Digital currency poses serious threat to economies

Haider Al Lawati – – Every day, the media announces the new negative developments of exposure of some traders and gamblers in the encrypted virtual currency bitcoin.

Billions of dollars have been lost of late due to the devaluation of this electronic currency, the source of which is unknown. Nor is there a regulatory body overseeing it.

The value of seven or eight bitcoins – used earlier to buy a small pizza – recently skyrocketed to more than $20,000 apiece. Due to the high demand, millions of dollars were invested by the GCC nationals to trade in this digital currency.

Banks in the region were in a state of panic, causing some to report to the relevant authorities about the transfer of large sums from their customers’ accounts to companies engaging in unknown activities in the region and abroad, along with the transfer of hundreds of millions of dollars to the accounts of other customers. This sparked a controversy among many groups in the GCC and other communities.

The Gulf region and overseas companies have seen dozens of advertisements published in Arabic on websites and social networks, luring people to deal with the virtual currency.

They are worded very attractively. For example, some of these ads claim the bitcoin is 100 per cent theft-proof, it is available 24/7, and customer support is provided in multiple languages and round the clock, among others.

As a result of the losses suffered by some of the countries of the region, the authorities in some GCC cities began to monitor the wealth of some people who started owning luxury cars and villas during the past period. It suggested an abnormal lifestyle for some people.

Some GCC banks, in cooperation with other concerned parties, have identified names of people in certain areas of the region as a result of their large and inflated bank accounts during the past period. Today, this issue has become controversial in many Gulf newspapers, social networks and socioeconomic forums. This has led them to conduct financial investigations on what is going on in this regard to find out the sources of these funds, after it turns out that some dealers in this currency in Saudi Arabia and Kuwait , for example, have inflated their wealth in millions, including some junior employees whose monthly salary did not exceed $2,500, which led to the questioning of some of them. This information reveals that thousands of GCC nationals and others have deposited millions of dollars into trade in this virtual currency, with some making millions, while others have lost millions of dollars in a certain period of time.

Some experts in the region have recently warned about the need to follow up on the results of dealing with the virtual currency, but the money was pumped habitually, considering that there is no legal basis for the authorities to stop it.

Investigations with some companies have revealed that they operate perfectly legally and have received millions of dollars in less than six months. This has prompted them to monitor these companies and their powers to protect people’s money from manipulating the currency, which has depreciated significantly in less than a month.

The spread of this digital currency many harm economies in the long term, which may lead to the weakening of national currencies against global currencies, while leading to large withdrawals, which may eventually weaken the national economies.

In this sense, some central banks in the region have started demanding that all operating banks shall not deal in any form with bitcoin or exchange it with any other currency, open accounts to trade with it or send or receive any money transfers for the purpose of buying or selling this currency.