Connect with us

DIGITAL ECONOMY & TECHNOLOGY

Crypto Miners See ‘Enormous Potential’ in the Gulf

Published

on

Spread the love

  • Crypto miners drawn to Gulf
  • Electricity is 80% of cost
  • Tech-savvy population

With cryptocurrencies edging up again after last weekend’s “halving” – in which the rewards Bitcoin miners get for solving problems is cut in two to maintain scarcity – these are heady days for holders of Bitcoin and other virtual currencies. Bitcoin miners have been attracted to the Gulf by cheap electricity and established infrastructure.

“GCC countries have enormous potential in relation to the development of the Bitcoin mining sector,” Abdumalik Mirakhmedov, executive president of Dubai-based Bitcoin miner GDA, told AGBI. “In the past year, the region has been experiencing active growth, with several significant launches.”

Bitcoin “mining” is a process in which information in a blockchain block is validated by specialist machines. When a complex solution is reached by this equipment, a reward – in the form of Bitcoin and fees for the work done – is then issued. Initially, mining was often done in back rooms and sometimes-unofficial data centres. These days, however, it is increasingly dominated by larger businesses.

This equipment, however, also requires a lot of electricity.  In 2023, the Cambridge Bitcoin Electricity Consumption Index (CBECI) estimated global electricity usage associated with Bitcoin mining to be around 120 terawatt hours – about the same as Australia’s total electricity consumption that year.

Working day and night, Bitcoin miners also generate a lot of heat.  In colder climates, this has sometimes been repurposed to provide heating.  In the Gulf, however, the heat creates even greater electricity consumption, as powered cooling systems are used to keep the machinery within its operational temperature range.

A further problem in the Gulf recently has often been the lack of a clear regulatory framework for the industry – sometimes because of a general suspicion of cryptocurrencies.  Kuwait, for example, has banned all virtual asset transactions, investments and mining. In Saudi Arabia and Qatar, crypto has only quasi-legal status.

Yet, despite the obstacles, “the GCC region is the world’s sixth-largest adopter,” said Paige Aarhus, Paris-based director of crypto news and analysis site DL News. And figures from Chainalysis, a US-based cryptocurrency software development company, estimate that total crypto transaction levels in Saudi Arabia alone amounted to $36 billion and in the first two months of 2024 it hit $6 billion.

In the UAE and Oman, too, a more positive approach has been taken. A regulatory framework has been established, enabling facilities such as the DMCC Crypto Centre in Dubai to provide a wide range of services, including mining. In Oman, $800 million is now invested in crypto mining in the Sultanate. Abu Dhabi’s Green Data City in Salalah was Oman’s first licensed mining entity, while Exahertz International has also now joined it in the southern – and slightly cooler – Omani city.

Power plays

With electricity representing around 75-80 percent of a data farm’s average cost, cheap power is a major draw for miners when it comes to the Gulf. In Oman, although subsidies for electricity are being phased out, typical costs remain at around $0.05 per kilowatt – much less than the US average of $0.23, which is itself lower than average tariffs in Europe. “Innovations such as liquid cooling and immersion cooling are expected to significantly contribute to the expansion of operations within the region,” says Mirakhmedov.

This was recognised at the recent Global Digital Mining Summit hosted by mining server manufacturer Bitmain, held in Muscat. The “Hydro-mining Wins in the Desert” gathering highlighted progress in water cooling.

Green, renewable energy from solar is also available in abundance in Oman and other Gulf countries, providing miners with more sustainable credentials. At the same time, the Gulf offers a developed infrastructure and few restrictions on land for large data farms.

Oman, and other Gulf states, have also all invested heavily in education and training in IT, producing large, tech-savvy populations. “Key benefits of the Gulf also include the region’s access to capital and the ease of doing business,” says Mirakhmedov.  These benefits may help Gulf miners weather the storm of the recent halving.

Larger mining companies, or groups of miners, stand a better chance of absorbing that loss, while “some smaller mining companies may well go out of business as a result,” Aarhus says. With miners in the Gulf generally larger operations with lower overall costs, they may now be well placed for further expansion. More data farms could therefore be springing up around the region, in the months to come.


Spread the love
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

DIGITAL ECONOMY & TECHNOLOGY

The Digital Currency that could Upend how the Gulf Trades

Published

on

By

Spread the love

By Shruthi Nair

Project mBridge – a China-led central bank digital currency initiative, which the UAE and Saudi Arabia are part of – could have “broad strategic implications” for regional trade, according to market analysts.

A CBDC is a digital form of a country’s fiat currency, which is backed by a government. It eliminates the need for intermediaries like banks, or even other currencies such as the US dollar, to facilitate real-time, peer-to-peer, cross-border payments.

