Policy and Technology Hinder Adoption of P2P Crypto-Currency Services in the Middle East

Data published by Arcane Research suggests that the main P2P cryptomoney trading platforms have struggled to take off in Iran and Lebanon.

Data published by Arcane Research suggests that, despite the demand for peer-to-peer crypt trading platforms in the Middle East, regulations and lack of infrastructure are holding back their adoption.

However, undocumented migrants in Western countries have been using these platforms to send money home.

According to an October report by the company, the volume of trading in peer-to-peer, or P2P, crypto-currencies across the Middle East and North Africa is approximately 15% of what it was at the end of 2017 on the main LocalBitcoins and Paxful platforms, or approximately USD 682,000 per week.

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„In general, there are several centralized exchanges that provide services in the more developed Arab states,“ the report states. „However, other countries in the region do not have this exchange infrastructure, and also lack financial and political stability, but [have] not recorded any notable cryptoadoption in P2P services.

There is a demand for P2P services in Middle Eastern countries that are facing inflation, as it allows residents to take money out of the country or simply convert it into crypto currencies. The Lebanese pound has suffered massive inflation in 2020. And while Iran has been a hot spot for cryptomakers because of the low cost of electricity, its currency has also been devastated by crippling hyperinflation since the US re-imposed sanctions in 2018.

Despite this, P2P exchanges in both Lebanon and Iran are struggling to establish a foothold because „poor Internet infrastructure and political regimes are negative for Bitcoin.

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Instead, Arcane researchers found that Bitcoin’s „less sophisticated“ P2P trading methods (BTC) have grown in the region over the same period, driven by messaging applications such as WhatsApp.

The report also indicated that undocumented immigrants living in Western countries are turning to crypto currencies to send funds home using gift cards in conjunction with P2P commerce platforms when local laws make sending crypto currencies more difficult.

In September, Paxful announced that it would no longer provide services in Venezuela due to regulations and sanctions related to the U.S. Office of Foreign Assets Control. In spite of this, the country represented 42% of the volume of P2P services in all Latin America, which is now USD 4.3 million.

Arcane Research suggests that Venezuelan immigrants have found „solutions“ for sending money home amid „restrictions on crypto-currency and strict currency control.

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According to researchers, immigrants can buy gift cards from any number of popular retailers such as Amazon or simply a prepaid credit card, and send a photo of it to family and friends abroad. Recipients could then sell it through Bitcoin using a P2P platform and convert it into local currency. The report stated that this method of shipping was fast and reliable, but involved significant costs.

Bitcoin is also a good way to get money out of the country. „Bitcoin can be used as a capital flight tool for Venezuelans,“ the report stated. „Hyperinflation is a big problem for Venezuela and has caused more than 10 percent of the population to leave the country.