The Kingdom of Saudi Arabia recently announced its decision to ban all cryptocurrency related transactions, a decision some might see as going against the Kingdom’s 2030 Digital transformation vision which includes the incorporation of technologies such as the Blockchain.
The decision to ban cryptocurrency activities received a lot of attention from regional as well as international media without delving deeply into the reasons for the ban. In our opinion and based on our knowledge of the KSA market, this decision while clear on paper needs more explanation given the following facts:
- Despite KSA’s weather which is not conducive to Bitcoin mining operations, the KSA youth were one of the first to develop mining centers.
- In February 2018, SAMA (Saudi Arabian Monetary Authority) signed a memorandum of Understanding with Ripple to develop the financial payments systems further in the Kingdom.
- Saudi telecom company STC signed, back in April 2018, an MoU with Blockchain company ConsenSys to develop Blockchain solutions and services for the Saudi market.
- In July 2018, IBM and Elm Company have collaborated to implement Riyadh Municipality’s Blockchain Roadmap to improve government transactions and services.
- A number of Business men and traditional investors have started to diversify their portfolios with cryptocurrencies in line with what other investors are doing worldwide.
- The many various Blockchain projects and implementations being carried out in UAE, Oman, Bahrain and others is part and parcel of a wider GCC implementation which is bound to reach KSA eventually.
- The Legislative situation is a challenge especially in the Blockchain realm and specifically when it comes to cryptocurrencies where legislations are still in the initial stages. To date many countries worldwide are still lagging behind when it comes to legislation even though they have been pioneers when it comes to innovation and technological development.
Given the facts mentioned above KSA is not chirping outside the cage but rather protecting its citizens and their virtual investments from fraudulent and Ponzi scams. Until then we await regulations that go hand in hand with the fast pace of development we are witnessing when it comes to new technologies. By banning crypto-related transactions, KSA is trying to cut off the road for any institution or individuals who use the lack of legal systems to mislead and rip off un-knowing citizens in an aim to make a quick profit.