“When we look at international trade, not much has changed over the decades. It is a primitive method in the digital age,” Arun Leslie John, chief market analyst at Century Financial, said.

China’s global digital yuan transactions amounted to 7 trillion yuan ($986 billion) in the first six months of this year. The UAE’s inaugural cross-border payment utilising the digital dirham amounted to AED50 million ($13.6 million).

Considering the UAE and China are major trading partners with the total volume of bilateral trade between the two countries reaching $95 billion last year, project mBridge would significantly reduce and replace the use of dollars in this case.  However, analysts believe that it might be too early to conclude whether CBDCs could result in global de-dollarisation.

“Dollar is the choice of transaction for global trade. The US has the deepest capital, debt and equity market. Many countries around the world would want to diversify away from the dollar but they aren’t able to do so,” John said.

While Europe does not have deep debt markets, the Chinese government has capital controls over the yuan. So the only remaining choice is the dollar.

Countries such as Russia and Iran that are facing sanctions stand to be beneficiaries of CBDCs and initiatives like mBridge too. While the Russian central bank announced plans to launch its CBDC next year, the central bank of Iran said that its digital rial will be used for retail transactions, including purchasing goods and services.

“In the current international payment structure, countries can arbitrarily kick out one country from the system. This reduces strategic autonomy and political power of other countries involved,” John said.

To find out how CBDC’s work and its retail use cases, click to watch the video above


Spread the love
Continue Reading

DIGITAL ECONOMY & TECHNOLOGY

How Blockchain can Enhance Islamic Finance by Overcoming Barriers

Published

on

By

Spread the love

Blockchain technology is making waves in the financial sector with its promise of transparency and immutability. These features align closely with the principles of Shariah law, which governs Islamic finance, creating significant opportunities for blockchain to overcome barriers and unlock growth. The Islamic finance sector is projected to reach approximately $6.7 trillion in assets by 2027, as noted in LSEG’s Islamic Finance Development Report. In this evolving landscape, blockchain technology is emerging as a crucial tool for addressing the unique challenges faced by Islamic finance.

Islamic finance operates under Shariah law, which prohibits practices such as interest (Riba), excessive uncertainty (Gharar), and speculative transactions (Maysir). Blockchain technology’s core attributes—transparency and decentralization—are well-suited to address these constraints. Blockchain can effectively enhance compliance with Shariah principles by providing a tamper-proof ledger and facilitating decentralized transactions. Its ability to create a permanent, verifiable record of transactions aligns well with the Islamic finance requirement for clarity and accountability.

According to Moody’s, innovations like smart contracts are poised to improve Islamic finance transactions significantly. Smart contracts are self-executing contracts with terms written directly into code. They automatically enforce Shariah-compliant rules, reducing human error and enhancing transparency. These advancements support real-time settlements, which align with Islamic finance principles of fairness and clarity. By using blockchain to overcome barriers related to transparency and automation, financial processes can become more efficient and compliant with Shariah.

Enhancing Transparency and Efficiency

One of the most significant ways blockchain can overcome barriers in Islamic finance is through its ability to enhance transparency. The immutable nature of blockchain ensures that every transaction is recorded in a tamper-proof ledger, providing a clear and verifiable record of all financial activities. This transparency is crucial for maintaining compliance with Shariah principles, which demand a high level of clarity and accountability in financial transactions.

Blockchain technology facilitates smart contracts that automate the execution of Shariah-compliant financial agreements. This not only streamlines processes but also reduces the need for intermediaries, lowering transaction costs and increasing the speed and accuracy of financial transactions. By addressing long-standing challenges in Islamic finance, blockchain technology is helping to create a more efficient and reliable financial system.

Modernizing Charitable Giving

Blockchain technology also holds promise for modernizing Zakat, the obligatory charitable giving in Islam. Traditionally, the collection and distribution of Zakat have faced challenges related to efficiency and transparency. Blockchain can address these issues by providing a more transparent and efficient platform for managing charitable contributions.

With blockchain, Zakat collection and distribution can be streamlined, ensuring accurate tracking of funds and effective distribution to eligible recipients. This technology allows donors to see exactly how their contributions are used, enhancing trust and accountability. Additionally, blockchain can facilitate the creation of smart contracts to automate the distribution of Zakat, ensuring compliance with Shariah guidelines and reaching those in need more efficiently.

Addressing Challenges and Compatibility Issues

Despite its potential, the integration of blockchain into Islamic finance comes with its own set of challenges. The compatibility of digital assets, including cryptocurrencies and tokenized assets, with Shariah principles, is a topic of ongoing debate. Concerns about speculation and anonymity associated with these assets pose significant challenges, as they contrast with the Islamic finance emphasis on transparency, accountability, and ethical conduct.

