Where are the Gulf Blockchain Startups?

2018–08–12 | Nick Gorman | The Gulf Blockchain Foundation

The Persian (or Arabian) Gulf is home to some of the wealthiest nations in the world. With annual, per-capita GDPs ranging from $60,000 p/p/y (Qatar, 2018) to $4,900 per person per year (Iran, 2017), the region’s rich, natural resources have buoyed its economies for almost fifty years. Home to Qatar, The United Arab Emirates, Kuwait, Bahrain, The Kingdom of Saudi Arabia, Oman and Iran, the area has a combined population approaching 135 million people (of which 26 million are expats). Now, with more energy-conscious global clients and oil prices today at 50% of their 2008 peaks, these nations are out to diversify their economies. One avenue for this diversification is knowledge and expertise exporting, or in simpler terms, building and selling skills & technology. Despite this approach, voluminous capital reserves and 50% of the region’s population under the age of 35, the tech scene is surprisingly sparse. Its blockchain scene — even sparser. But it doesn’t have to be.

The Good

The region can certainly deliver when it wants to and the UAE is a clear leader in this department: Careem’s most recent valuation tipped $1bn and Souq.com sold to Amazon for $580m (cash) in 2017. Fetchr has received over $52m in funding, which included contributions from Winklevoss Capital and 500 Startups. There are other, smaller startups who bootstrap themselves through the region’s VC drought, like Washnow in Qatar, but even with these successes, when compared to the Baidus ($12bn annual revenue), Googles ($100bn), WeChats ($800m) and Grabs (over $1bn) of the world, the Gulf just doesn’t hold a candle. If this is the case with Web 2.0 startups, what does it mean for blockchain companies?

Dubai, United Arab Emirates

The lazy answer would be “dead in the water”, but a look under the hood reveals a more optimistic outlook. In 2017 Dubai announced its intention to have all government services transacted on blockchain systems and estimated the associated savings to be in excess of $1.5bn. In Qatar, a local bank completed its first trial remittance using blockchain technology in May 2017. The Saudi Arabian Central Bank announced it is working with Ripple in this Fortune.com article in May 2018 and the Digital Incubation Centre in Doha includes ‘Blockchain’ startups on its list of preferred technologies for their incubation programmes.

The Gulf’s traditionalist approach to business investment means most capital will flow either directly or indirectly from the government. Lacking a mature, organic VC ecosystem, most countries implement formalized, government-backed incubation or investment programme. The funding mechanisms vary and include grants (for nationals only), SAFEs, loans and investment by incubation. In Qatar these can be accessed through QSTP and the Digital Incubation Centre. In Dubai, there is Dubai Silicon Oasis and DTEC and in Muscat the Wadi Accelerator is the first port of call for anyone wanting to launch their tech product, blockchain included.

Doha, State of Qatar

The Bad

If ever there was need for a consenus mechanism it would be to determine whether cryptocurrencies comply with Sharia law. Muftis in Egypt have declared Bitcoin non compliant with religious law (and therefore national law), while in Saudi and the UAE Bitcoin is not ilegal. In Iran it is illegal to bank with it, but holding it is legal. Qatar’s central bank issued this statement in February 2018 declaring Bitoin illegal and Kuwait shares this sentiment. Working from the (shaky) premise that if Bitcoin is legal, other cryptocurrencies are as well, we can summarize as follows:

  • Cryptocurrencies are legal in all Gulf states except Qatar and Kuwait. In Oman and Bahrain there is no explicit statement from a central authority declaring Bitcoin or other cryptocurrencies illegal.

Interestingly, there are no active, credible crypto exchanges in the whole region.

In all Gulf nations blockchain startups are accepted (encouraged in some places), even though some of those countries might consider cryptocurrencies to be illegal. Working from another shaky premise it would seem acceptable then to build a DAPP or cryoptocurrency anywhere in the gulf, as long as you don’t trade the crypto in Kuwait or Qatar.

The vagueness surrounding crypto legalities is not native to the Gulf, nor is the poor perception of cryptocurrencies as tools of criminals or as Ponzi schemes. However, where public perception of new tech in say, the Bay Area, can be altered by pointing to past success from the immediate surroundings, the same is not true in the Gulf. There is no regional Apple, Microsoft or Facebook to point to when the investors start check their watches. Yet.

The Future — Hearts and Minds first

The major hurdle to large-scale adoption and support in the region is poor perception of cryptocurrencies and the associated skepticism of all things blockchain. Changing this perception cannot start with large-scale ICOs, but with changing the way the region’s people view this technology.

The quick wins will happen by appealing to the Distributed Ledger Technology (DLT), “blockchain, not bitcoin” and cyber security aspects of blockchain. Smartcontract development for asset transfers and automation of governmental processes are other areas worth considering.

None of the above can be achieved without developers able to build on platforms like Ethereum, Lisk or EOS. Following the region’s affinity to government-backed investment, a good starting point is investment into Blockchain Academies and Foundations — Places and communities that teach people about the possibilities of blockchain and how to build on the platforms.

Once these platforms are established and community members can launch their own products, positive public perception (and investment) will follow and so too will the building of bigger, better and more relevant blockchain products. But let’s cross that sidechain when we get there.

What can you do?

For now, join us at one of our meetups in Doha and Dubai and learn how you can help build a new, decentralized internet in some of the most interesting countries in the world.

twitter: @gulfblockchain

Email: gulfblockchain@protonmail.com

The Gulf Blockchain Foundation

Written by

A non-profit dedicated to building an understanding of blockchain in the Gulf and broader Middle East Region through talks, courses and research.

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