Kuwait-based investment banking and asset management firm Kuwait Financial Centre, also known as Markaz, has published a new report on bitcoin in which it heralds digital currency as a disruptive technology that could help ignite the region’s e-commerce industry. Entitled ‘Disruptive Technology: Bitcoins, Currency Reinvented?’, the 20-page report provides a broad introduction to bitcoin, while highlighting the opportunity it presents to investors in the Gulf Cooperation Council (GCC) and its member countries Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). Markaz examines bitcoin’s strengths and weaknesses, the differing stances of global regulators and the details of the Mt. Gox collapse, but its overall takeaway is encouraging for both the Middle East’s local bitcoin operators and for the wider digital currency industry. The report concludes that, despite the risks, the benefits bitcoin could bring to the region should not be overlooked by MENA investors. It reads: “If properly nurtured, this technology can help e-commerce take off in a big way. Micropayment and cashless payment technologies would make it easier for people to carry just their smartphone and pay for it.” Markaz also noted that bitcoin may be uniquely suited to the needs of MENA given its high smartphone penetration – 50% of its mobile phones are smartphones – and comparatively youthful demographic, writing: “Bitcoin initially is hard to comprehend, however, GCC nations have a majority of younger population [sic] who are in their 20s and educating them is much easier. Social media forums show that it is people from this age group who actively participate in bitcoin related threads.” The report follows bitcoin’s appearance at Dubai’s recent ArabNet Digital Summit 2014. There, local entrepreneurs from bitcoin startups Yellow and Umbrellab introduced new members of the region’s tech community to the technology. Markaz also examined the road ahead for bitcoin, suggesting that informed industry observers believe it could be 10 years before MENA is significantly affected by bitcoin technology. Bitcoin, Markaz concluded, has “a long way to go” to catch up to the transaction volumes of Visa and MasterCard, citing Coinmetrics data that places bitcoin’s daily transaction volume at $89m. Potential roadblocks to the ultimate realization of bitcoin as a currency and system of payment, the report said, are most likely to come from conservative governments – which will wait for other jurisdictions to take the lead on lawmaking – and an overall lack of acceptance. As a result, Markaz warns that bitcoin presents a high-risk investment opportunity: “Bitcoin rests on the foundation of people’s acceptance. If acceptance does not gain widespread traction, bitcoin might vanish into internet’s oblivion.”
