2021, the year Bitcoin is institutionalized as a legal tender
The year 2021 is full of revelations for cryptocurrencies. Recognized for the first time as the legal currency of a sovereign state, El Salvador, with others looking to follow a similar path, Bitcoin (BTC) is steadily growing its influence beyond the exchange platforms.
People in countries with fragile economies or volatile currencies are looking positively at an asset they see as more trusted than their national currency.
Bitcoin is then seen as an anti-inflation remedy, where some Westerners, who live in a kind of monetary paradise (stable and “trusted” currencies, minimal inflation), despise this same Bitcoin, only seen as a speculative asset.
Among the territories where crypto-currencies are growing exponentially, Iraq and the Kurdistan region are among those not necessarily expected.
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Crypto-currencies in Iraq and Kurdistan, a real craze fraught with pitfalls
For nearly two decades, Iraq and Kurdistan, a territory shared by four countries (Iraq, Iran, Turkey and Syria), have been living in chronic instability, both security and economic.
Yet one man, Abdurrahman Bapir, believed in the power of cryptocurrencies in his home region. Bapir is an Iraqi Kurd, a graduate of King’s College London. He is known for having, in 2017, founded Kurdcoin, the first and currently only exchange platform for the Iraqi and Kurdish market.
Not helped much by the general situation in the region, the use of cryptocurrencies in Iraq and Kurdistan has additionally suffered from the strictest regulation.
In 2017, the year Kurdcoin was created, the Central Bank of Iraq, backed by the government, outlawed the use of digital assets. This year, it’s the Kurdistan Regional Government’s turn to ban exchange platforms from operating in its territory.
Despite the general instability in the region and a de facto ban, cryptocurrencies have emerged within a territory that is hostile to them. Kurdcoin, based in the UK, is the main architect of this success, claiming thousands of customers.
While the latter number may seem small, it is actually significant for the region, where understanding of the digital asset issue is close to nil.
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Separating the wheat from the chaff, an additional difficulty to consider
Inconsistent legal framework hasn’t helped cryptocurrencies get established
anter in Iraq and Kurdistan. Between, on the one hand, a ban on use by the central bank alone and, on the other hand, the ban on exercise for exchange platforms only in Kurdistan alone, it is difficult to differentiate what is legal from what is prohibited.
Above all, the country’s economy being what it is, the population, often poor, wanted to touch this El Dorado represented by cryptocurrencies. However, to exercise, some have played the black market card, using unscrupulous schemes.
Iraq and Kurdistan have not escaped the sad scams polluting the world of crypto-assets. Ponzi pyramids, disappearing assets, frauds of all kinds: thousands of locals have fallen victim to scams from abroad, making several tens of millions of dollars disappear.
Some might say that the regulator is the sprinkler in the story: by wanting to ban cryptocurrencies and exchange platforms, as allegedly used to facilitate fraud, it is the real fraudsters who won the first game.
Because no, the government couldn’t stop the public’s infatuation with digital assets.
The potentially bright future of cryptocurrencies in Iraq and Kurdistan
Today, Kurdcoin offers a legal offering alongside the counterfeiters and fights against them as well as the authorities.
Kurds and Iraqis mostly suffer from a lack of financial knowledge, much more than in the West. For cryptocurrencies, the ignorance is multiplied by ten, which is joined by the government and civil society.
Despite this bleak picture, why is there optimism? According to Abdurrahman Bapir, every day sees the number of Kurdcoin users and transactions increase in the region. The interest is real and the insecurity at all levels presented upstream can only help the emergence of a crypto-economy.
Of the 40 million Iraqis, 60% are under the age of 25. Yet, all the examples in Latin America, Africa and even in the West, show that it is young people who are mainly interested in crypto-currencies.
There are 37 million mobile phone subscriptions and 75% of the population has access to the Internet. Despite the underdeveloped digital payment sector, many young Iraqis know how to make online purchases and even pay for subscriptions in cryptocurrencies.
Most importantly, less than one in ten Iraqi adults have a bank account. Of the 90% unbanked, how many have now switched to digital assets? To date, the exact answer to this question is impossible.
Still, many businesses are starting to use cryptocurrencies, which present an alternative to the classic cash reserve, still widespread in Iraq.
All social strata are affected: the rich are adding digital assets to their wallets, the poor have access to a market that banks deny them. In other words, the use of cryptocurrencies is spreading in Iraq and Kurdistan, faster and faster.
There seems to be no stopping this march forward, regardless of what the government thinks. Whether the next few months will confirm this trend remains to be seen.
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About the author: Benjamin Allouch
Lawyer specialized in digital and personal data law. He quickly became interested in bitcoin and blockchain technology, and founded the blog bitcoin-blockchain.fr. He is interested in the emergence of blockchain law and the legal consequences of this technology.
All articles by Benjamin Allouch.