AMMAN — Since its
initial release in 2009, bitcoin and other forms of
cryptocurrency have
promised to revolutionize transactions and have even been adopted by national
central banks. But in Jordan, despite interest from some youth and
businesspeople, the changes this new technology promises to bring have been
obstructed by outright bans and resistance from the
Central Bank of Jordan
(CBJ).
اضافة اعلان
Cryptocurrencies,
which are digital assets designed to operate as a medium of exchange, could
help revitalize Jordan’s semi-rentier economy, which heavily relies on migrant
remittances. Such digital assets pave the way for efficient, low-cost
cross-border money transfers, which would allow Jordanians abroad to easily
transfer money into the Kingdom.
But the Central
Bank prohibited cryptocurrency even before engaging in research on the topic.
According to documents made available to Jordan News by Maher Mahrooq, director
of the Association of Banks in Jordan, the CBJ first sent out a circular prohibiting
“all banks, financial institutions, exchange companies, and payment card
companies” from dealing with cryptocurrencies under any possible circumstance
in February of 2014.
It wasn’t until
over six years later that the bank published its first cryptocurrency research
report, which came to light in March of 2020. In 2018, Ziad Freiz, the
crypto-cautious governor of the CBJ, sent out another circular prolonging the
ban, citing Ethereum and Ripple as two notable examples.
The Central Bank of
Jordan has issued contradictory statements claiming support for “solutions that
leverage on new innovations like blockchain”, and then stressing its policy of
“banning cryptocurrencies in the Jordanian financial system.” But these
policies can’t be reconciled: To leverage blockchain, cryptocurrencies must be
exchanged freely.
The CBJ’s authority
does not actually allow it to ban cryptocurrency trading at a retail level,
i.e. at the level of the individual consumer. But its restrictions on
commercial banks have the same effect of making it next to impossible to trade
cryptocurrency in the Kingdom.
As a result of this
ban on commercial banks, individuals in Jordan attempting to purchase
cryptocurrency online through platforms like EToro are faced with extensive
restrictions. Users of popular social media platform Reddit’s Jordan forum
cited days-long holds on their bank accounts, which could only be lifted by
submitting trading app transaction history to prove that no cryptocurrency was
bought. Many are therefore discouraged or barred from participating in the
market.
Simply put, rather
than squaring up to its intended goal of protecting investors, this ban is
“limiting Jordanian citizens’ ability to take part in the future of finance,” said
Talal Tabbaa, cofounder of Jibrel Network, an open-source web development
company that aims to “bridge the gap between governments, central banks,
regulators, and blockchain technology,” in an interview with
Jordan News.
“It’s illogical that Jordan’s lottery system
(gambling) is regulated and accepted, whereas cryptocurrency investment isn’t,”
argued Tabbaa.
Jibrel was one of
the first cryptocurrency-related companies to collaborate with the Kingdom’s
Central Bank in 2018 via a regulatory Fintech (financial technology) Sandbox
established to incentivize businesses and entrepreneurs “to test
newly-developed FinTechs”. Tabbaa accredited the bank’s crypto-based timidity
to a lack of fundamental awareness on cryptocurrency, which has bred “a fear of
the unknown” among the entity's workforce.
He referred to the
CBJ’s ban on cryptocurrency as an ostrich policy -— a metaphoric expression
used to describe the tendency to ignore obvious matters and pretend they don’t
exist. “It is the absolute worst thing you can do as a regulator,” he asserted.
The Central Bank
described the Fintech Sandbox program as an incubator where businesses can test
ideas “without directly being subject to regulatory and supervisory
requirements” in order to “support them in entering the market faster”.
Tabbaa’s Jibrel Network, however, faced supervisory restrictions in the form of
a 10-person limit when it came to demonstrating proof of concept.
As a startup founder,
Tabbaa understands “it’s impossible to make commercial sense out of working
with 10 people,” he admitted. “We were a bit tied down.” He cited the Central
Bank’s “low appetite for risk” as a factor at play. Nevertheless, Tabbaa is
optimistic about working with the CBJ in the future, and that’s due to the
presence of “many bright-minded people” that are not necessarily anti-cryptocurrency.
Tabbaa has
experience dealing with regulators in the UAE, Saudi Arabia, and Switzerland.
To him, CBJ regulators stand out. “I can comfortably say that there are
individuals at the Central Bank of Jordan that have a better vision than anyone
else, with the exception of those in Bahrain.”
Since many at the CBJ
aren’t against the cryptocurrency, it becomes clear that the bank’s centralized
group of decision makers is responsible for the hindrance of cryptocurrency
expansion in Jordan. Tabaa agreed.
In addition to the
CBJ’s opposition to cryptocurrency, the Telecommunications Regulatory
Commission bans importing the cryptocurrency mining equipment used to mint and
verify coins such as Bitcoin.
According to Jordan
Open-Source Association Executive Director Issa Mahasneh, this ban on mining
equipment is largely redundant. This is because while the TRC is responsible
for regulating the entry of technology into the country, it cannot practically
control simpler mining operations, including mining via cell phones. Such
under-the-radar mining methods are inevitable and, according to Mahasneh,
“impossible to control.”
This attempt at
suppressing the expansion of blockchain technology through over-regulation is
what Mahasneh refers to as a “lost opportunity” for Jordanians. There is rising
privacy concern about credit card payments; by contrast, the blockchain’s
decentralized, encrypted nature, enables trust among users and ultimately
ensures privacy, according to Mahasneh.
Mahasneh referred
to this extended level of privacy as an “added value” that should be
appreciated and not downplayed. In a world of over-centralization,
decentralization is imperative. “There is a stronger need for privacy globally,”
he said.
The CBJ’s main
defense of its reluctance to use cryptocurrency is that the technology can be
easily misused, whether through hacking, money laundering, or other illegal
activities facilitated by the technology’s anonymous capabilities. But the data
shows that this fear is largely unfounded.
Mahasneh noted that
the bank’s fear of cryptocurrency misuse is “largely exaggerated”. At the end
of the day, traditional banks are statistically and historically more prone to
hacks.
In fact, most
illegal activity, whether hacking or money laundering, occurs using fiat
currency, not crypto. “We don’t ban fiat currencies for their inevitable use in
illegal activity, do we?” asked Mahasneh rhetorically.
Here, a question
arises: Why is cybersecurity a much bigger concern to the Central Bank when it
comes to cryptocurrency, when most cybersecurity breaches occur within
fiat-dealing commercial banks?
Regardless of the
rate at which the Jordanian financial ecosystem really accepts blockchain
technology and cryptocurrencies, both will continue to grow over time, and
retail interest in the technology has only proven solid. Historically, attempts
at suppressing a growing technology almost always backfire. At some point, the
Central Bank of Jordan will have to engage with digital currencies, one way or
another, but so far, its public stance remains unchanged.
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