I wonder how many rich foreigners or Arabs have lost their money in financial transactions involving digital currencies like Bitcoin recently, after making huge financial fortunes through investments in virtual assets. This question is on the minds of many people following several reports about billions of dollars in losses suffered by cryptocurrency dealers.
Although the identities of any Arab investors are unknown at this point, some foreigners, notably Sam Bankman Fried, are known to have suffered a disaster due to the collapse of his cryptocurrency trading empire. He was transformed from the owner of $32 billion in assets to an accused in a criminal investigation overnight.
Those losses occurred to him and others due to their greed-driven pursuit of instant wealth in an industry that is largely unregulated by global central banks. Such people used to compare the proceeds of the benefits they gained from dealing in securities with the cryptocurrencies that gave them millions of dollars daily on global stock exchanges. Such wealth creation prompted them to buy virtual currencies, especially “bitcoin” at a low price, and sell them again on cryptocurrency exchanges at a high price to generate fortunes for themselves. These operations witnessed an acceleration in buying and selling during the past five years and increased the prices of cryptocurrencies before operations slowed down slightly during and after the Covid-19 pandemic.
One of the reasons for Bankman’s losses and the collapse of the US-based FTX cryptocurrency exchange was his decision to use deposits amounting to $8 billion to support other companies dealing in cryptocurrency trading. As losses mounting, he became unable to pay the debts incurred by him due to the collapse in the value and price of digital currencies. The results led to the loss of much of his institution’s capital, bringing the value of its balance to zero, and the collapse of his empire overnight.
Such losses today affect cryptocurrency dealers, whether individuals or companies, and reduce public confidence in the demand for digital currencies in the global economy. This situation needs to be addressed through effective laws and regulations to protect depositors in official financial institutions.
What matters to us in the Arab world is that the Arab investors have to invest in productive economic sectors through which the sources of national income can be diversified and thereby address youth unemployment. There are sectors of industry, agriculture, fish, and others that can generate great financial returns for investors in the future instead of these currencies, which some see as fake and unregulated.
Oman Observer is now on the WhatsApp channel. Click here
