BANKS AND CRYPTOCURRENCIES GLOBAL EVALUATION: THE MIDDLE EAST

The financial landscape is undergoing a seismic shift, and the Middle East is emerging as a key player in this transformation.As discussions intensify about potentially replacing the U.S. dollar as the global reserve currency, cryptocurrencies like Bitcoin and the rise of nationalized digital currencies are being explored as avenues for enhanced economic stability and greater autonomy, especially within Muslim countries seeking alternatives to Western dominance.This is coupled with a rapidly digitalizing world and growing interest in Central Bank Digital Currencies (CBDCs) across the Middle East and Central Asia (ME CA) region. The Middle East has the second-smallest cryptocurrency market (6.6 per cent of global activity), received $271.7billion worth of cryptocurrency between July 2025 and June 2025. Despite the Middle East being low it was a 1,500 per cent increase from the previous year. Why is cryptocurrencies popular in MEA as a whole?From exploring the potential of CBDCs to navigating the complexities of integrating Bitcoin into existing financial structures, the region is rapidly evolving.This evaluation delves into the confluence of banks and cryptocurrencies in the Middle East, examining the opportunities, challenges, and the overarching impact on the global financial stage. Limited crypto selection: When trading crypto through a bank or finance app, expect a limited selection of cryptocurrencies, often fewer than 20. Conclusion A crypto-friendly bank acts as a bridge between the traditional finance world and the world of digital assets.We will explore how the Middle East is not only modernizing its financial infrastructure but also strategically repositioning itself in the evolving global order, forging new alliances and asserting its influence in the digital age.This includes considering how countries are working to promote financial inclusion and the efficiency of cross-border payments with digital currencies.

The Middle East: A Burgeoning Crypto Hub

The Middle East is no longer a bystander in the global cryptocurrency revolution; it's actively shaping the future of digital finance. This post is an excerpt from our 2025 Geography of Cryptocurrency Report. Reserve your copy now! The Middle East North Africa (MENA) region ranks as the seventh-largest crypto market globally in 2025, with an estimated $338.7 billion in on-chain value received between July 2025 and June 2025, accounting for 7.5% of the world s total transaction volume.According to Chainalysis' Geography of Cryptocurrency Report 2025, the Middle East and North Africa (MENA) region holds the sixth-largest crypto economy, receiving an estimated $389.8 billion in on-chain value between July 2025 and June 2025. Global penalties totalled US$5.35 billion in 2025, compared with US$10.6 billion in 2025. [1] Despite this global decrease, Europe, the Middle East and Africa (EMEA) moved in the opposite direction, with a large increase in financial penalties at US$3.4 billion across the region up from US$1 billion in 2025.While accounting for 6.6% of global activity and being the second-smallest cryptocurrency market, it’s important to note that the $271.7 billion received between July 2025 and June 2025 represents an astonishing 1,500% increase from the previous year, signaling explosive growth and adoption.

Driving Forces Behind Crypto Adoption

Several factors contribute to this surge in cryptocurrency usage in the Middle East:

• Economic Instability: In some countries, cryptocurrencies offer a hedge against inflation and currency devaluation.
• Limited Access to Traditional Banking: Cryptocurrencies provide financial inclusion for those underserved by traditional banks.
• Remittances: Digital assets facilitate faster and cheaper cross-border payments.
• Geopolitical Tensions: Some nations view cryptocurrencies as a way to circumvent sanctions and exert greater financial autonomy.
• Diversification of Alliances: Strengthening ties with countries like China and Russia encourages exploration of alternatives to traditional Western financial systems.

CBDCs in the Middle East: A New Era of Digital Finance

Almost two-thirds of countries in the Middle East and Central Asia are actively exploring the adoption of Central Bank Digital Currencies (CBDCs).This interest stems from the potential benefits of CBDCs, including:

• Financial Inclusion: CBDCs can extend financial services to unbanked and underbanked populations.
• Improved Efficiency of Cross-Border Payments: CBDCs can streamline and reduce the cost of international transactions.
• Enhanced Monetary Policy Implementation: CBDCs can provide central banks with new tools for managing the economy.
• Increased Transparency: CBDCs can provide greater visibility into financial transactions, potentially reducing illicit activities.

