Financial institutions in the MENA region remain skeptical of bitcoin despite its growing adoption. Small groups and entrepreneurs are developing platforms to promote bitcoin as a means of addressing poor financial inclusion in the region. While low credit card usage and difficulty obtaining bank accounts drive potential bitcoin demand, cultural and technological challenges remain. Combined efforts between governments and businesses are needed to build trust and drive bitcoin growth, through education and outreach. However, bitcoin adoption in the MENA region currently remains low due to lack of incentives, innovation, and trust in the currency's security.

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Bitcoin in MENA Market
 Financial Institutions in the MENA region remain skeptical about bitcoins, despite a
slow but steady growth in bitcoin adoption.
 Small groups and Entrepreneurs are developing platforms to promote the digital
currency, which can address the long-standing problem of financial inclusion in the
region.
 Low credit card penetration and difficulty to acquire a credit card or a bank account in
the MENA region will drive the demand for the Bitcoins in the region. However,
cultural and technological challenges exist.
Bitcoin was created in 2009 by an unknown person, or group of people, using pseudonym
Satoshi Nakamoto. It is a decentralized (digital) currency, without any authority, company,
website or symbol.
Bitcoins are created by a slow and highly iterative computing process called ‘bitcoin mining’,
enabling individuals or companies engage in this activity in exchange for transaction fees and
newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for fiat money,

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products, and services, and users can send and receive bitcoins electronically for an optional
transaction fee using wallet software on a personal computer, mobile device, or a web
application. Bitcoins can also be bought from bitcoin exchanges by paying through other
payment methods including cash.
Currently, 50 bitcoins are generated every 10 minutes; however, the mining process will get
slower and complex with time. However, this payment method is getting increasingly popular,
especially in the developed world. According to Coindesk.com, as of 26 June, one Bitcoin is
worth about USD 570 and on average, 80,000 Bitcoin transactions worth over USD 100 million
occur daily. In Dec 2013, daily value of Bitcoin transactions crossed Western Union transactions.
Global Bitcoin Transactions
Source: seconmarket.com
Large number of financial remittances, low level of financial inclusion, and high mobile
penetration rates in the Middle East creates a good market for the Bitcoins.
MENA region is home to large number of expats who send significant amounts of salaries back
home. The region accounts for nearly 15% of global remittances and the bitcoin being a low

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cost money transfer option (compared to average 8% transfer fee for other money transfer
modes), help save significant amounts of remittance fee.
The low levels of financial inclusion in the MENA region has led to limited access to any sort of
financial services. According to Findex, MENA has the lowest percentages of adults with a
formal bank account (18%) and of poor people with formal access to financial services (9%). The
recent success of mobile banking is an example of how alternative payment methods can make
their place in the market.
The mobile and internet penetration is high when compared to the global average. As per the
Global Media Intelligence Report by eMarketer, at 525.8 mn, the Middle East and Africa had the
second largest mobile phone population in 2013. Also the internet penetration is 37%, which is
above the global average. These two channels can facilitate the use of Bitcoin and can help the
region address the issue of poor financial inclusion.
Some groups are continually working on new platforms for Bitcoins in the region to make
them popular and easy to use. In June 2014, BITBOX launched the Middle East’s first bitcoin
ATM in Tel Aviv (Israel). The vending machine allows both purchase and sale of Bitcoins.
Although Bitcoin is witnessing significant growth trend in Israel, however, at present all the
transactions have to be through a bank, involving lot of bureaucracy. With the launch of the
Bitcoin ATM, it will help the users to transact without being hassled by the bureaucracy of the
banks. This will encourage the users to exchange Bitcoins for local currency and also create a
wallet to store Bitcoins. This platform will enable sending Bitcoins via email and phone and
redeeming them at any of the similar ATMs. The ATMs are priced at about $15,000 and includes
biometric features which may be activated depending on the local requirements.
Iranians got a Bitcoin Marketplace, CoinAva, which allows people to buy and sell Bitcoin. Bitcoin
Exchange is similar to a traditional exchange except that it is entirely online.

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Lack of innovation, knowledge and skepticism are the main hindrances for the Bitcoin growth
in the region. Although with lot of potential for growth of Bitcoins available in MENA, it is one
of the toughest regions to operate and acquire Bitcoins. Some of the reasons that may be
pulling down the potential are:
 Absence of incentives to use bitcoin
 Lack of innovation as the environment is still more reactive than proactive
 Lack of confidence in the security and trustworthiness of the currency
 Broader community in Middle East is still in the early learning phase about bitcoin
 It was difficult to find options to exchange other forms of local digital money with Bitcoins
till Bitcoin Nordic recently introduced CashU as a payment option
The central banks in the region have issued warnings against the usage of the Bitcoins making
it tougher for the people to trust this digital currency.
 According to the Central bank of Jordan, the virtual currencies are not legal tender and
there is no obligation on any central bank in the world or any government to exchange its
value for real money issued by them.
 According to the Lebanese Central Bank, due to its relatively small user base, the value of
Bitcoins is subject to intense volatility and as the money is not backed by any central bank,
the value of Bitcoin is not stable, and the price can drop to zero.
However, people in favor of Bitcoin argue that the technology is desirable as there is no issuing
authority making it a borderless currency on Internet. Anyone having access to the Internet or a
phone can access Bitcoin and leverage the financial services around it.
Combined efforts by governments and businesses is needed to drive the growth in the
region. There is a lack of trust in online payments in the region leading to low credit card usage
and growing but comparatively small e-commerce sector. It has to be tackled by educating
people about bitcoin and related terms like wallets and exchanges and addressing issues with
the conventional online payments. Bitcoin entrepreneurs in the region are focusing on
education and outreach which will include:

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 Showcasing at events like ArabDigital;
 Building contacts at other tech start-ups; and
 Reaching out to the region’s merchants and consumers.
Another challenge is incentivizing the use of the digital currency. However, it is a catch 22
situation because there is a need for more users to incentivize businesses to use it, and more
businesses to incentivize users to use it. The region needs more innovators and risk takers,
more ideas and solutions as the market is more reactive than proactive.
Bitcoin appears to be destined to grow big in MENA, however, it remains to be seen how long
the cultural barriers and lack of technological integration stopping it from penetrating deeper in
the region.
Cases of acceptability of Bitcoins in the Region and Warnings issued by Regional Banks
Despite being a favorable market, Bitcoin has a very low presence in MENA region with only two
merchants accepting Bitcoin in the entire region: a restaurant in Dubai and a coffee shop in Jordan.
 UAE homegrown F&B brand “The Pizza Guys” became the first restaurant in the wider region to
accept Bitcoin. According to these pizza guys, they are able to accept the volatility in the price of
Bitcoin because of their small transaction size
 According to the owner of the coffee shop in Jordan, accepting Bitcoin payments, there is very low
risk of losing money given the small size of the transactions
The article was originally published at: Arab Business Review
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