Digital assets, particularly unbacked cryptocurrencies, have sparked discussions about their suitability for Islamic finance. The potential for speculation and the lack of intrinsic value associated with some digital assets diverge from Islamic finance principles that prioritize stability and ethical behavior. As a result, Shariah scholars and financial institutions are actively evaluating the compatibility of these assets with Islamic financial principles.

A promising alternative is Central Bank Digital Currencies (CBDCs), which align with Shariah principles by emphasizing transparency, fairness, and social welfare. CBDCs offer a way to digitize national currencies, providing a more efficient and accessible payment system while maintaining compliance with Islamic financial principles. This approach could address some of the concerns associated with speculative digital assets and provide a stable alternative for Islamic finance.

Islamic Finance Innovation in the UAE

The UAE serves as a notable example of how blockchain can be integrated into Islamic finance effectively. With a well-regulated Islamic finance sector, the UAE is at the forefront of digital assets innovation. The country’s regulatory framework for digital assets is overseen by key federal bodies, including the Securities and Commodities Authority (SCA) and the UAE Central Bank. While the SCA focuses on securities-related matters, the Central Bank regulates digital currencies and stored value.

The UAE also has three additional jurisdictions for digital assets regulation: the Dubai International Financial Center (DIFC), regulated by the Dubai Financial Services Authority (DFSA); the Abu Dhabi Global Market (ADGM), regulated by the Financial Services Regulatory Authority (FSRA); and the Virtual Assets Regulatory Authority (VARA). Each jurisdiction approaches digital assets regulation with a unique focus, contributing to the dynamic regulatory landscape in the UAE.

The UAE’s proactive stance on digital assets regulation and innovation underscores its commitment to leveraging blockchain technology to enhance its Islamic finance sector. The country’s regulatory framework continues to evolve, aligning with international trends and addressing emerging challenges.

Strategic Integration and Collaboration

For Islamic finance institutions to fully capitalize on blockchain technology, comprehensive adoption strategies are essential. These strategies should include technology integration, Shariah compliance, regulatory adherence, risk management, and customer education. Collaboration with Shariah scholars and experts will be vital to ensure that blockchain initiatives and digital asset offerings align with Islamic ethical and legal principles.

Many Islamic banks and financial institutions are exploring blockchain technology to streamline their operations. However, they face challenges related to regulatory compliance and interoperability with existing legacy systems. To overcome these obstacles, institutions are seeking solutions to integrate blockchain effectively while ensuring alignment with regulatory requirements and Shariah principles.

In conclusion, blockchain technology holds significant promise for overcoming barriers and unlocking growth in Islamic finance. By enhancing transparency, efficiency, and compliance with Shariah principles, blockchain can address the unique challenges of Islamic finance. As the technology continues to evolve, its integration into Islamic financial practices will likely become increasingly sophisticated, driving further innovation and growth in the sector. The potential of blockchain to transform Islamic finance underscores the need for ongoing collaboration, research, and strategic planning to fully realize its benefits.


Spread the love
Continue Reading

DIGITAL ECONOMY & TECHNOLOGY

How Blockchain Can Enhance Islamic Finance by Overcoming Barriers

Published

on

By

Spread the love

Blockchain technology is making waves in the financial sector with its promise of transparency and immutability. These features align closely with the principles of Shariah law, which governs Islamic finance, creating significant opportunities for blockchain to overcome barriers and unlock growth. The Islamic finance sector is projected to reach approximately $6.7 trillion in assets by 2027, as noted in LSEG’s Islamic Finance Development Report. In this evolving landscape, blockchain technology is emerging as a crucial tool for addressing the unique challenges faced by Islamic finance.

Islamic finance operates under Shariah law, which prohibits practices such as interest (Riba), excessive uncertainty (Gharar), and speculative transactions (Maysir). Blockchain technology’s core attributes—transparency and decentralization—are well-suited to address these constraints. Blockchain can effectively enhance compliance with Shariah principles by providing a tamper-proof ledger and facilitating decentralized transactions. Its ability to create a permanent, verifiable record of transactions aligns well with the Islamic finance requirement for clarity and accountability.

According to Moody’s, innovations like smart contracts are poised to improve Islamic finance transactions significantly. Smart contracts are self-executing contracts with terms written directly into code. They automatically enforce Shariah-compliant rules, reducing human error and enhancing transparency. These advancements support real-time settlements, which align with Islamic finance principles of fairness and clarity. By using blockchain to overcome barriers related to transparency and automation, financial processes can become more efficient and compliant with Shariah.