Project Aber: A Pioneering CBDC Initiative

The Saudi Central Bank (SAMA) and the Central Bank of the UAE (CBUAE) have already conducted a CBDC interoperability test under Project Aber, which means ""crossing borders"" in Arabic. إن الأحمر يطعى على الأخضر حقًا!This initiative demonstrates a commitment to exploring the potential of CBDCs for cross-border payments. Bitcoin and blockchain tech are ripe for mainstream adoption in Africa, where the population is well positioned to embrace the innovative technologies.The CBUAE has also participated in interoperability tests, further emphasizing the region's proactive approach to CBDC development.

Considerations for CBDC Adoption

Despite the potential benefits, adopting a CBDC requires careful consideration.Countries must address several key challenges, including:

• Cybersecurity Risks: CBDCs are vulnerable to cyberattacks, which could compromise the integrity of the financial system.
• Privacy Concerns: CBDCs could allow governments to track citizens' financial transactions, raising privacy concerns.
• Technological Infrastructure: Developing and maintaining a CBDC requires significant investment in technological infrastructure.
• Regulatory Framework: Clear and comprehensive regulations are needed to govern the use of CBDCs.

Banks Bridging the Gap: Crypto-Friendly Solutions

Traditional banks are increasingly recognizing the importance of integrating with the cryptocurrency ecosystem.Crypto-friendly banks are emerging as crucial bridges between the traditional finance world and the world of digital assets.These banks offer a range of services, including:

• Custody of Digital Assets: Providing secure storage for cryptocurrencies.
• Trading Platforms: Allowing customers to buy and sell cryptocurrencies.
• Payment Processing: Enabling businesses to accept cryptocurrency payments.
• Lending and Borrowing: Offering cryptocurrency-backed loans.

Challenges and Opportunities for Traditional Banks

While the integration of cryptocurrencies presents significant opportunities for traditional banks, it also poses several challenges:

• Regulatory Uncertainty: The regulatory landscape for cryptocurrencies is still evolving, creating uncertainty for banks.
• Security Risks: Cryptocurrencies are vulnerable to theft and hacking, requiring banks to implement robust security measures.
• Volatility: The price volatility of cryptocurrencies can make them risky assets for banks to hold.
• Compliance Requirements: Banks must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations when dealing with cryptocurrencies.

Ripple and XRP: Transforming Cross-Border Payments

Ripple and its native cryptocurrency XRP are playing a significant role in transforming cross-border payments in the Middle East and beyond. By David King BOISON (PhD) Raphael Nyarkotey OBU(Prof) Global cryptocurrency markets have undergone a breathtaking transformation over the past five years, evolving from niche experiments into pillars of the modern financial system. In January 2025, total market capitalization of all cryptocurrencies had climbed to approximately US$3.32 trillion, up from under US$500 billion at the start ofRipple's technology enables faster, cheaper, and more transparent international transactions. Nevertheless, the Middle East seems to be on its way to become the global blockchain powerhouse: From Dubai to Tel Aviv, the technology is being thoroughly researched and adopted.Ripple has partnered with banks and remittance firms in the Middle East, Africa, Southeast Asia, and Latin America to facilitate these payments.

The XRP Ledger (XRPL): Purpose-Built for Digital Payments

The XRP Ledger (XRPL) is a decentralized blockchain designed specifically for fast and scalable digital payments.It offers several advantages over traditional payment systems, including:

• Speed: Transactions on the XRPL are typically settled in seconds.
• Cost-Effectiveness: Transaction fees on the XRPL are significantly lower than those charged by traditional payment systems.
• Transparency: All transactions on the XRPL are publicly recorded and auditable.

Air Arabia: Embracing Stablecoin Payments

Air Arabia, a leading low-cost carrier in the Middle East, has become the first airline in the region to accept stablecoin payments.In partnership with Al Maryah Community Bank in Abu Dhabi, Air Arabia now allows customers to book flights using AE Coin, a UAE Dirham-pegged digital currency, through the AEC Wallet App.This move demonstrates the growing acceptance of cryptocurrencies and stablecoins in the region.

