Monday, March 20th, marked exactly 20 years since Iraq suffered its first American airstrikes, thus beginning an 8-year war. Without the approval of the UN Security Council, the United States of America, under the command of George W. Bush, ended the Ba'athist regime of Saddam Hussein , who was hanged on December 13, 2011, bringing the war to a close.
When American troops withdrew, the country found itself face to face with itself, destitute and demolished with a bruised population and sovereignty on life support. The war notably contributed to the rise of the Daesh movement which continued to destabilize the region before spreading to the rest of the world...
Thus, twenty years later, people are finally speaking out and it's time for an objective assessment . Iraq today still suffers from the aftereffects of a war that is still difficult to justify , and the economic situation remains complex for the entire population.
In this particular context, it appears that an ever-increasing number of people are interested in bitcoin and cryptocurrencies. In a country that must rebuild everything with a shaky financial system, cryptocurrencies are a first choice alternative for making international payments. However, the use of cryptocurrencies was banned in the country in 2017. Presumably, this does not prevent the population from circumventing the law to obtain bitcoin and other cryptocurrencies.
Despite the ban on the use of cryptocurrencies, its adoption is still greater
The Iraqi government banned the use of cryptocurrencies in 2017, following the example of other countries such as China, Algeria, Turkey, and Nigeria. Although some regulations have since been relaxed, and other countries have become more crypto-friendly from a legal standpoint, the Iraqi government has not reversed its ban. Yet, Iraqis, like other populations in the Middle East such as Lebanon and Turkey, are showing a growing interest in cryptocurrencies. While states can theoretically prohibit the use of cryptocurrencies, it proves very difficult, if not impossible, to do so in practice. This explains why cryptocurrency adoption continues to rise in the region.
The ban on the use of digital currencies may have paradoxically contributed to the rise of all kinds of scams. When cryptocurrencies are prohibited, the lack of a regulatory framework creates an opening for numerous frauds. The equivalent of millions of dollars has been stolen by companies posing as legitimate businesses and using crypto-assets to lure victims. This was the case, for example, with Praetorian Group International , a Ponzi scheme whose founders disappeared with over $40 million.
In a country plagued by economic difficulties, where investments often constitute life savings, these scams have dramatic consequences within the families of the victims.
In a financial cemetery, exchange platforms flourish
Iraq has a population of approximately 40 million, with over 60% under the age of 25. Internet and mobile penetration exceeds 75%, making it an ideal candidate for cryptocurrency adoption, especially given the still-developing nature of the digital payments and open banking sectors.
For many entrepreneurs like Nimrod Lehavi , it is precisely in this context that the adoption of Bitcoin and cryptocurrencies is likely to be strongest. Bitcoin appears, in fact, as a prime alternative in countries that lack a robust financial system.
There are many peer-to-peer exchange groups on social networks such as Telegram and Facebook, and some anonymous exchange agents are also present on decentralized messaging platforms.
The country's first cryptocurrency exchange, Kurdcoin, was launched in 2017 by Abdurrahman Bapir . Based in Erbil, the capital of Iraqi Kurdistan , the platform circumvents the Iraqi ban because it falls under the jurisdiction of an autonomous state that has not (yet?) legislated on the use of cryptocurrencies. The platform has thousands of clients who regularly use it to buy and sell Bitcoin, primarily, with Iraqi dinars (IQD).
Abdurrahman Bapir stated that the vast majority of these clients were businesspeople and individuals interested in technology in general. He added that many people living outside Iraq used Kurdcoin to send money to their families. This was a way to bypass providers like Western Union, which do not accept cryptocurrencies and charge significant commission fees. Cryptocurrencies, including Bitcoin, were then used as payment for certain services.
Some Iraqis are also attracted to bitcoin as a speculative asset because "there are no opportunities to invest through banks," Abdurrahman Bapir said, and it allows them to access financial products that would otherwise be inaccessible.
How do Iraqis manage to circumvent the ban on using cryptocurrencies?
Buying and selling bitcoin in Iraq, given the ban, is not easy. What makes things even more complicated is that the vast majority of Iraqis do not have a bank account.
Therefore, to buy or sell Bitcoin for international fiat currencies like the dollar, they can use exchange platforms based in jurisdictions with flexible regulations, such as OKX, based in the Seychelles. This platform is open to all nationalities worldwide, even those from countries that have banned the use of cryptocurrencies. It is also a very popular platform for Africans who want to buy Bitcoin. Users can make transactions with payment cards that do not require opening a bank account, unlike services such as ZainCash.
Bitcoin can be an economic springboard for the Middle East region
The Middle East presents a rather heterogeneous landscape in terms of cryptocurrency regulations. While Bahrain and especially the United Arab Emirates, with Dubai at the forefront, continue to attract crypto companies, Iraq, Lebanon, and Turkey have banned the use of cryptocurrencies. It's worth noting that Bitcoin is considered a "Halal" asset, meaning it is not prohibited under Islamic law. Governments prohibit Bitcoin for political and economic reasons, particularly to combat fraud and money laundering.
According to the founder of KurdCoin , the use of cryptocurrencies could attract new players to the region and foster the development of a new technological sector. He stated that cryptocurrencies can greatly " improve the quality of life (in Iraq) and around the world ."
“I hope our government and central bank will approach crypto with an open mind and see it as a gateway to the future, not a threat.”
Abdurrahman Bapir, https://www.al-monitor.com/originals/2022/11/kurdcoin-founder-says-lack-regulation-cryptos-big-challenge-iraq#ixzz7wV1UAnck
Rather than ban it, Iraq should consider regulation
What we see with Iraq, as with many countries where the population is largely unbanked, the use of bitcoin is necessary. Bitcoin is not considered only as a speculative asset, a safe haven but indeed a currency, like another, even superior (in terms of possibilities) than the national currency.
This is why many Iraqis, as Abdurrahman Bapir points out, want the country to establish a clear regulatory framework for companies operating in the cryptocurrency sector. This view is also shared by Nipun Srivastava, director of the consulting firm Deloitte in the Middle East, who specifies that "instead of pushing cryptocurrencies to the periphery of financial systems, central banks and other regulators must play a leading role in mainstreaming them."
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