It’s ironic that Saudi Prince Al-Waleed bin Talal, the richest tech investor in the Middle East, criticized block chain technology and Bitcoin by calling it a “fraud.”
The Gulf Cooperation Council countries, including Saudi Arabia, have been working since 2014 to weave sharia compliant Blockchain technology and Bitcoin into their existing financial and legal infrastructure, while transforming them all at the same time.
“I just don’t believe in this Bitcoin thing, I think it’s just going to implode one day. It doesn’t make sense. This thing is not regulated. It’s not under control. It’s not under the supervision of . . . [the] United States Federal Reserve or any other central bank,” Prince Al-Waleed said days before he was arrested as part of a corruption crackdown in Saudi Arabia.
The sweep has ensnared over 200 high level government officials and 16 other princes.
Bitcoin is a type of unregulated, virtual currency that is issued over the Internet. It has ranked as the best performing currency in the world six out of the last eight years since its launch in 2009. Satoshi Nakamoto from Japan is credited with Bitcoin’s design and its original reference implementation including blockchain database.
Bitcoin transactions are tracked and made public using blockchain, which is a digital ledger distributed over a network of computers rather than located on a single or multiple servers. Transactions made in virtual currencies are recorded chronologically and publicly. It is almost impossible to alter the historical records on a blockchain and more importantly, access to a blockchain can also be restricted.
Nevertheless, virtual currencies also have a dark side, as flagged by the U.S. FBI for the first time, in an April 2012 report that analyzed the likelihood and consequences of illegal activities involving Bitcoins, as part of the ever-growing shadow banking system.
The emerging frauds in the digital age according to FBI’s report included terror financing, drug and weapons dealing, tax evasion, bribery, money laundering, theft of Bitcoins, theft of services to mine Bitcoins and “ransomware” which uses a computer virus that locks computer or mobile phone files and will not release them until a Bitcoin payment is sent to a designated address (Cyber Crime).
But because of the transparent nature of the blockchain technology — that ‘‘provides a really useful source of truth’’ explained Jonathan Levin, cofounder of Chainalysis, which develops software tools to track Bitcoin users — it has attracted investment from the world’s largest banks, investment companies, and technology companies to find new applications for its use in the burgeoning “FinTech” industry.
Earlier this year, Softbank launched a $100 billion technology focused “SoftBank Vision Fund” in partnership with tech groups Apple (U.S), Qualcomm (U.S), Foxconn (Taiwan), and Sharp (Japan). And because investing in Bitcoin is considered halal, investors in the fund also included Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Company.
The Gulf Cooperation Council’s fascination with the new web technology began with the realization that they could save time and money with faster, cheaper, and more efficient global oil trade transactions conducted on blockchain technology using Bitcoin.
In part to achieve that, the Saudi Arabian Ministry of Communications and Information Technology Minister Eng. Abdulla Al-Sawaha, Sir Richard Branson, and OneWeb — a low earth orbit satellite company with a mission to, “fully bridge the digital divide by making internet access available and affordable for everyone” — signed a memorandum of understanding to develop the Kingdom’s high-speed internet infrastructure for the vast majority of its rural and remote areas.
Saudi Arabia’s Islamic Development Bank also decided to use Blockchain-based financial platforms for multiple financial applications as well.
In Bahrain, the CEO of the Economic Development Board, Khalid Al-Rumaihi, affirmed that his country is looking closely into virtual currencies for issuing bonds as well as establishing a Saudi Arabian Bitcoin exchange in Bahrain.
The Commercial Bank of Qatar completed an initial pilot phase using the “first ever” Sharia compliant blockchain network to process international transfers in partnership with National Bank of Oman and United Arab Bank in the UAE.
Paycent, a mobile virtual currency wallet company obtained regulatory licenses to operate in the UAE and is in the process of acquiring the same in Bahrain and Qatar.
Meanwhile, Saudi Arabia’s Crown Prince Mohammed bin Salman, who oversaw the arrest of the 17 princes, is reportedly in discussions with Softbank to double it’s SoftBank Vision Fund investment.
Selva Ozelli is a tax attorney and legal and accounting analyst, with special expertise on the extraterritorial application of the FCPA via international tax rules.