Though cryptocurrencies have been around for over a decade, their status is still highly contested. Crypto proponents see them as innovative assets with the potential to revolutionise the financial system and create investment opportunities, the likes of which we have never seen before.
At the same time, critics worry that cryptocurrencies lack any inherent value. Because they are not backed by anything, digital coins depend entirely on demand and public opinion for their value. Unsurprisingly, this unreliability is highly concerning to more conservative investors.
And it’s not just ordinary people that stand divided on crypto, either. Governments and institutions are also unsure how to approach the crypto market. Some have limited cryptocurrency trading as much as possible to protect investors from the high market risks.
Other countries, meanwhile, have taken steps to accommodate the cryptocurrency industry. We have all heard of El Salvador’s adoption of Bitcoin as a legal tender. But other governments have also hatched plans to make their countries appealing to crypto miners and investors.
Most recently, Saudi Arabia made it into the headlines of crypto news sources. The reason? The country is implementing new measures to supposedly make itself more attractive to crypto investors. Let’s see what those are and how they would affect the cryptocurrency landscape.
Saudi Arabia’s Stance on Cryptocurrency
On the scale between extremely sceptical and extremely cautious regarding crypto, Saudi Arabia is closer to the former. Though it is not the country with the toughest restrictions on cryptocurrency, it has definitely established itself as a critic.
Like it is with other governments opposed to crypto, the main issue is decentralisation and the lack of regulation on digital coins. Cryptocurrency is a dangerous resource because it cannot be easily tracked, controlled, or manipulated, at least not by the government. It is not under the influence of any central authority.
Thus, crypto has the potential to unlock many benefits for individuals and increase their financial freedom and independence from the government and central bank. But at the same time, crypto users cannot benefit from governmental protection.
For instance, if you become a victim of a cybercrime and someone steals your cryptocurrency, there is no one you can contact to help you. Most likely, you might be blamed for not protecting your wallet details well enough. There simply isn’t a government agency that can take your side and champion your rights.
Plus, considering how highly volatile the cryptocurrency market is, investors could win — and lose — money very quickly. As crypto platform Bitcoin Up warns, “trading involves risk, and trading with leverage could result in losing your entire investment.” That’s precisely the grave mistake Saudi authorities want to spare their residents.
Saudi Arabia, a rather affluent country, has an interest in keeping its population rich and happy. Naturally, this includes limiting people’s exposure to risk, or in this case, to somewhat unreliable financial assets.
According to data by Freeman Law, the Saudi Arabian Monetary Agency (SAMA) has imposed some limits on cryptocurrency transactions. However, crypto trading itself is allowed.
So, What’s New?
In September, SAMA decided to hire Mohsen AlZahrani. He will now work directly with the Saudi central bank in its digital currency division.
AlZahrani is a financial veteran. He has over a decade of experience in the sector and most recently worked at Accenture. In fact, AlZahrani has worked with the Saudi central bank before, though in a different capacity. Between 2015 and 2018, he led the bank’s innovation program, which was responsible for exploring avenues of utilising blockchain technology for the bank’s purposes.
Supposedly, Saudi Arabia plans to launch its own cryptocurrency to represent the riyal digitally. As of now, this token will most likely be used to facilitate interbank operations within Saudi Arabia and may not be open to the general public.
Nevertheless, bringing a well-known crypto proponent into a leadership role within the central bank certainly signals that Saudi Arabia is warming up to the sector.
Why the Changes?
The simplest explanation for the change in attitude towards cryptocurrencies is a business rivalry with the United Arab Emirates.
The UAE, especially Dubai, is a famous business and financial hub, arguably the most popular one in the Middle East. The UAE has already established itself as highly crypto-friendly, which has been good for business and international investments.
Naturally, Crown Prince Mohammed bin Salman of Saudi Arabia, who is seen by many as a relatively progressive leader trying to modernise his kingdom, also wants a slice of the crypto pie. Seeing how good the cryptocurrency industry has been to his neighbours, he seems ready to make some adjustments in his kingdom.
Is Saudi Arabia a Good Place for Crypto Businesses?
We will hardly surprise anyone if we say Saudi Arabia is a rich country. According to Worldometers, Saudi Arabia is 17th in GDP per capita, which is quite high. However, it is considerably behind Qatar (1st), the United Arab Emirates (7th), and Kuwait (8th). So, even within the Middle East, the kingdom has some catching up to do economically.
For a very long time, the Saudi economy has depended on the oil sector. The instability of oil prices, with their occasional crashes in the past few years, has made it even more evident to the Crown Prince that the country needs to diversify its economy and create wealth in new ways.
If Saudi Arabia warms up to crypto and fosters new business opportunities in that field, it will open a brand-new page in its financial history. That may just be what the Crown Prince and SAMA are looking for.
Summary
Though Saudi Arabia is somewhat conservative regarding cryptocurrency, attitudes appear to be changing. Evidence suggests that the Crown Prince and the country’s central bank are interested in playing around with blockchain and digital currencies.
The recent appointment of crypto expert Mohsen AlZahrani might help Saudi Arabia create a local cryptocurrency industry and compete with the UAE.
Still, right now, crypto transactions in Saudi Arabia are limited, even though trading is allowed.
