Banks and Cryptocurrencies Global Evaluation: The Middle East
Arab markets were flooded with new investors in April after an Islamic scholar announced cryptocurrency is halal under Sharia law. The announcement settled contradicting statements issued by several other Islamic experts, but there are still conflicting interpretations of Sharia’s allowance of virtual currencies among Muslim leaders.  
The mufti’s announcement opened crypto markets to potentially 1.6 billion new customers, but it is certain that Middle Eastern governments will play a central role in the development of the crypto industry in order to ensure individuals and institutions adhere to Sharia law.
Sharia law places strict guidelines on economic activity whereby value must be attributed to real, physical assets. The highly contested religious law that governs the Islamic finance sector also prohibits market speculation and collection of interest on loans.
Muslim entrepreneurs, investors, and governments are intent on being leaders in the competitive global marketplace. As many advocate to replace the U.S. dollar as the global reserve currency, Bitcoin and nationalized cryptocurrencies may finally offer Muslim countries economic stability and leeway in Western politics.
It’s an unlikely coincidence that the Islamic Council on Sharia Finance broadly legalized goldownership for investments around the same time that OPEC and Middle Eastern countries began moving away from the U.S. PetroDollar system in 2016.
Iran, which no longer recognizes or uses the U.S. dollar, and Turkey both announced plans to release government issued digital currencies following the pre-sale of Venezuela’s national, oil-backed currency Petro, earlier this year.
In fact, President Nicolas Maduro of Venezuela called on all 14 OPEC nations to develop a platform for trading oil-backed cryptocurrencies. Just as Venezuela launched its own cryptocurrency to circumvent U.S. sanctions, other oil-producing countries have hinted at abandoning the PetroDollar system that has been operating in the Middle East for over 40 years — threatening the global supremacy of the U.S. dollar.
The following assessment of cryptocurrency regulation in the Middle East is a part of a larger series of pieces evaluating regulation of the flourishing global fintech industry. Part one of the series looks at activity in Asian hotspots like Japan, Hong Kong, Singapore, and Taiwan, and how governments are facilitating or hindering growth. Part two examines crypto regulation and the critical attitudes held by many European leaders. Part three analyzes the varying attitudes of Western leaders on the disruptive new technology, and how regulatory agencies in the Americas are preparing for mainstream adoption of cryptocurrency. Part four assess how African countries are embracing the economically- and politically-liberating force of cryptocurrency and Blockchain.
The list below is based on thorough news research, but should in no way be considered complete. If you have more detailed information on banks and the crypto relationship in your country, we encourage you to share it in the comment section.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, and you should conduct your own research when making a decision.
LEGEND

Saudi Arabia

Saudi Arabia, a key player in the U.S. PetroDollar system, has continuously sold off its foreign exchange reserves ever since the price of oil plummeted in 2014. Saudi regulators are taking a close look at cryptocurrencies, but have yet to propose regulations. Many say an outright ban is unlikely.
The Saudi Ministry of Communications and Information Technology announced the agency completed a three-day “Blockchain bootcamp” in May as part of its plan to create a “digital environment” to leverage the kingdom’s untapped Information and Communications Technology (ICT) potential. The ministry partnered with Blockchain technology company ConsenSys for the event, and focused on Ethereum smart contracts and building decentralized applications.
The Saudi Arabian Monetary Authority also partnered with Ripple in February and launched a
pilot program that will provide cross-border payment technology to banks in the kingdom. The program is the first of its kind to be coordinated by a central bank, and will be accompanied by a regulatory sandbox, program management and training.

Oman

The Omani Blockchain Symposium, held at the end of last year, was the country’s largest business gathering, with nearly every government cabinet member in attendance, as well as 700 attendees from the private sector.
The Central Bank of Oman, as well as the Central Monetary authority, promoted the successful event and indicated that the government will aid in providing the technological infrastructure to promote the implementation of blockchain technology in Oman.
The Blockchain Solutions and Services Company (BSS), a government entity and initiative of the Blockchain Symposium, is reportedly collaborating with the Oman Banks Association, other government agencies and local businesses to develop regulations for the country’s digital transformation.
BankDhofar is the country’s first bank to join BankChain, an international banking community dedicated to the research and development of blockchain solutions. The initiative is part of BankDhofar’s plans to digitize a range of banking services to ensure accuracy, efficiency, and security to customers.

