In the last few years, the Middle East has recorded one of the most rapid growths in the global crypto market. Many United Arab Emirates (UAE) crypto users in the region use crypto for remittances and savings,
Migrant Cryptocurrency Use in UAE
As reported by the U.N. Capital Development Fund last year, nearly 90% of the UAE’s 9.3 million population are migrants. These migrants are primarily from countries such as India, Pakistan, Bangladesh, Indonesia, and Egypt. Despite being responsible for significant remittance flows back to their home countries, most migrants in the UAE, particularly manual laborers, do not meet the minimum monthly income requirement of 5,000 dirhams ($1,350) needed to open a bank account in the country.
According to Mohammad Jalal Uddin Sikder, a researcher specializing in labor migration and the Center for Migration Studies in Bangladesh coordinator , migrants often opt for cash transfer services due to their affordability.
He explained that migrants are very cautious about every penny. In the UAE, money transfer services typically impose a fixed fee of 25 dirhams per transaction. However, cryptocurrencies offer an alternative. They offer “peer-to-peer” transfers directly between users online. The transfer of digital assets bypasses intermediaries like banks or financial authorities. This helps the residents save money.
Migrants can purchase cryptocurrencies using credit cards or through crypto exchange offices. Subsequently, their relatives may convert the crypto into the local currency.
Transfer expenses typically range from free to 0.5%, depending on the application used and the destination country for the funds. Additionally, there is usually a fee for currency conversion, although some services charge as little as one cent for this service.
Cross Border Trade in UAE
UAE recently reached a historic milestone by executing the inaugural cross-border payment utilizing the Digital Dirham. Spearheaded by Sheikh Mansour bin Zayed Al Nahyan, Chairman of the Central Bank of the UAE, this achievement involved transferring AED 50 million (approximately $13.6 million) to China. The achievement of this initiative facilitated through the collaborative “mBridge” platform, marks a pivotal moment for Central Bank Digital Currencies (CBDCs) and their potential to reshape the international financial arena.
The “mBridge” Platform
The “mBridge” platform, a collaborative endeavor involving the BIS Innovation Hub, four founding central banks, and over 25 observing members, introduces an innovative approach to cross-border payments. By harnessing distributed ledger technology (DLT), this initiative aims to establish a unified platform for various Central Bank Digital Currencies (CBDCs). The primary objective is to tackle enduring inefficiencies in cross-border transactions, such as high costs, slow processing times, lack of transparency, and operational complexities.
The UAE achieved a significant milestone by conducting the first cross-border payment using its central bank digital currency (CBDC), known as the Digital Dirham. This transaction involved transferring Dirham 50 million ($13.6 million) to China. It utilized the mBridge cross-border CBDC platform, with participation from both countries as well as Hong Kong. Notably, 23 central banks observed the process.
UAE and China reached a mutual agreement to enhance digital currency payments between their respective countries. The Central Bank of the UAE executed the transaction utilizing the mBridge platform during the bank’s 50th-anniversary celebrations. Interestingly, this coincided with the eve of the inaugural BRICS meeting following its expansion from five to ten member nations. Earlier this year, the UAE became a member of BRICS.
Final Words
Crypto has been growing rapidly in the UAE. While one can use crypto for different uses, including cross border trade or transfer. Residents prefer sending crypto because it is cheaper.
