At the intersection of technology and capital, entrepreneurs in the Middle East are hoping that Bitcoin will prove the next big thing.
David El Achkar, a former McKinsey employee who has started Yellow, a company that provides Bitcoin payment products to firms in the Middle East, has a number of bright ideas about how to turn Bitcoin into a fully-fledged currency regime.
He thinks Bitcoin’s potential to change how people interact is comparable to the invention of the internet.
“It’s like pre and post-internet times. Bitcoin as a technology … allows anyone to innovate … with value. We now have this platform that enables completely permissionless value transfer. Which is very exciting.”
Mr El Achkar sees Bitcoin disrupting existing industries in remittances, retail banking and the media.
“Right now, we’re paying hefty fees to send money … we’re paying for [banks’] infrastructure … which includes a lot of inefficiencies,” he said.
Tarik Kaddoumi, a co-founder of Umbrellab, which provides Bitcoin payment solutions to retailers, is similarly enthused. “As Bitcoins are free to transfer worldwide, there will no longer be a need for anyone to charge for remittances, and consequently anyone charging for it will go out of business,” he said.
Mr El Achkar explained: “To use Bitcoin you need a phone or an internet connection. But only 20 per cent of the adult population [has a bank account]. So as more Bitcoin services are developed for devices, anyone who has a phone can … have their own Bitcoin bank account on their phone and send and receive money internationally.”
Fees can vary between 0.1 per cent and 1.5 per cent to change national currencies to Bitcoins. But this is likely to fall in the long run, Mr El Ackhar said.
“[And] that’s still significantly [cheaper] than the online payment options you have in the Middle East.”
Bitcoin could also allow companies to make money from microtransactions – payments of less than $1, where volume is key. This could be a boon for the media industry, which has experimented – mostly unsuccessfully – with various ways to make newsgathering in the 21st century economically viable.
“Online content monetisation is [currently] provided by ads and online subscriptions that are expensive, inconvenient … and doomed.” But “micropayments -- [allow for] many ways of doing business we can’t even think about.”
But there are still significant hurdles to Bitcoin’s adoption globally – and especially in the Middle East.
“It’s a chicken and egg problem, as all marketplaces are,” said Mr El Achkar. “You need more users to incentivise businesses to use it, and more businesses to incentivise users to use it. ”
Bitcoin’s small number of users hasn’t helped.
Mr Kaddoumi also pointed to the lack of innovation as a challenge. “Ideally, we would have a lot more independent and innovative risk takers, with ideas and solutions that will be offered globally from the Middle East,” he said. “The environment is still more reactive than proactive.”
More recently, the bankruptcy of Mt Gox, an exchange on which the majority of Bitcoins were traded in early 2013, has damaged confidence in the currency. No clear explanation for the exchange’s collapse has yet emerged.
And some critics have pointed to the cryptocurrency’s use in illegal trades online, notoriously on the global bazaar and drug emporium Silk Road. Yet, as Mr Kaddoumi points out, “The world’s favourite medium of exchange for any criminal activity, drug trafficking, terrorism, corruption, money laundering and white-collar crime, is good old cash.”
Building confidence in the security and trustworthiness of the currency is vital. But the likelihood that new ideas will bring new ways to take advantage of the cryptocurrency provides some hope for Bitcoin entrepreneurs.
“It’s really up to people like us to develop solutions,” said Mr El Achkar. “Some will work out, some won’t, but that’s how we’ll reach the second stage – true innovation that’s going to change business and change the way we live the same way the internet did – in unpredictable ways.”
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