because these regions are primarily Muslim, Islamic finance guides these organizations. The MENA region consists of 28 countries with an estimated population of more than 357 million. The region is developing rapidly. As one of the world’s resource-rich regions, it is home to the world’s largest Islamic banks, serving Muslim as well as other communities around the world and basing their decisions on Islamic financial beliefs.

Islamic finance is the only example of a financial system that is directly based on the ethical precepts of a major religion, providing not only investment guidelines but also a set of unique investment and financing products. Islamic finance is based on the Shari’ah, which provides guidelines for several aspects of Muslim life. (Shari’ah is an Arabic term often translated as “Islamic law.”)

Shari’ah-compliant finance includes a set of practices that follow a legal guideline that adheres to Islamic laws and beliefs, such as prohibiting interest and promoting ethical investments that follow the Qur’an. Shari’ah compliant finance has become an accepted and vibrant element of international transactions.

Indeed, Islamic finance requires adopting impact-oriented financial activities and resource allocation to satisfy the material and social needs of all members of a community. Under Islamic law, money is a measure of value and not an asset in itself. No one should be able to receive income from money alone, so income from interest or speculation is considered usurious and exploitative, and is therefore forbidden, or “haram”.

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For this reason, some central banks and government leaders were initially skeptical of crypto, and even today there is an uneven approach to these new technologies in the region.

However, leaders across the region have recognized that Web3/blockchain applications are an important alternative financing method, directing funds to impact-oriented social and economic activities that satisfy the core foundations of Islamic finance.

From July 2021 to July 2022, the Middle East was the fastest growing crypto market, indicating that both individuals and organizations are embracing the technological capabilities of blockchain and the incentives it supports. While crypto transactions increased by more than 20% around the world, MENA saw a gain of more than 45%, led by Turkey.

Underlying this interest and adoption are quality Web3 research and educational resources, conferences and media attention. Central banks feel pressure to develop coherent policies that embrace innovation. Ultimately, unlike in some other nations, it is not possible to ban crypto. If all assets go digital, such steps could ban all digital assets and consequently the next step in the development of the digital economy.

Progress in individual countries has been uneven, but generally there has been progress. Here’s a closer look at some key nations:

United Arab Emirates

The United Arab Emirates (UAE) leads the region, and Dubai leads in its own right with about a third of all public applications running on blockchain. It has also supported interesting policy innovations such as the creation of metaverse police to monitor illegal behavior in the virtual worlds increasingly built on the Web3.

The Central Bank of the United Arab Emirates concluded a CBDC pilot for cross-border multi-currency payments with the Hong Kong Monetary Authority, the Bank of Thailand and the Digital Currency Institute of the People’s Bank of China.

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The Dubai Financial Services Authority has also issued regulations on crypto-tokens for clients looking to use this new asset class. The announcement was made to expand the range of virtual asset regimes available, based on the investment token regulations announced in October 2021.

The UAE Central Bank also announced the completion of the first CBDC pilot in September. Today, it is working on an e-KYC, an innovation center and wholesale and retail CBDCs to stay at the forefront of blockchain adoption.

Saudi Arabia

The Kingdom uses Web3 in many forms. For example, Saudi Arabia just celebrated its national day in the metaverse for the first time. The Saudi Central Bank (SAMA) and the Central Bank of the United Arab Emirates collaborated on a pilot CBDC. In September, SAMA hired a new crypto chief to lead its virtual assets and CBDC program.

The Saudis have also worked on the tokenization of real estate as well as the implementation of blockchain in the healthcare sector and the supply chain. Most recently, the Saudi-British Bank (SABB) used blockchain to improve the digitization of letters of credit.


The Central Bank of Bahrain (CBB) issued final regulations in February in response to the growing demand for crypto assets, which included the licensing of a blockchain-based crypto exchange called Rain that allows users to buy, sell and store cryptocurrencies. It has more than 180,000 users and there have been over $1.9 billion in transactions.

Binance and CoinMENA have also received crypto asset service provider licenses. Bahrain has even created the region’s first onshore regulatory sandbox and focuses on blockchain applications that strengthen supply chains.


Oman has been among MENA’s blockchain leaders. A few years ago, the government worked on a massive upskilling project by planning courses and seminars to raise awareness of the importance of technology. The Central Bank of Oman has engaged experts to study the advantages and disadvantages of authorizing the use of cryptocurrencies in its economy.

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Most recently, a prominent energy company, Al Shawamikh Oil Services, has partnered with Frontech to develop a sustainable energy management system built on blockchain technology. It will track and manage the sustainable energy production units on the blockchain.


For years, the Qatar Central Bank (QBC) had banned the mining and investment of Bitcoin and other cryptocurrencies. Recently, interest in blockchain technology has increased in the country, and therefore QBC is changing its approach. It has shown strong interest in setting up a legal framework for the use of digital assets and blockchain applications and is exploring tokenized solutions for real estate. Under the auspices of the Qatar Financial Center, the country is establishing an expert council which will be introduced next year.

Blockchain adoption is beginning in Qatar, giving software development companies room for innovation. Qatar University spinoff Genesis Technologies has formed a local blockchain development team to begin evaluating relevant use cases. Equally exciting, FIFA World Cup organizers chose blockchain startups—Algorand for its green credentials and for its user-friendly systems—as sponsors of the tournament that just ended on Sunday.

Aline Daoud is a civil engineer and managing partner at the Blockchain Research Institute Middle East. Headquartered in Toronto, BRI has completed 150 projects on Web3 use cases, opportunities and challenges. BRI Middle East conducts educational and pilot programs in the United Arab Emirates, Saudi Arabia, Qatar, Turkey and Egypt. The opinions expressed in comments are solely the views of their authors and do not reflect the opinions or beliefs of Fortune.

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