Today, the world is experiencing what is known as the Fourth Industrial Revolution, which has become the backbone in many areas, including financial transactions.
It resulted in so-called cryptocurrencies like Bitcoin, Ethereum, and other currencies. What are cryptocurrencies?
Everything you want to know about cryptocurrencies
Cryptocurrencies are a means of conducting financial transactions using digital currencies equivalent in value to official cash currencies (Fiat Currency).
This value is controlled by the entities or persons issuing it, and the history of cryptocurrencies dates back to the beginning of the 1980s when the American scientist David Chaum proposed the idea of digital currencies through a research paper he published in a scientific journal.
The first real embodiment of digital currencies was the electronic gold currency E-gold, launched by the Gold and Silver Reserve Company in 1996 at the beginning of the Internet revolution.
The company allowed its customers to open accounts on its website for purchasing and bartering using electronic gold.
Unlike transactions in cash currencies, which take time and require the presence of separate systems dedicated to that, in addition to the need for places to keep and store these currencies (for example, bank vaults), cryptocurrencies are characterized by speed, low costs, and simplicity of the steps associated with them, especially in the issue of accounting and records.
It also allows individuals who do not have bank accounts and are theoretically considered outside the economic system to contribute to it by conducting financial transactions using electronic wallets on mobile phones.
In addition to the above, cryptocurrencies reduce the need for intermediaries, especially in transactions between countries.
Types of digital currencies
There are different types of digital currencies, but the most famous and widespread are as follows:
1. Central Bank Digital Currencies
These currencies are considered official currencies as they are issued by the central bank of the country. They are similar to cash currencies in that they are backed by the central bank and are covered by the bank’s monetary regulations and policies.
These currencies are characterized by reducing the need for intermediaries between the central bank and citizens, and China is considered one of the leading countries in this field by launching the digital yuan, whose number of users has reached 260 million users.
2. Cryptocurrencies
Cryptocurrencies are digital currencies that use encryption systems to secure, verify, and manage transactions.
These currencies are characterized by the fact that they are not restricted by official legislation or regulation, which makes them illegal in many countries, Bitcoin and Ethereum are considered the most prominent of these currencies.
3. Stablecoins
Stablecoins are defined as cryptocurrencies designed to avoid the volatility problems found in known cryptocurrencies (they are stable over time).
It is characterized by being linked to the value of an official currency in circulation, such as the dollar, and the USDT and USDC currencies are considered one of the most famous of these currencies.
The current situation in the Arab world: UAE, KSA, Tunisia, and Egypt
Although cryptocurrencies are still in their infancy, especially in the Arab region, the Kingdom of Saudi Arabia and the Emirates are considered the most prominent pioneers in this field.
In the Kingdom, the Saudi Central Bank “SAMA” is working in cooperation with many banks and financial technology companies on a special project aimed at testing the bank’s digital currency (Digital riyal).
As for the UAE, the Central Bank of the United Arab Emirates launched the strategy for the digital dirham, which is considered one of the initiatives of the financial infrastructure transformation program, which aims to transform the country into a digital economy.
In Egypt, the Central Bank of Egypt is considering setting rules for launching digital currencies as an alternative to cryptocurrencies.
As for Tunisia, the Central Bank of Tunisia is considering licensing digital currencies after the success of the tests conducted between it and the Bank of France.
The future situation in the Arab world
In general, it is expected that financial transactions will increase in the Arab world using digital currencies, especially after many countries, like China and India, adopted the use of their official digital currencies in financial and commercial transactions with other countries.
Digital currencies will contribute to enhancing intra-regional trade between the region and other countries of the world, which will reflect positively on the gross domestic product.
It is expected that digital currencies, specifically the official currencies or those approved by the Saudi Central Bank, will contribute to enhancing the efficiency of both the financial and economic sectors.
In addition to addressing a group of current problems related to cash currencies, such as money laundering, in addition to accelerating digital transformation, which is considered one of the basic pillars of the Kingdom’s Vision 2030.
