The next wave of crypto adoption in the region is likely to come from citizens in unstable autocracies or those facing crushing inflation in countries like Iran and Lebanon.
Although several Middle Eastern countries continue to restrict cryptocurrency trading and mining, digital transformation in the region has proceeded at a rapid rate. From Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel, enthusiasm among authorities and citizens is spreading, even as certain governments remain openly hostile to bitcoin (BTC, +0.87%) and other digital assets.
Despite the majority of blockchain startups choosing to set up shop in crypto-friendly territories such as the United Arab Emirates (UAE), the next wave of crypto adoption is likely to come from citizens in unstable autocracies, as well as those in countries suffering from crushing inflation – Iran and Lebanon to name but two.
Bitcoin blueprint
A template for wider adoption in such countries can be seen in Turkey, where around one in five citizens reportedly own or has owned cryptocurrency. Deputy Minister of Treasury and Finance Sakir Ercan Gul will unveil a fresh legal framework for digital assets in October, with a view to protecting retail investors and tackling money laundering.
The Turkish government’s stance on crypto hasn’t always been favorable: In May, a law came into force banning the use of digital assets for payment. Despite such heavy-handed interventions, crypto usage in the country has increased 11-fold in the last year, a consequence of the Turkish lira’s falling value against the dollar.
At present, the country has the fastest inflation in all of Europe and the 13th highest inflation rate on the planet. Little wonder Turks are escaping into stable coins and deflationary assets like bitcoin, which allow them to retain their purchase power and transact on the international market.
Iran’s economic outlook is just as stark, with inflation running at over 40%. As the cost of everyday items (rice, meat, oil) skyrockets and pushes citizens into desperate poverty, U.S. sanctions have compounded the matter by hitting government coffers hard.
In this unforgiving milieu, a rampant crypto mining industry has unfathomably emerged because of low electricity prices and government support. Two years ago, Iran recognized bitcoin mining and established a licensing system that forced miners to pay a higher tariff for electricity consumption. Another caveat stipulated that miners must sell their mined bitcoins to the central bank. Amazingly, mining in the country now accounts for around 5% of all bitcoin mining worldwide.
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