Bitcoin has received mixed response from governments across the world. Some of them have accepted it and have gone a step further by accommodating them in existing and new regulations while few nations have declared bitcoin illegal and banned them outright. Then, there is another group of nations that doesn’t fall under both these categories. They are willing to wait and watch before they take a decision regarding it.
Middle Eastern countries mostly belong to the third category. Bitcoin is still at its nascent stages in this region. Most people are still at the stage of understanding bitcoin’s concept and ways to use it. Surprisingly, a few businesses in the region have started accepting bitcoin as payment, which is a positive sign.
Currently, Dubai and Amman are the forerunners in this region. Kuwait is catching up, and they seem to have even bigger designs in mind for bitcoin, and considering the MENA region, there is a considerable rise in the number of people using bitcoin based money transfer services instead of conventional players like Western Union and MoneyGram.
A recent report titled – “Disruptive Technology: Bitcoins, Currency Reinvented” published in mid-2014 by Kuwait Financial Center (Markaz) explores the potential of using bitcoin for exports, especially petroleum. It is a well-known fact that about 80% of the Gulf economy is dependent on petroleum and its byproducts. Markaz’s report has stressed upon the possibility of using bitcoin for petroleum sales/exports. This study forms an important basis for exploring alternative payment options in case the US dollar stops being the preferred currency for trading oil and petroleum. Also, the time and costs involved in funds transfer, especially across international boundaries.
Even though it was just a suggestion, the importance and timing of it is not lost. In the present scenario, the US Dollar is being slowly nudged out as the standard currency for international trade. Chinese yuan is the strong contender against the dollar, followed by the Russian ruble. China has been pushing hard to replace the dollar with the yuan. The country has in recent months signed currency swap agreements with about 28 central banks. Meanwhile, Russia has also inked agreements with countries like India, Iran, Turkey and China to trade with their respective national currencies. Ruble also has a strong influence on international trade and national economy of CIS nations. To make matters worse, the United States is being increasingly perceived as an aggressor state due to its undue geopolitical and military influence in the Middle East. United States’ stance has resulted in the destabilization of oil producing countries like Iraq, Libya and Syria, which in addition to sanctions on Iran has convinced many GCC nations to minimize dependency on the petrodollar. The proposal of using decentralized currency like bitcoin presents itself as an attractive alternative option.
Using bitcoin in petroleum trade may sound attractive, but is it a viable option? What will be the repercussions of such a shift, these things have to be well thought-out before taking any step in that direction.
For further reading: Will Petrobitcoin Replace Petrodollar Anytime Soon?