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October 16 2021 8:08 AM ˚

How cryptocurrency can transform Jordan’s economy

Jordan cyrptocurrency analysis
Experts say that despite the novelty, cryptocurrencies could provide benefits for rentier economies like Jordan's. (Photo: AFP)
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AMMAN — Cryptocurrencies, which are digital assets designed to operate as low-cost mediums of exchange, are being increasingly viewed as a potential catalyst for economic growth, especially in developing, semi-rentier economies. Jordan, which heavily relies on migrant remittances (i.e. money from abroad) to boost the economy, is widely recognized as a semi-rentier state. اضافة اعلان

Balaji Srinivasan, former Chief Technology Officer at Coinbase, the United States’ most prominent cryptocurrency exchange, is acclaimed for his popular report, “Why India Should Buy Bitcoin.” A key aspect addressed by Srinivasan is cryptocurrency’s ability to drastically lower the transfer of money into India, “the world’s top recipient of remittances.” Similarly, Jordan can bring down the cost of remittance transfers, by allowing “crypto to serve as the conduit for large flows of money into the country,” wrote Srinivasan. 

According to the World Bank, remittances make up approximately 10 percent of Jordan’s gross domestic product or GDP, or the total income generated in an economy. Therefore, an easier flow of remittances into a country using digital currencies is bound to boost income and alleviate poverty.

In fact, the “effective and economical transfer of remittances is consequential” for the alleviation of poverty, economic empowerment and growth, and reduction of inequalities among and within countries, according to the London School of Economics.

Talal Tabbaa, cofounder of Jibrel Network, an open-source, web development company that leverages blockchain technology “to build the financial infrastructure of the future,” likened Jordan’s sluggish adoption of cryptocurrency, a novel technology, to Belarus’ initial rejection of the internet — a novel technology at the time, following its independence from the Soviet Union in 1991.

Unlike Belarus, Estonia, a nearby nation with “similar economic and social characteristics,” embraced the internet, according to Tabbaa. “It wouldn’t have been possible for Estonia to identify how the internet was going to revolutionize the country 30 years ago, but the results now are very clear,” said Tabbaa in an interview with Jordan News. “Estonia, despite its size and limited resources, is one of the leading digital economies of the world and Belarus continues to lag behind.”

When it comes to Jordan, Tabbaa said it is similarly “hard to identify the (precise) impact crypto can have on the Jordanian economy” as of today.

Nevertheless, “the world is clearly moving digital,” he stated, which pushes for the adoption of cryptocurrency. As such, “it’s hard to believe that we will still use money and assets built over 100 years ago,” said Tabbaa in reference to the fiat US Dollar.

Still, the Kingdom has been reluctant to adopt the new technology, with the Central Bank of Jordan (CBJ) banning cryptocurrency and the Telecommunications Regulatory Commission banning the import of crypto mining equipment.

Most notably, cryptocurrencies like Bitcoin and Ethereum have the potential to boost the Jordanian economy by offering local businesses and entrepreneurs access to capital and financial services.

In a virtual panel discussion on Jordan’s tech ecosystem led by Tech Wadi Head of Digital Tawfiq Abu Khajil, Minister of the Digital Economy and Entrepreneurship Ahmad Hanandeh noted that entrepreneurs in Jordan do not face “a shortage of capital.” Rather, they face inaccessibility to the pool of capital. To that end, “Jordan has a fresh opportunity to revive its financial markets and be at the forefront of the internet of money,” said Tabbaa. 

In decentralized finance, a fast-growing crypto sector, a liquidity pool is a collection of funds locked into a smart contract, a blockchain-based transaction protocol that involves the automatic execution of actions according to a defined set of terms of a contract or an agreement.

In simpler terms, smart contracts, which exist on the decentralized blockchain, facilitate financial services typically offered by a bank, such as lending money to earn interest or taking out loans, but without the bank and accompanying mark-ups. Given the decentralized nature of liquidity pools, then, Jordanian entrepreneurs would have access to capital from around the globe, at little to no cost.

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