The crypto market has been in turmoil in recent weeks. According to research, Bitcoin experienced its worst quarter in a decade. It fell by 56.27%, exceeding its previous record of a loss of 40.37% in the first quarter of 2021.
Zawya spoke with Talal Tabbaa, CEO and co-founder of CoinMENA, a regulated cryptocurrency exchange under the Central Bank of Bahrain, to discuss the outlook for cryptocurrencies.
A number of cryptocurrency exchanges are setting up bases in the Middle East, making the region a crypto trading hub. What’s the reason behind it?
I think there are a couple of primary driving factors: regulation and demographics. The Central Bank of Bahrain was the first in the region to issue onshore licenses to digital asset exchanges, which is why we at CoinMENA set up our headquarters in Bahrain.
In addition, earlier this year the UAE established the Virtual Asset Regulatory Authority (VARA), a new entity specifically set up to regulate virtual and crypto assets. This regulatory clarity is crucial for founders and investors who are looking to gain exposure to this emerging asset class.
The second factor is demographics. The MENA region has one of the youngest demographics in the world, which makes them more likely to adopt new technologies quickly. We saw this with the adoption of the Internet and smartphones, where the region has among the highest adoption rates. So as a founder this market offers a lot of opportunities.
What makes CoinMENA different from other crypto exchanges in the GCC/Middle East?
Our objective from day one was to be the simplest and safest way for regional investors to go from fiat to crypto and crypto to fiat. We accomplished this by developing strong relationships with local regulators and banks.
Many of the international exchanges operating in the region are doing so without a license. This means users face issues when they want to withdraw their funds to their bank accounts. Due to our stable banking relationships in the region, we are able to process user deposits and withdrawals within 24 hours on most days.
Secondly, we focus a lot on content, especially in Arabic. Crypto is a new technology, and there is a lot of misinformation and confusion about it in the mainstream press. We see it as our responsibility to develop informative and educational content about our sector to elevate the market understanding of crypto in the region.
We were the first exchange in the region to develop a weekly newsletter and [launch a] podcast called Kalam Crypto, and we are building a new “Learning” section on our website which will have the largest collection of crypto essays in Arabic. We plan to release that very soon.
What are your views on the current crypto crash? Where is the cryptocurrency market headed next?
This is nothing new for crypto; it goes through bull and bear cycles every four years. It is slightly different this time because of the macroeconomic conditions which are affecting all asset classes, including crypto.
For example, we have blue chip stocks this year like Netflix down over 70 percent, Facebook (META) is down over 50 percent, TESLA and Amazon [are] down around 40 percent. Crypto is still in the very early stages of adoption. Less than 4 percent of the world owns crypto, which is the same number of Internet users in the late 90s.
I fully expect this number to rise significantly over the next decade. To answer your question, in the short term, it’s difficult to say if the worst is behind us because the market is going through difficult macro conditions with the US Federal Reserve increasing interest rates to try and curb inflation.
However, in the long term, I see crypto as the future of finance, and I expect the next decade will continue to see more mainstream adoption.
What skill sets do you think will be critical for crypto businesses to be successful in the region? What are the hardest skills to find in this sector?
We need all kinds of skills in crypto, from technical, to creative, to sales and marketing. We are seeing a trend across the world where talent is flowing from traditional finance and tech to crypto.
It makes sense because crypto is the future of finance and will eventually attract the best talents across all disciplines. One of the most difficult skills to find in the region are tech roles and developers.
How would you describe the participation of retail and institutional investors from the Middle East in the crypto asset space over the years?
We’ve seen a huge increase in both, especially during the bull market run-up to the end of 2021 and Q1 2022. This feeds back to my point on regulatory clarity from the first question.
Both retail and institutional investors want to feel safe and know that they can exit and liquidate their positions anytime. Operating in a region with regulatory clarity enables investors to allocate capital to digital assets and be comfortable knowing that they can easily move their money to and from the legacy financial world to the crypto world.
Warren Buffett once described Bitcoin as a “real bubble” and said that cryptocurrencies don’t have real value. How would you respond to that?
With all due respect to Mr. Warren Buffet, he’s one of the best investors in history, but on crypto, I think he is wrong. A bubble implies one cycle of boom and bust and then it’s over. Like the tulip mania.
Bitcoin has survived eight separate 50-percent-plus drawdowns without any bailouts, and each time the price has come back to set new all-time highs. If we look at bitcoin’s price over the past decade, the trend is clearly up and to the right.
Even with the current price drawdown back to the 20K range, bitcoin is still the best-performing asset class in the world over the past decade. By his own admission, Mr. Buffet says that investing in tech is not his strong suit.
He famously admitted it was a mistake [that] he passed on investing in companies like Google and Amazon. I think it’s clear where I stand on bitcoin. I consider it like digital gold or property, and eventually, every asset manager in the world will have exposure to bitcoin in one way or another.
(Writing by Sunil S; editing by Seban Scaria)