The Middle East is poised to become one of the leading Blockchain and Crypto markets in the world, thanks to a combination of factors such as supportive regulations, high digital adoption, and a welcoming environment for foreign investment. The UAE, in particular, has a robust regulatory framework and a digital adoption rate of 78% according to McKinsey with an overwhelmingly positive sentiment toward digital assets and Cryptocurrencies. With such a favorable backdrop, financial institutions in the region have the perfect opportunity to explore and experiment with digital assets, taking inspiration from forward-thinking and enterprising institutions in countries such as Australia, Singapore, and Germany. Of note, it is imperative for each of these highly-regulated entities to consider a robust tech stack that gives them the ability to scale and explore different use cases, but — most importantly — meet the highest standards of security, even as bad actors approaches and attacks become more advanced and elaborate.
Below are some examples of successful Blockchain implementations spearheaded by corporations and financial institutions that may provide some insights for Middle Eastern financial institutions looking to embark on their own digital transformation journeys and cater to the customer needs of the future.
Australia: Speeding up Transactions with Stablecoins
ANZ Bank’s Collaboration with Fireblocks
Australia and New Zealand Banking Group (ANZ) collaborated with Fireblocks to mint a stablecoin pegged to the Australian Dollar. Launched in March 2022, this was the first time a major bank had been involved in the creation of a stablecoin. The bank developed the stablecoin for Victor Smorgon Group, a large family office based in Australia. This stablecoin allowed ANZ’s customers to find a safe and secure gateway to the digital economy, significantly reducing transaction times from a day or two to just Thirty minutes. Transferring assets to Zerocap via a stablecoin demonstrated how Blockchain technology could improve the efficiency and security of financial transactions.
National Australia Bank (NAB) and Cross-border Stablecoin Transactions
In March 2023, NAB made the first-ever cross-border stablecoin transaction by a major bank. As the second of Australia’s “Big Four” banks to issue a stablecoin, NAB aims to support transactions by corporate clients by the end of the year. NAB executed the first-ever cross-border stablecoin transfer by a major financial institution on a layer-1 public Blockchain. The intrabank transfer used the bank’s fully backed AUDN stablecoin, tied to the Australian Dollar. The transaction was conducted on the Ethereum Blockchain and used smart contracts for seven currencies: Australian, New Zealand, Singapore and United States Dollars, Euros, Japanese Yen, and British Pounds. This achievement showcases the potential of Blockchain technology in streamlining international transactions and reducing transaction costs.
Singapore: Streamlining Issuance and Green Financing
DBS Bank and FIX Marketplace
In June 2021, DBS, the largest bank in the Southeast Asia region, launched Asia’s first automated digital bond issuance platform, FIX Marketplace. The platform marked Asia’s first fully digital and automated fixed income execution platform, where issuers could directly connect with investors at their sole discretion. Keppel Corporation Limited was the first corporate issuer to have its $1bn Euro-Commercial Paper Programme digitalised for issuances under the FIX Marketplace, and appointed DBS as the sole arranger and dealer of the Programme. The platform enables issuers to connect directly with investors, paving the way for more efficient and transparent capital raising.
OCBC Bank and Green Financing Services
In April 2022, Singapore-based OCBC bank partnered with Fintech MetaVerse Green Exchange (MVGX) to develop green financing services aimed at corporates moving to carbon neutrality. The range of products includes tokenized carbon credits in the form of MVGX’s carbon neutrality tokens at a time when carbon credits are becoming an increasingly popular option for corporates looking to offset their carbon emissions. This innovative approach offers corporates an accessible and transparent way to offset their carbon emissions, showcasing the potential of Blockchain technology in addressing sustainability challenges.
Germany: Revolutionising Bonds and Payments with Blockchain
Siemens and Digital Bonds
In February 2023, Germany’s third-largest publicly traded company by market cap, Siemens, issued its first digital bond as it sought to reduce paperwork and reach out to potential purchasers directly. The 60mn euro ($64mn) bond, issued on the Polygon Blockchain, has a maturity of one year. A Blockchain bond “makes paper-based global certificates and central clearing unnecessary,” the company said in a statement. “What’s more, the bond can be sold directly to investors without needing a bank to function as an intermediary.” The sale isn’t Siemens’ first experiment with Blockchain technology. In December 2021, JPMorgan Chase partnered with the engineering and manufacturing giant to develop a Blockchain-based system for payments. The system is used to automatically transfer money between the Munich-based company’s own accounts. The Electronic Securities Act that allows the sale of Blockchain-based debt to take place came into force in June 2021. This issuance demonstrates how Blockchain technology can simplify the bond issuance process and eliminate intermediaries.
Siemens and JPMorgan Chase: Blockchain-based Payment System
Siemens also partnered with JPMorgan Chase to develop a Blockchain-based payment system, showcasing the potential of this technology in streamlining internal financial processes. The system, which was developed in December 2021, is used to automatically transfer money between the Munich-based company’s own accounts. By leveraging Blockchain technology, Siemens was able to enhance the efficiency and security of its internal payment processes while reducing the need for manual interventions.
Middle Eastern financial institutions have a unique opportunity to capitalise on the favorable environment and embrace Fintech innovations, such as Blockchain technology. By learning from Global Blockchain and digital asset pioneers, these institutions can embark on their own digital transformation journeys and generate additional revenue streams, ensuring that they are prepared for customers of the next generation.
As the region gears up for this exciting phase, it is essential for financial institutions to invest in upskilling their talent and preparing their digital asset infrastructure. By ensuring a secure and robust tech stack, Middle Eastern institutions can lead the charge in shaping the future of finance through Blockchain innovation. By leveraging best-in-class and highly secure, battle-tested technology like Fireblocks, financial institutions in the Middle East can confidently innovate and experiment with Blockchain technology, revolutionising the way they conduct business and serve their customers.