Enhancing Transparency and Efficiency

One of the most significant ways blockchain can overcome barriers in Islamic finance is through its ability to enhance transparency. The immutable nature of blockchain ensures that every transaction is recorded in a tamper-proof ledger, providing a clear and verifiable record of all financial activities. This transparency is crucial for maintaining compliance with Shariah principles, which demand a high level of clarity and accountability in financial transactions.

Blockchain technology facilitates smart contracts that automate the execution of Shariah-compliant financial agreements. This not only streamlines processes but also reduces the need for intermediaries, lowering transaction costs and increasing the speed and accuracy of financial transactions. By addressing long-standing challenges in Islamic finance, blockchain technology is helping to create a more efficient and reliable financial system.

Modernizing Charitable Giving

Blockchain technology also holds promise for modernizing Zakat, the obligatory charitable giving in Islam. Traditionally, the collection and distribution of Zakat have faced challenges related to efficiency and transparency. Blockchain can address these issues by providing a more transparent and efficient platform for managing charitable contributions.

With blockchain, Zakat collection and distribution can be streamlined, ensuring accurate tracking of funds and effective distribution to eligible recipients. This technology allows donors to see exactly how their contributions are used, enhancing trust and accountability. Additionally, blockchain can facilitate the creation of smart contracts to automate the distribution of Zakat, ensuring compliance with Shariah guidelines and reaching those in need more efficiently.

Addressing Challenges and Compatibility Issues

Despite its potential, the integration of blockchain into Islamic finance comes with its own set of challenges. The compatibility of digital assets, including cryptocurrencies and tokenized assets, with Shariah principles, is a topic of ongoing debate. Concerns about speculation and anonymity associated with these assets pose significant challenges, as they contrast with the Islamic finance emphasis on transparency, accountability, and ethical conduct.

Digital assets, particularly unbacked cryptocurrencies, have sparked discussions about their suitability for Islamic finance. The potential for speculation and the lack of intrinsic value associated with some digital assets diverge from Islamic finance principles that prioritize stability and ethical behavior. As a result, Shariah scholars and financial institutions are actively evaluating the compatibility of these assets with Islamic financial principles.

A promising alternative is Central Bank Digital Currencies (CBDCs), which align with Shariah principles by emphasizing transparency, fairness, and social welfare. CBDCs offer a way to digitize national currencies, providing a more efficient and accessible payment system while maintaining compliance with Islamic financial principles. This approach could address some of the concerns associated with speculative digital assets and provide a stable alternative for Islamic finance.

Islamic Finance Innovation in the UAE

The UAE serves as a notable example of how blockchain can be integrated into Islamic finance effectively. With a well-regulated Islamic finance sector, the UAE is at the forefront of digital assets innovation. The country’s regulatory framework for digital assets is overseen by key federal bodies, including the Securities and Commodities Authority (SCA) and the UAE Central Bank. While the SCA focuses on securities-related matters, the Central Bank regulates digital currencies and stored value.

The UAE also has three additional jurisdictions for digital assets regulation: the Dubai International Financial Center (DIFC), regulated by the Dubai Financial Services Authority (DFSA); the Abu Dhabi Global Market (ADGM), regulated by the Financial Services Regulatory Authority (FSRA); and the Virtual Assets Regulatory Authority (VARA). Each jurisdiction approaches digital assets regulation with a unique focus, contributing to the dynamic regulatory landscape in the UAE.

The UAE’s proactive stance on digital assets regulation and innovation underscores its commitment to leveraging blockchain technology to enhance its Islamic finance sector. The country’s regulatory framework continues to evolve, aligning with international trends and addressing emerging challenges.

Strategic Integration and Collaboration

For Islamic finance institutions to fully capitalize on blockchain technology, comprehensive adoption strategies are essential. These strategies should include technology integration, Shariah compliance, regulatory adherence, risk management, and customer education. Collaboration with Shariah scholars and experts will be vital to ensure that blockchain initiatives and digital asset offerings align with Islamic ethical and legal principles.

Many Islamic banks and financial institutions are exploring blockchain technology to streamline their operations. However, they face challenges related to regulatory compliance and interoperability with existing legacy systems. To overcome these obstacles, institutions are seeking solutions to integrate blockchain effectively while ensuring alignment with regulatory requirements and Shariah principles.

In conclusion, blockchain technology holds significant promise for overcoming barriers and unlocking growth in Islamic finance. By enhancing transparency, efficiency, and compliance with Shariah principles, blockchain can address the unique challenges of Islamic finance. As the technology continues to evolve, its integration into Islamic financial practices will likely become increasingly sophisticated, driving further innovation and growth in the sector. The potential of blockchain to transform Islamic finance underscores the need for ongoing collaboration, research, and strategic planning to fully realize its benefits.


Spread the love
Continue Reading

Trending

Copyright © 2024 Focus on Halal Economy | Powered by Africa Islamic Economic Forum