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city: Riyadh
nation: Saudi Arabia
population: 7.82 million people (subway)
Established: 1737
language: Arabic
At the heart of the Nafud Desert lies Riyadh. Its name means “the plains” in Arabic and it is the third most populous city in the Middle East. But it’s probably not the first place that comes to mind when you think of cryptocurrencies and gaming.
Cryptocurrencies are an opaque area that is either completely banned or unapproved, and can be tricky to access.
Nevertheless, according to a survey by KuCoin, 14% of Saudis aged 18-60 own cryptocurrencies. Morrad Irsane, CEO of Takadao, a blockchain for halal insurance, sees this as clear evidence of where things are headed. He tells the magazine:
“They can’t buy or sell, but they still have the fastest growing cryptocurrency ownership demographic!”
The area was founded by the Banu Hanifa tribe, and was built about 1,000 years later in 1737, when a wall was built around several oasis villages, or “meadows.” Agriculture brought wealth, and in 1774 the First Saudi State established its capital at nearby Diriyah. 250 years later, the city expanded to become the modern capital of Saudi Arabia.
Ahmed Yusuf, an American who has lived in Saudi Arabia since 2015, described the local approach to cryptocurrencies to the magazine as “not illegal or legal. It may be criticized, but it is being used.”
He explains that banks are generally cautious and unfriendly towards cryptocurrencies, and governments are essentially buying time because they “don’t want to regulate until they understand it.”
He pointed to recent market volatility and speculated that “no government (Saudi Arabia) would be as bold as El Salvador” in encouraging citizens to take risks by promoting investments that could lead to losses.
Still, “20% to 30% of my classmates own or trade cryptocurrencies,” a local finance student told the magazine, who attended the Outer Edge Riyadh forum that the magazine attended in April. He works at Alinma Bank, which provides Shariah-compliant financial services.
In the past, buying cryptocurrencies was easy because you could transfer funds “B2B – from your bank to Binance”. However, since then, banks have started blocking these transfers and even closing accounts due to well-publicized issues with Binance.
For this reason, peer-to-peer trading, where buyers and sellers exchange money between their personal bank accounts, has become commonplace, either through professional dealers or informally in the student community. There is no personal income tax or capital gains tax in the kingdom.
The use of foreign bank accounts for these transfers has also become common, with Bahrain being a typical gateway.
Given the difficulty of integrating cryptocurrencies into banking and fiat currency transfers, it is hard to find a culture of buying and selling goods or services with cryptocurrencies. Instead, the focus is on holding and trading cryptocurrencies.
According to Yusuf, some large entities, such as family offices of wealthy local residents, are also interested in cryptocurrency trading. “They have no way to buy directly, so they use indirect methods. That’s where I’ll end it,” he concludes.
From gaming to Web3
Outer Edge Riyadh was opened by Prince Faisal bin Bandar bin Sultan Al Saud, Chairman of the Saudi Esports Federation and the Arab Esports Federation.
He spoke passionately about his passion for gaming and the potential of the metaverse, and was joined by Yat Siu, chairman of Animoca Brands, the event’s main sponsor. Siu declared that Saudi Arabia’s position in the Middle East is on par with China’s position in Asia.
“When China finally decided to enter the market, it first had a regional impact, and then a global impact. I think Saudi Arabia has the same potential as one of the richest countries in the world.”
The word “cryptocurrency” was largely absent from the event, but Siu’s message was clear: Saudi Arabia may not have made any significant moves in the blockchain and crypto space, but it is a sleeping giant in terms of wealth, population, and influence, and could set the tone for the industry across the region.
Siu’s presence was no surprise. Last month, Animoca Brands partnered with the King Abdulaziz City for Science and Technology (KACST), a government agency that promotes technological innovation. The partnership aims to build a Web3 hub to support Riyadh startups and further support university research into blockchain gaming.
As Prince Faisal publicly gave his blessing, it became clear that the kingdom was opening the door to the Metaverse.
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Gaming is one of the kingdom’s diversification goals in Vision 2030, which seeks to move away from dependence on the oil industry. This is a welcome direction for the city’s young population, whose climate is not conducive to outdoor activities during the day all year long. The combination of blockchain and gaming presents a natural step towards becoming the crypto hub of the future.
“We aim to revolutionize the development of blockchain and digital innovation by building a Web3 hub and growing the Web3 ecosystem in Saudi Arabia,” said Mariam Nouh, Vice President of Future Economy at KACST.
The partnership with Animoca is by no means the first foray into this industry. In January 2020, Saudi Aramco, along with other energy companies, invested $5 million in Vakt, a company that streamlines commodity trading by putting transactions on a corporate blockchain to eliminate the paper-based processes that are still standard in the oil sector.
Regional competition?
Yusuf is the CEO of Vision Innovation, which advises the Saudi government on blockchain adoption in aviation and healthcare. Yusuf describes his work as a slow process of education and advocacy, saying, “We have to let them know that this is a useful technology.”
“When we talk to governments, we don’t talk about cryptocurrencies. We talk about what Web3 can do.”
Since his clients are “still not very friendly to public blockchains,” Yusuf talks about options like zero-knowledge proof chains, which he speculates could enable blockchain functionality without governments losing control of their data. He gives the example of medical data, which cannot be uploaded to the cloud because it must remain in the country.
As a business hub, Riyadh attracts businesses from the country of 32 million people and surrounding countries. From a blockchain space perspective, it is closely linked to nearby Dubai, which acts as a regional magnet for the industry.
But according to Irsane, the UAE’s approach is unreliable because it is constantly changing. It is more focused on attracting foreigners and their money. Saudi Arabian authorities, on the other hand, say, “There is no need for people to come and buy houses. They have a population.”
In fact, many locals point out that the UAE’s quick adoption of the industry was an experiment made possible by the country’s small size. Saudi Arabia, a much larger country, has much to learn from the country’s experience as it implements its own strategy.
The city, a hub for game development, has seen the emergence of numerous blockchain development and consulting firms, many of which are working on overseas projects.
“They are closing one eye because they want this innovation to grow. You will see a few startups based in Saudi Arabia that are building real blockchain solutions.”
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Elias Ahonen
Elias Ahonen is a Finnish-Canadian writer living in Dubai who bought his first Bitcoin in 2013 and has since run a small blockchain consulting firm around the world. His book Blockland tells the story of the industry. He holds a Masters in International and Comparative Law and has written a thesis on NFTs and metaverse regulation.
Follow the author @LeeHonen