The Dubai Blockchain Strategy: A Vision for the Future

Dubai is positioning itself as a global leader in blockchain technology. Leader in cryptocurrency, Bitcoin, Ethereum, XRP, blockchain, DeFi, digital finance and Web 3.0 news with analysis, video and live price updates.The Dubai Blockchain Strategy aims to make Dubai the first city fully powered by blockchain by 2020. In regions like the Middle East, Africa, Southeast Asia, and Latin America, Ripple has partnered with banks and remittance firms to put that into motion. The institutions are reaping the fruits of the XRP Ledger (XRPL), which was purpose-built for fast and scalable digital payments.While the initial timeline has been adjusted, the commitment to blockchain innovation remains strong.The strategy focuses on several key areas, including:

• Government Services: Streamlining government processes using blockchain technology.
• Financial Services: Promoting the adoption of blockchain in the financial sector.
• Supply Chain Management: Improving the efficiency and transparency of supply chains.
• Real Estate: Simplifying real estate transactions using blockchain technology.

Navigating Regulatory Complexities and Taxation

The regulatory landscape for cryptocurrencies in the Middle East is diverse and evolving.While some countries have adopted a welcoming approach, others remain cautious.Taxation of cryptocurrencies is also in its early stages in the region.Many countries are still grappling with how to classify and tax digital assets.

Central Bank Warnings and Uncertainty

Although the legislation in some countries may not explicitly prohibit the use of cryptocurrencies, central banks often issue strong warnings against such transactions.This creates an atmosphere of caution and uncertainty for market participants. Furthermore, cryptocurrencies have strict relations with energy resources, thus, not all Middle East countries will be able to develop financial instruments based on blockchain. At the political level, Bitcoin and other cryptocurrencies may represent an obstacle to monitor the cash flow for some countries.It is crucial for individuals and businesses to stay informed about the latest regulatory developments in their respective jurisdictions.

Challenges and Considerations for Middle Eastern Countries

While the Middle East shows great promise in becoming a blockchain powerhouse, several challenges and considerations must be addressed:

Energy Resources and Cryptocurrency Mining

Cryptocurrencies, particularly Bitcoin, have strong ties to energy resources. In the Gulf, the Saudi Central Bank, previously known as the Saudi Arabia n Monetary Authority (SAMA), and the Central Bank of the UAE (CBUAE) have conducted a CBDC interoperability test in 2025 under Project Aber (meaning crossing borders in Arabic). 5 In addition, the CBUAE participated in the interoperability test through ProjectMining operations require significant electricity consumption, and not all Middle Eastern countries possess the necessary infrastructure to support large-scale mining activities. Although the legislation does not prohibit the use of cryptocurrencies, the Central Bank strongly recommends avoiding such transactions, creating an atmosphere of caution and uncertainty for market participants. Taxation of cryptocurrencies. In the Middle East, taxation of cryptocurrencies is still in its early stages:This could limit the development of financial instruments based on blockchain in certain regions.

Political Obstacles and Cash Flow Monitoring

At the political level, Bitcoin and other cryptocurrencies can present obstacles to monitoring cash flow. Against the backdrop of a rapidly digitalizing world, there is a growing interest in central bank digital currencies (CBDCs) among central banks, including in the Middle East and Central Asia (ME CA) region.This can be a concern for countries seeking to combat money laundering and other illicit activities.Governments need to strike a balance between fostering innovation and maintaining financial stability and security.

Key Takeaways and Future Outlook

The integration of banks and cryptocurrencies in the Middle East is a dynamic and rapidly evolving field.The region is poised to become a significant player in the global digital finance landscape, driven by factors such as economic instability, limited access to traditional banking, and the desire for greater financial autonomy.CBDCs, Ripple's technology, and the Dubai Blockchain Strategy are all contributing to this transformation.However, challenges remain, including regulatory uncertainty, security risks, and the need for robust technological infrastructure.

Actionable Advice for Stakeholders

• Businesses: Stay informed about the evolving regulatory landscape and explore opportunities to integrate cryptocurrency payments into your operations.
• Individuals: Educate yourself about cryptocurrencies and understand the risks involved before investing.
• Governments: Develop clear and comprehensive regulations that foster innovation while protecting consumers and maintaining financial stability.
• Banks: Embrace the opportunities presented by cryptocurrencies and explore partnerships with fintech companies to offer innovative financial services.

The future of finance in the Middle East is undoubtedly digital.By embracing innovation, addressing challenges, and fostering collaboration, the region can unlock the full potential of cryptocurrencies and blockchain technology to drive economic growth and improve the lives of its citizens.As the Middle East continues to navigate the complexities of the digital age, its proactive approach and strategic investments position it as a region to watch in the evolving world of banks and cryptocurrencies.