Even the most learned economists would struggle to accurately describe the complicated relationship between Kuwait and cryptocurrency.
From previously rejecting cryptocurrency to linking up with RippleNet and trying to position itself as a leader in the digital asset stratosphere, Kuwait’s journey has been anything but straightforward.
Initial Crypto Scepticism
Cryptocurrency became a globally recognised market around 2017. Several countries immediately recognised its potential, but Kuwait stood vehemently against it.
The Middle Eastern nation declared it illegal, warning people to steer clear. The government was concerned about fraud, the volatility and the speculative nature of cryptocurrencies.
Their anxieties were validated when Kuwait suffered a massive crypto scam involving Bitcoin Kuwait. This fraudulent scheme led to around 40 million Kuwaiti dinars ($130 million) disappearing from a seemingly immutable system.
Many inexperienced investors fell for this con hatched by an anonymous developer. They were devastated financially. The scam triggered louder calls for the government to enforce strict regulations around digital assets.
Cybersecurity expert Dr Safaa Zaman is a leading voice in the space and has been vocal about the dangers of cryptocurrency trading. She believes the lack of oversight and the risks for uninformed investors make it a snake oil venture.
Zaman has championed cries to criminalise crypto while pushing for authorities to set up legal deterrents to force unsuspecting citizens from falling prey to scams.
A Surprise U-Turn
The National Bank of Kuwait (NBK) surprisingly signed a deal to integrate RippleNet into their system in 2018. The NBK was the first national financial institution to do so.
RippleNet debuted in Kuwait with the launch of the NBK Direct Remit, a payment system that allows customers to perform cross-border transactions. The product was built on Ripple’s blockchain technology.
It was a shocking change of direction. However, it was also a healthy step towards financial modernisation for a country eager to move with the times.
Kuwait has also pondered its stance on other modern topics such as online gambling. Even though it is still not a fully ratified industry, they may have to initiate new plans with several international betting companies now catering to Kuwaiti players.
Several online casinos in Kuwait offer an exciting mode of entertainment, and the government must step in to regulate them and allow local entrepreneurs to compete with international operators.
The partnership between RippleNet and NBK was a sign that Kuwait is willing to consider embracing modernisation and for blockchain to fulfil its potential. Legalised betting could also be on the cards.
Kuwait was initially a pioneer in the blockchain space. However, other Middle Eastern countries have also struck similar exciting partnerships without the threat of illegality hanging over their heads.
For instance, the United Arab Emirates (UAE) has been touting its Dirham-based stablecoin AE Coin. It is backed by reserves within the UAE.
The UAE and other countries have entered the spotlight with Kuwait’s apprehension preventing the nation from remaining at the forefront of fintech advancements in the region.
Adapt or Die
Kuwait has very valid concerns about the risks that come with crypto, but rejecting digital assets cannot be the wisest path, especially as they bid to wean the economy off its reliance on crude oil.
Most of the Middle East is in a soft race to find new revenue routes for their economy, and Kuwait cannot afford to be left behind in digital finance.
Blockchain technology is the future. Even though it is rough around the edges, the potential is limitless. This modern-day phenomenon has seeped into banking, investment and commerce.
Countries that have established a clear crypto regulatory framework are pulling in massive investments while taking the leadership mantle from Kuwait in the digital economy space.
Kuwait needs to find a way to balance financial security and innovation. Instead of gunning crypto down with stringent policies, they should design a legal framework that allows proper oversight.
The government must decide whether to re-engage with blockchain technology or remain on the sidelines while Bahrain, Saudi Arabia and the UAE outpace them.
The Middle Eastern financial sector is undergoing a massive transformation that could see them playing catch-up to their neighbours if they don’t move quickly.
