Policy actions key to mass adoption of digital currencies

MUSCAT, DEC 9 – With blockchain becoming a key technology for improving the efficiencies of government entities and private sector in Oman, crypto-currencies and associated Initial Coin Offerings (ICOs) could be tested as a means to raise funds for new initiatives. It is however critical that such initiatives are legitimised by a strong government and central bank point of view and in time, regulatory guidelines before the Sultanate can see mass adoption of digital currencies, says Mohamed Nayaz, Business Resilience Advisory Leader — Africa, India, Middle East (AIM), EY, in the following Q&A:

1. What, in your view, is the strength of interest within the local financial services and investor community in crypto-currencies?
A) Actual crypto-currency adoption is low in the Africa and Middle East region. Crypto-currency user share (based on combined wallet and payment provider data) is the least in the Africa and Middle East region (4 per cent) as per an industry study conducted by the University of Cambridge in 2017.
However, that doesn’t mean that there’s a lack of interest in crypto-currencies in the financial services or investor community. The Central Bank of Oman (CBO) conducted a meeting on “Assessment of vulnerabilities in the Omani Macro-Financial system” with external stakeholders in April 2017, which discussed the possibilities around the adoption of blockchain and crypto-currencies (e.g. Bitcoin) as a medium of exchange. It would be safe to say that interest is gathering momentum and peak interest is expected in a not so distant future.
Governments and the private sector in the GCC understand the significance of blockchain technology in a digital world and how it would be the most appropriate technology to foster digital transactions. These government initiatives naturally garner large scale media attention and also enable economic events. With the Omani government’s first blockchain symposium having kicked off, it’s expected that there is going to be large scale traction in crypto-currency and wider blockchain adoption.
2. Why does the subject of digital currencies attract barely any attention at economic events, while in the UAE and elsewhere, the issue is gaining a lot of play?
A) Smart Dubai is a project that kicked off a large-scale blockchain adoption initiative (the technology that underpins crypto-currency) at a government level. The government themselves have stated that there will be workshops conducted across all the spectrums of organisations (government, private and semi-government) to bolster the use of the technology. The private sector in Dubai has followed suit with a number of digital currency ventures launching and gaining market traction e.g Bit Oasis (Bitcoin & Ethereum exchange house) and OneGram (ICO).
Governments and the private sector in the GCC understand the significance of blockchain technology in a digital world and how it would be the most appropriate technology to foster digital transactions. These government initiatives naturally garner large scale media attention and also enable economic events. With the Omani government’s first blockchain symposium having kicked off, it’s expected that there is going to be large scale traction in crypto-currency and wider blockchain adoption.
3. What is the position of the government/regulators with regard to crypto-currencies, and its most famous icon Bitcoin?
A) Governments and regulators across the world tread a path of caution when it comes to crypto-currencies, which is understandable. Very few countries/regulators (like a few countries in Europe, Canada, Japan, Singapore etc.) have legitimised the use of bitcoin and other crypto-currencies by announcing a position on their regulation. Others like Venezuela have made the use of such crypto-currencies illegal. The majority of regulators, including the UAE are still debating how to regulate and govern crypto-currencies, which is in itself a testimony to the fact that governments are a bit reluctant to replace fiat currency with crypto-currency.
The Omani government has however taken a very encouraging step towards digitisation through the blockchain symposium. The topics that were covered in the symposium regarding crypto-currencies are indicative towards a future that is different.
4. What is the status of regulation in Oman and the wider GCC governing crypto-currency investment and transactions?
A) The majority of countries in the world have not come up with a solid regulatory framework to regulate bitcoin or other virtual currencies. Different countries take different approaches, for example bitcoin is legal in the UAE (as the central bank has clarified its circular) however Saudi Arabia prefers to take a wait and watch approach. Most countries are in the process shaping up regulations related to crypto-currencies.
5. In your view, is there a trend towards crypto-currency investments by Omanis and local investors?
A) There is going to be a definite upward trend as far as crypto-currency investment by Omanis is concerned thanks to the symposium, attended by over 700 participants. The interest is definitely there and this could propel an upward trend for crypto-currency investment and adoption, provided there is more support from the government.
6. What needs to happen on the legislative and regulatory fronts if crypto-currency uptake is to grow?
A) There needs to be a global standard to regulate crypto-currency. Governments and Central Banks need to take strong steps towards forming standards and frameworks which would aid the adoption of crypto-currency frameworks. Central Banks have a crucial role in framing a regulation for crypto-currencies. With central banks providing a strong framework on regulations, this would increase the uptake significantly.
7. Should Oman embrace these digital currencies in the first place?
A) One of the reasons why many of the countries are leaping ahead of others in digital transformation is the increasing adoption of blockchain technology as well as the use of digital currencies like bitcoin in transactions. This is accelerating the digital transformation in many developed countries.
Oman has a digital vision for the future and with smart city projects announced, these connected cities would need an efficient transaction system powered by blockchain. The trading currency would also be digital thereby paving the way for crypto-currency adoption in a not so distant future. With blockchain becoming a key technology for improving the efficiencies of government entities and private sector in Oman, crypto-currencies and associated ICO’s could as well be tested as a means to raise funds for new initiatives. It is however critical that such initiatives are legitimised by a strong government and central bank point of view and in time, regulatory guidelines before we see mass adoption.
8. With the government championing the adoption of blockchain technology, as was evident from its hosting of the first Oman Blockchain Symposium last month, does this bode well for the growth of crypto-currencies in Oman?
A) Definitely, with the government taking initiative and the interest in the symposium, these are both good signs for blockchain technology adoption and growth in Oman. Considering the fact that key ministries and CBO were involved in organising the event which as well as blockchain initiatives, had crypto-currency and ICO as topics of discussions, the future could be bright.
9. Which ministry / entity in government should take the lead in preparing the regulatory groundwork for crypto-currency adoption in the Sultanate: Ministry of Finance or CBO?
A) Central Banks around the world have taken the initiative to prepare a regulatory framework for crypto-currencies. CBO is an obvious choice to develop a framework for regulating the crypto-currencies. With a clear plan and framework laid out by CBO, there could be no doubts in the minds of investors and adopters of crypto-currencies in the Sultanate.

Conrad Prabhu