Iran

In January 2017, the governor of Iran’s central bank announced the U.S. dollar would no longer be used in the country in response to President Trump’s temporary travel ban. The country’s first crypto exchange, BTXCapital, stated that Iran had the potential to become a major market in the future due to the exit of the American dollar — although purchasing Bitcoin in the country remained notably difficult at the time.
The Iranian government seemingly held positive views toward Bitcoin when the Iranian cyberspace authority — the High Council of Cyberspace — first announced plans last year to collaborate with the Central Bank of Iran to publish a report on cryptocurrencies. But the central bank has since issued a statement claiming it never recognized Bitcoin as a legal tender, and banned domestic banks and other financial institutions from dealing with cryptocurrencies in April.
However, the Iranian Information and Communications Technology minister stated the ban on cryptocurrencies does not preclude the central bank from developing a domestic cryptocurrency, and that an experimental model of a state-issued digital currency was ready.
The ban on cryptocurrencies preceded U.S. sanctions imposed on Iran in May, and is seen as an attempt to protect the country’s struggling financial institutions and depreciating national currency. Iran’s state-issued digital currency parallels Venezuela’s Petro, which is used to circumvent international sanctions.

Turkey

Turkish authorities have sent mixed signals to the cryptocurrency industry in the past, but are following the lead of other Middle Eastern countries with plans to release a national cryptocurrency.
The Turkish government took a harsh stance on Bitcoin last November, when lawmakers of the Directorate of Religious Affairs stated cryptocurrencies were “not compatible” with Islam because of the speculative nature of the market and lack of government control. 
But in February, a report by the deputy chair of Turkey’s Nationalist Movement Party not only proposed regulations for the market, but also mentioned the possibility of a national Bitcoin, called the TurkCoin.
The Turkish Bitcoin exchange BTCTurk, which opened in 2013, terminated operations in 2016 after local banks abruptly discontinued services and closed accounts associated with the exchange. BTCTurk has since reopened, along with the Turkish exchange Paribu.com.
However, domestic exchanges are limited to Bitcoin and Ether, and customers are forced to use English exchanges to access altcoins. BTCTurk’s history is exemplary of the varying responses and divisions between financial institutions and the government's acceptance of Bitcoin. Although cryptocurrencies are far from mainstream adoption, a number of Turkish businesses and real estate companies accept Bitcoin as payment.
On a separate note, various blockchain projects in Turkey have garnered interest from individuals who wish to see cryptocurrency become more accessible. The Blockchain and Bitcoin Conference held in Istanbul in March gathered global leaders to discuss the development and legislative regulation of the sector.

Iraq

The Central Bank of Iraq prevents the use and promotion of Bitcoin, according to a statement by an economic expert last December. Furthermore, those found using Bitcoin may be prosecuted under pre-existing Anti-Money Laundering (AML) laws.
Russia’s Federal Security Service claims to have prevented 25 of 29 terrorist attacks coordinated from Syria and Iraq in 2017, and that “terrorists love cryptocurrency.” The Russian authorities allegedly discovered 100 cases where virtual money was used to financed illicit activities. However, less than 1% of Bitcoin-related transactions between 2013 and 2016 were discovered to be funding illegal activities, according to research by the Center on Sanctions and Illegal Finance (CSIF).

Afghanistan

Code to Inspire, a non-profit organization dedicated to advancing Afghan women’s economic and social standing in the country’s tech industry, is providing resources to women to learn how to code and design mobile apps and software. CIT’s mission will allow women to have a career in IT, participate in the global economy, and become financially independent by using Bitcoin.
However, the lack of domestic exchanges in Afghanistan marks a common issue with Bitcoin’s inability to reach remote, underdeveloped nations. The lack of technological infrastructure, local exchanges and stable wifi connections makes trading and using Bitcoin in Afghanistan difficult.

