How 9 Middle Eastern countries are jump-starting blockchain development

As blockchain continues to develop, more and more governments in the MENA region are taking on the technology to address national issues ranging central banking to humanitarian aid.

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Though blockchain technology is arguably in its nascent stages across most of the Middle East, governments in the region are beginning to leverage the technology to streamline public services, enhance security in their central banking systems and even provide a higher level of care for at-risk communities such as refugees.

MENA governments are now setting into place a foundation of legislation for blockchain-based projects, most notably outlining policy for blockchain-based financial and contractual transactions. With the support of governments across the region, banks are developing blockchain-powered exchange systems and blockchain startups are popping up with innovative blockchain solutions.

Blockchain is a distributed ledger technology (DLT) in which a growing list of records -- blocks -- are timestamped and linked using cryptography. The peer-to-peer (P2P) nature of blockchain allows data to be stored globally on thousands of servers, making it almost impossible to tamper with.

Although blockchain first became known as the underlying technology for bitcoin, its applications go beyond cryptocurrency, particularly within markets that require transactional trust between two or more parties. That's the case, for example, in the food industry or, more generally, in supply chains, where blockchain technology can offer transparency regarding product provenance, its production and distribution.

Within the public sector, a growing number of governments around the world are using blockchain to improve services.

Gartner forecasts that blockchain will generate an annual business value of over US$175 billion by 2025 and rise to over $3 trillion by 2030.

Here we review the some of the most interesting blockchain cases among private and government initiatives in nine Middle Eastern countries.

Bahrain taps blockchain for shipping supply chain

APM Terminals Bahrain announced earlier this year that ports in the small island kingdom would integrate with the blockchain platform TradeLens. 

TradeLense has already been adopted by the Khalifa Bin Salman Port, Bahrain's only commercial port, and is transmitting data on a "trial basis" according to APM Terminals Bahrain chief executive and managing director Susan Hunter.

TradeLens, developed by Maesk and IBM, includes an ecosystem of over 100 carriers, ports, terminal operators and third-party logistic providers that provide and subscribe to an array of shipping-related data. 

The aim of integrating with TradeLens is to provide all shipping stakeholders with the ability to collaborate, and to have a clearer overview of the transactions and data that are created as cargo moves along its trade route.

Egypt to set cryptocurrency rules

The Central Bank of Egypt (CBE) has drafted a bill allowing its board of directors to issue rules regulating cryptocurrency trade, according to a report in the Egypt Independent. The rules reflect a U-turn from 2018's "fatwa" by the country's Grand Mufti, which forbade cryptocurrency trade under Islamic law.

Last April, Nile University and the Academy of Scientific Research and Technology (ASRT) launched the first tech-focused incubator in the country specialised in cognitive technologies and blockchain.

NU TechSpace, as the centre is called, helps startups to improve their products and business models using the university research facilities, in order to increase their opportunities to scale internationally.

The idea of starting an incubator was sparked by a rise in blockchain startups across Egypt. 

The creation of the centre was announced during Egypt Blockchain Day in 2018.

Iran develops banking platform

Iran has been showing more interest in blockchain than many other countries in the Middle East and North Africa region.

In 2018, ICT Minister Mohammad Javad Azari-Jahromi and Ashraf Boroujerdi, head of the National Library and Archives of Iran (NLA), signed a memorandum of understanding (MoU) to digitise the National Library's archives using blockchain.

The Islamic republic has also become increasingly interested in cryptocurrency, with some sources reporting that this could be a way of circumventing the economic sanctions imposed by the U.S.

In May last year, the Central Bank of Iran (CBI), in partnership with Areatak, a local blockchain enterprise, started developing a national blockchain project for the finance industry. Known as the Borna platform, the CBI expects to use it as a central digital platform for Iran's banking and financial sectors. 

Using IBM's Hyperledger Fabric framework, Borna's aim is to allow the CBI to implement smart contracts, while also improving operations transparency in the finance industry.

However, the developers of Borna also claim that the platform could be applied outside the banking industry for uses such as digital identity.

The CBI has also collaborated in the establishment of Iran Blockchain Labs, a research, advisory and innovation hub focused on blockchain technology. Based in Sharif University of Technology, the mission of the lab is "to define a roadmap for the utilisation of blockchain technology within the country".

Key focus areas of the lab include blockchain-based research, training, consultancy and facilitating relevant seminars and events to promote a blockchain-aware culture.

Israel startups flourish

Deloitte dubs Israel "a hotspot for blockchain innovation."

The country has positioned itself as a global leader for technological innovation, particularly when it comes to the military and defence, where it spends a massive budget developing high-tech equipment.

Israel, which serves as one of the main tech incubators in the Middle East, has the highest concentration of technical companies outside of Silicon Valley and the greatest number of NASDAQ-listed technology companies after the U.S. and China. Its technology industry accounts for 15.7 percent of the country's GDP.

There are numerous Israeli entrepreneurs and startups, as well as leading Israeli universities, that are currently developing a wide range of blockchain applications. Last year, Tel Aviv University (TAU) launched the Hogeg Institute for Blockchain Applications, a centre with the mission of developing blockchain uses in areas such as healthcare, law, business or government.

Some go as far as claiming that blockchain could help bring peace to the region. Writing for The Times of Israel, rabbi and blockchain expert Andrew Bloom said that a "blockchain-centred joint-project between the UAE and Israel may help to lessen tensions throughout the region, as the technology can be used for such things as water allocation, desalination, humanitarian aid, and other necessary services whose current lack of efficiency, lack of trustworthiness, and general bureaucracy may be hindering progress."

Jordan refugee centers use humanitarian app

The most innovative blockchain currently in use in Jordan is also helping thousands of people who had to flee the horrors of war from neighbouring Syria.

