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Chronicle of the Middle East and North Africa

Instability Fuels NFT Craze Across MENA

Instability Fuels NFT Craze
A picture taken on February 6, 2018 shows a person holding a visual representation of the digital crypto-currency Bitcoin. JACK GUEZ / AFP

Justin Salhani

The Middle East has joined the Bitcoin craze. Though the dynamics of bitcoin adoption differ across Gulf States and countries in the area that are experiencing economic and banking difficulties, the overall trend is clear: Middle Easterners are becoming more familiar with, and adopting cryptocurrencies.

This new phenomenon has many people asking themselves a simple question: what is it? Cryptocurrency, is a digital, decentralized currency that engenders a wide spectrum of reactions. Many critics believe it to be an environment polluting, get-rich-quick scheme ripe for exploitation. The most known cryptocurrency, Bitcoin, uses the same energy consumption as the entirety of Thailand while its carbon footprint is comparable to that of the Czech Republic.

Proponents, however, are convinced it is part of the reinvention of global finance and, along with NFTs and web 3.0, will reimagine how society interacts with the internet. In the Middle East, this spectrum of views are also expressed, though certain particularities also stand out between the region’s richer and poorer countries.

The investment-oriented Gulf has seen cryptocurrency booming in recent years, after some initial Islamic scholars debated whether or not the phenomenon was halal. While many might expect Dubai to be the MENA region’s cryptocurrency hub, a lack of banking regulations has meant that its island neighbor, Bahrain, is the current regional leader. Bahrain beat its neighbors to the punch by enacting regulations for cryptocurrency in 2019. Rain, a leading cryptocurrency platform in the region, is based in Bahrain and exceeded $1 billion in trading in just the first half of 2021, according to CNN Business. Saudi Arabia has also jumped on board with its own digital currency called Aber. Saudi Arabia’s low energy costs mean it could be ripe for building mining farms that harvest cryptocurrency.

But while the Gulf States are looking for new ways to outline the glimmer of their energy-rich autocracies, the region’s poorer countries – and their Diasporas – are looking at cryptocurrency as a way to keep their money out of corrupt financial institutions.

In Lebanon, corruption and financial mismanagement from the country’s ruling class has seen the currency devalue by over 85 percent in just over two years. The World Bank said the economic crisis was among the worst seen in almost 200 years and that such a sharp crash is usually only associated with war. Banks set limits on withdrawals of U.S. dollars, meaning the savings of the country’s citizens was suddenly inaccessible. Now, many locals are looking at cryptocurrency as a way to keep money out of the hands of the banks that robbed them.

“It’s funny when people say crypto isn’t real because what we found out in Lebanon is that this digital currency is 100 times more real than the lollars we have in the bank,” a crypto enthusiast named Ahmad told the Thomson Reuters Foundation. Lollars refers to ‘Lebanese dollars’ or an inaccessible U.S. dollar stuck in the Lebanese banking system.

The adoption of cryptocurrency in Lebanon is at least partially driven by an ideology of opposition. Most businesses still do not accept cryptocurrency and the fluctuating value means it is still not entirely reliable. But the complete lack of trust in the country’s banking institutions means any alternative will be welcomed by suffering citizens.

“Yes, bitcoin can lose 30 percent of its value, but the pound has lost 100 percent,” Patrick Mardini, the director of the Lebanese Institute for Market Studies and a finance professor, told Middle East Eye.

Cryptocurrency purchasing with local payment cards or on trading platforms has been illegal in Lebanon since 2013. Transactions are thereby organized on WhatsApp or Telegram groups. Without official regulation, the chance of being scammed or being charged higher commission rates increases.

Lebanese and other Diasporas are also looking at cryptocurrencies as a way to send remittances home. A remittance/GDP ratio of 32.9 percent, makes Lebanon the 3rd highest in the world. More than $6 billion was transferred to Lebanon in 2020. Normally, cross country transfers require substantial fees. But one of the benefits of the decentralized nature of crypto is the low fees – between one and three percent of a transaction. Therefore, owning cryptocurrency “increases the likelihood of using it for cross-border payments, as one would expect, and the growing population of crypto holders are driving the trend,” according to a report on cross-border remittances by PYMNTS and the Stellar Development Foundation.

One thing that cryptocurrency can be used to buy are Non Fungible Tokens, more commonly known by their acronym – NFTs. NFTs are digital artwork with unique identification codes that assign ownership. However, copying or stealing of NFTs is rife with critics arguing a simple ‘right-click, save-as’ can duplicate the artwork. Still, NFTs are taking off in the art world and the MENA region is no exception.

In 2021, an American artist named Beeple sold a digital art piece for $69 million. This craze has now led artists and art platforms in the Middle East to adopt NFTs. The Middle East’s largest annual contemporary art fair – Art Dubai – featured NFTs for the first time in 2022. This year was the art fair’s 15th edition. The three day fair had a wing of 17 galleries and platforms dedicated to showcasing NFTs of foreign and local artists.

While cryptocurrency and NFTs are still figuring out their place in society, it is clear that many in the Middle East see them both as permanent fixtures in the region’s future. It may come as no surprise as the last time this many people increased their fortunes at this speed was the discovery of oil in this very region. The adoption of these technologies are being fueled by the region’s fortunes – those recently gained and those potentially forever lost.

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