A UAE based blockchain startup, GCBIB, has managed to raise an incredible $143 million through its Initial Coin Offering which is akin to ~55% of funds raised by ICOs this month (Source). At a time when leading crypto markets like the USA are down in the doldrums, will the middle east take a more benign stance towards crypto and blockchain and provide the next surge for growth? The adoption of the blockchain could radically revamp its economy by boosting its business sector which has increasingly become more rudimentary in the past few years.
UAE is no stranger to its economy being radically transformed by an enterprising solution, the country used to be dependent on fishing and the pearl industry to fuel its economy but was radically transformed during the mid-20th century when the country struck oil. Now the country’s GDP is on par with some of the developed European countries and was even was ranked the most competitive economy by World Economic Forum back in 2014.
The country’s economy has recently been going through a rough patch as global crude oil prices plummeted and nations of the world swaying towards more cleaner sources of energy. Their economy is so interwoven with exporting crude oil that a shift from fossil fuels to renewable energy could restrict the country’s growth prospects.
Blockchain is the underlying technology behind the sensational Bitcoin, made famous albeit largely due to Bitcoins extreme price volatility. Blockchain is a digital ledger that records all transactions on it in a secure way and is not owned by a single entity but instead is sustained by a network of computers. Undeniably an ingenious invention, blockchain is the brainchild of anonymous entity simply known as Satoshi Nakamoto and the technology has been making waves in scores of industry sectors. From digital currencies and token offerings in Financial Services to peer-to-peer payment platforms in FinTech, the technology is undoubtedly revolutionary.
In April of 2018, the UAE government revealed its plans to leverage blockchain technology through an official blog post.
According to the Emirates Blockchain strategy 2021, the country aims to make 50% of all government transactions through blockchain networks by 2021. This monumental shift is expected to save $2.97 billion, 398 million hard copy of documents and 77 million work hours annually by eliminating the need to manually process these documents.
This statement by itself clearly demonstrates the country’s benign attitude towards blockchain and crypto, this encouraging attitude could also be the reason for the slew of ICOs to originate from the country.
In the past year alone, as many as 166 enterprises raised funds through token offerings in the country among which eight of them were carried out this year. Amongst the handful of ICOs launched this year, the crown jewel is GCBIB, as it single-handedly managed to raise over $140 million.
In terms of funds raised, the UAE has leapfrogged ahead of major countries like the US which managed to raise a measly $1.5 million. On top of this, the number of ICOs in UAE grew by as much as 400% while in the US it declined by 33 %.
With the downfall of ICO market in the United States, countries like the UK and Singapore have taken up the mantle but the UAE crypto market is far outstripping its European and Asian colleagues by picking up the pace, as the government encourages companies to use ICOs as a fundraising tool and opening doors to foreign blockchain startups to set up shop in UAE.
Unlike countries like the UK which has a more democratic establishment, the UAE government is more authoritarian, ironically, this could benefit the country as passing laws and regulations that are conducive for a proliferating blockchain environment, is less time intensive under an authoritarian government. This side-effect of an authoritarian rule could inadvertently fuel the rise of blockchain technology as the country’s government desperately tries to revamp its economy.
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