The United Nations World Food Programme (WFP) is using the emerging technology to distribute cash-for-food aid to Syrian refugees in the Hashemite kingdom. "Building Blocks," as the programme is known, was implemented in early 2017 to replace food vouchers.

Over 100,000 people living in two refugee camps can purchase groceries using iris-scanning technology at checkout. The platform is built on a private and permissioned blockchain. It's also integrated with United Nations High Commissioner for Refugees' existing biometric authentication technology.

WFP keeps a record of every transaction that takes place in the refugee camps using the Building Blocks platform. This in turn allows refugees to have a digital wallet and some sort of identification, which will make it easier for them to participate in the world economy in the future.

The WFP claims that the blockchain-powered system saves on 98 percent of financial transaction fees in the camp setting and ensures greater security and privacy for Syrian refugees. The international organisation is now exploring the use of blockchain for unrestricted cash distributions, starting with mobile money inside the refugee camps.

Kuwait offers remittance system

In December 2018, the National Bank of Kuwait (NBK) launched a remittance service using blockchain technology from U.S.-based Ripple Labs.

Since the Central Bank of Kuwait (CBK) prohibits the banking sector and companies under its control from trading in cryptocurrencies, NBK Direct Remit, as the service is known, doesn't use XRP, Ripple's native token.

Instead, NBK Direct Remit bank customers can transfer fiat currencies through the online banking platform, which incorporates Ripple's RippleNet blockchain platform. The main feature of this system is that it allows end-to-end visibility of the payment journey.

A few months before NBK's announcement, Kuwait Finance House (KFH) became the first financial institution in the Gulf country to start using RippleNet's technology for instant international transfers.

Oman creates blockchain promotion body

In 2017, the government of Oman launched the Blockchain Solutions and Services Co. (BSS), a body with the mission of promoting blockchain infrastructure, adoption and implementation in the sultanate.

"We are a government entity which has been given the task to roll out needed blockchain infrastructure for the country and we are working closely with all other stakeholders. We are working with multiple government entities to establish infrastructure and to provide proper regulations," said Dr Khalid MW Tahhan, CEO of BSS, during the Blockchain Oman Forum.

Tahhan added that BSS was formed so local businesses could benefit from emerging technologies. Through the implementation of blockchain across different industries such as finance, energy or manufacturing, the government wants to boost Oman's digital transformation at a state level.

Saudi Arabia brings in IBM

As part of the "Saudi Vision 2030" national programme, Saudi Arabia's Riyadh Municipality recently declared that it will be forging ties with IBM to work on a strategic plan to integrate blockchain technology in the country.

IBM will collaborate with local partner firm Elm Company to put government services and transactions on the blockchain. The ultimate objective of this partnership is to streamline government services to improve efficiency.

In 2017, the Saudi government conducted a blockchain boot camp with a special focus on developing decentralised applications (DApps) and Ethereum smart contracts.

And like some of its neighbours in the region, the Saudi Arabian Monetary Authority (SAMA) has partnered with Ripple to facilitate the adoption of Ripple's cross-border payments technology by banks in the country.

Turkey focuses on import-export

Turkey's Minister of Commerce, Ruhsar Pekcan, said last year that her ministry "is working on a new system that will expedite both export and import transactions via blockchain."

Pekcan added that through this initiative, the Ministry of Commerce will be the first public body in the new "Turkish Blockchain Platform", a project founded by the Turkish Informatics Foundation (TBV).

The Ministry of Commerce is committed to the development of the emerging technology and is working around export-import transactions using blockchain, Pekcan said. She added that Turkey is collaborating with software companies and countries that are leaders in blockchain, such as Singapore, to expand the technology even further.

UAE stakes global leadership position

The UAE has positioned itself at the forefront of blockchain innovation at a global level. The federation of emirates aims to complete 50 percent of government transactions at the federal level using blockchain by 2021.

The country could save 11 billion dirhams (US$3 billion) by adopting blockchain technology, as it would reduce the time and resources required to process transactions, according to a study published earlier this month.

In an attempt to provide regulation and guidance for crypto transactions, including cryptocurrency based on blockchain technology, the UAE Securities and Commodities Authority released a draft of its cryptotransaction regulatory framework in October.

The draft includes 28 articles and comprehensively addresses an array of crypto-related activities including the creation of crypto assets (ie cryptocurrencies), storage and security. The articles outline which entities can trade in such assets, including capital markets, accredited investors, exchanges, brokers and more.

The regulations aim to protect consumers from financial crimes and ensure security and data protection. With the release of the draft regulations, the SCA called upon interested stakeholders in the financial and tech industry to provide their feedback.

The government of Dubai is also working on more then 20 blockchain projects and has formed partnerships with IBM and Consensys to consult on Smart Dubai, a citywide initiative aimed at transforming Dubai into the "world's smartest and happiest city."

In November 2018, the UAE government announced at the second UAE Government Annual Meetings two national initiatives aimed at strengthening the country's leading position in emerging technologies, including blockchain.

During the meeting held by the AI [Artificial Intelligence] and Blockchain Joint Working Group, attendees discussed the appropriate mechanisms to attract foreign investment, encourage entrepreneurship and develop the necessary infrastructure that supports such technologies.

"The UAE is keen to adopt AI and blockchain technologies in all the economic, health, educational and other vital sectors. It seeks to boost cooperation and forge partnerships between the various government, federal and local entities, international companies and startups in a bid to find effective and innovative solutions and make a positive impact," said Omar bin Sultan Al Olama, minister of state for artificial intelligence, at the meeting.

Company directory Crunchbase identifies at least 23 startups in the country working with blockchain, including an e-commerce platform and supply chain traceability for seafood and ArabianChain, the first public blockchain in the Arab world.

Copyright © 2020 IDG Communications, Inc.

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