United Arab Emirates

The Prime Minister of the UAE and ruler of Dubai announced the launch of the UAE Blockchain Strategy 2021 in April, with ambitious plans to be the world’s first blockchain-powered government. The UAE plan will focus on citizen and resident happiness, government efficiency, legislation and global entrepreneurship.
The strategy aims to have 50% of federal transactions being conducted using blockchain technology by 2021, which includes moving to paperless documentation of visa applications, bill payments and license renewals with blockchain technology, which could potentially save $11 billion annually.
The most recent development of the Emirates’ blockchain strategy is Dubai’s partnership with IBM to create a blockchain business registry to ensure businesses operate under its jurisdiction. The government announced the initiative in May, and says it will streamline the process of business operations, digitized documentation of activity and assurance of regulatory compliance.
The technology arm of the government, Smart Dubai, is tasked with facilitating digital implementation in the city and conducts research to determine services that could benefit from blockchain technology. The government entity, which is involved in various initiatives, will propose necessary legislation to ensure Dubai’s “smart transformation,” and aid mega projects developing in the city.
The Dubai Land Department (DLD) launched a blockchain-powered system to record real estate contracts, secure financial transactions and connect tenants and landowners with property-related billers, such as electrical and telecommunications utilities. The government agency, which is tasked with overseeing real estate purchases and approving contracts, says the initiative is exemplary of the country’s blockchain strategy to consolidate government services on a single platform.
In contrast to the government’s embrace of blockchain, the legality of using Bitcoin is not clear because pre-existing regulations do not recognize virtual currencies. However, the government and central bank of the UAE announced earlier this year that regulatory framework for Bitcoin usability and exchanges is coming in the near future.
The central bank previously rejected proposals for licensing trading exchanges, and the UAE Securities and Commodities Authority voiced concern over the high risk of ICOs. But after the announcement of future regulations for the crypto industry, the government and central bank seem adamant on federal oversight to ensure cryptocurrency doesn’t move to underground markets.
Meanwhile, investors in Dubai and the UAE continue to buy, sell and trade cryptocurrencies, despite the lack of local exchanges.
The supposed first-ever Sharia-compliant cryptocurrency, Onegram, launched in Dubai in May 2017 and is backed by actual gold reserves. Because each unit of value is backed by physical gold, speculation and market volatility are tightly controlled.
Notably, a gold investment and trading firm in Dubai is the first company licensed to store virtual currency in the Middle East. The company established a “cold storage vault” for clients to store Bitcoin and Ethereum. The secure vault holds cryptocurrencies in a physical form and are detached from networks in order to address the concerns investors have over online wallet-hacking and malware.
A Dubai-based entrepreneur, Com Mirza, launched the Islam-friendly “Bitcoin of the Middle East,” or Habibi Coin in late 2017. The asset-backed and interest-free Habibi Coin is a monumental advancement for Muslims who previously had difficulty buying homes and investing in other assets. Com Mirza claims to be planning a $100 million USD ICO, and will allow investors to purchase property directly on the Habibi Coin platform.

Kuwait

Kuwait’s Ministry of Finance banned the central bank and financial institutions from trading and dealing with Bitcoin in late 2017, due to market volatility and consumer risk. Other legal authorities in Kuwait indicate that online trading is prohibited by the country’s e-commerce laws, and Kuwaiti law does not recognize Bitcoin as a currency.

Qatar

The central bank of Qatar issued a warning to banks in the country in February, urging others to deny accounts to crypto exchanges and traders, and that failure to comply with the request may result in legal recourse under pre-existing law.

Syria

Cryptocurrency is providing relief to the humanitarian crisis in Syria, where the United Nations World Food Program is using the Ethereum Blockchain to transfer vouchers to refugees. The successful project sent funds to buy food to 10,000 refugees and the U.N. plans to extend the program to 100,000 people in Jordan as well.