There has been a great deal of buzz surrounding the crypto-currency Bitcoin in recent years. In 2009, the payment technology was released as open-source software, allowing users to use it as a decentralised virtual cash. Though other crypto-currencies exist, Bitcoin is by far the largest and most used in this new world of virtual transactions.
Though the currency has been undeniably unstable for the past year, more and more businesses, particularly in the Middle East, are beginning to do business in Bitcoin. In 2014, the first functioning Bitcoin ATMs were installed in the UAE.
The Middle East is fast following in the footsteps of many other Bitcoin friendly countries. New Zealand, Canada, Finland and Australia are extremely supportive of the use of digital currency. Canadian taxes can even be paid with Bitcoin. Other governments are less than excited about the prospect. Denmark, for example, recently outlawed the use of Bitcoins in transactions.
The reason for some governments’ hesitancy is relatively straightforward. There are few laws and regulations in regard to Bitcoin, or any digital currency for that matter which can leave governments weary.
Transactions, since its inception, can be kept anonymous – though that benefit may soon be a thing of the past. The cypto-currency gained notoriety as it was the currency of choice on the notorious website the Silk Road, which allowed anonymous users to purchase illegal goods.
The way that Bitcoins work is actually fairly easy to understand. Bitcoins can be obtained in a number of different ways – most commonly by receiving them from another Bitcoin owner during a transaction. Bitcoins can also be mined. Mining of Bitcoins is done through verifying other transactions to record in the public ledger. Bitcoins are then stored in a virtual “wallet” and secured with digital keys.
Yet, as Bitcoin increases in popularity, businesses and brokers alike are looking to lend a little bit of structure to the technology. In August of 2014, the Australian company igot opened its doors in the UAE. “igot is a multinational Bitcoin exchange platform,” explains Vignesh Pethuraja, Strategy & Business Development, igot.
igot functions as a broker for Bitcoin users, or more simply, as an exchange service for the currency. With a familiar “buy-sell” model, the company is able to take some of the mystery out of using the currency for investments and purchases. igot has secured local banking partners and payment processors to give users in the region as many options as possible. igot is registered in the UAE with a Commercial Brokerage Licence.
igot uses KYC – or Know Your Customer – best practices. “To be a customer with igot, individuals must be verified,” explains Pethuraja. While this may put a damper on original users of Bitcoin, who revelled in the idea of anonymous transactions, it protects the company as well as the local economy from nefarious activity. “Any and all suspicious activity noted on an account is investigated,” Pethuraja goes further. The result may mean less anonymity, but it also means truly transparent, secure and real-time banking and accounting.
The company is determined to keep both their customers and the community safe. “We also are certified in Anti-Money Laundering practices,” says Pethuraja. The days in which crypto-currency could be used for illicit activities are certainly on their way out.
igot is the first Bitcoin brokerage house in the UAE and, according to Pethuraja, its presence should be no shock. “There have been 2 million dirhams in Bitcoin transactions in the UAE,” he says, “and a daily global transaction volume of nearly 1200 Bitcoins.” It was only a matter of time, therefor, before a company such as igot made its way to the region.
Bitcoin was the worst performing currency of 2014, however, according to Pethuraja, there is an explanation for the fluctuations. “Bitcoin is a technology, and it is a relatively new one at that,” says he explains. The instability that the Bitcoin has experienced in the last year, he says, is due to the newness of the technology itself. As people become more confident in the currency, he predicts the exchange rate will stabilise.
Indeed, Bitcoin is becoming easier to use. As the currency gains popularity, companies like BitPay – a service that can be described as the Bitcoin version of PayPal – are streamlining the way that users conduct Bitcoin transactions. “Bitcoin today is like the Internet in 1998,” quips Pethuraja, “At that time, the Internet existed, to be sure, but it wasn’t very user friendly.” Proponents of digital currency are fast at work adding layers to the BitCoin user interface to make it accessible to even the least tech-savvy user.
“Because using Bitcoin does not incur international transaction fees, those wanting to do international business tend to be interested in the currency,” says Pethuraja.
On a smaller scale, micro-payments derived from international remittences will mean big business for brokers such as igot. Real estate transactions could also forgo international fees when doing business over borders, and travel related industries could stand to benefit as well.
However, with igot in the region, it is NGOs that stand to collect in the moment. “We want to do something for the community,” says Pethuraja, “so we are providing zero percent transaction fees for non-profit organisations.” With this offer, NGOs can make everyday donations much more lucrative for their organisations, and provide more for their beneficiaries.
igot is expanding in the region with an enormous 400 percent growth in trading and 60 percent growth in users. The company has plans to launch in Egypt and Saudi Arabia as of the end of 2014. The company is thriving on the large expatriate population in the region, with a great deal of its business coming from remittances countries with heavily represented ex-patriot populations in the region such as India. “Using Bitcoin allows access to transactions that those without banks did not previously have,” explains Pethuraja, “There are many people without banks, particularly in developing and emerging markets. With Bitcoin transactions individuals no longer need to be linked to a banking account to transfer funds.”
The future of Bitcoin technology may be uncertain for the time being, but if the cryptocurrency catches on, it could mean a wealth of convenience for its users. Pethuraja gives a real-world example – “For instance, if you are traveling overseas, and you are a Bitcoin user, you would be able to simply take out your card, and withdraw cash from an ATM in the local currency. While this is possible now, users would be able to do this without worrying about local exchange rates or international transaction fees.”