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The COVID-19 pandemic might help to further Qatar’s national strategy in the fintech and blockchain spaces to reduce the crisis’s impact.
Qatar is a World Bank “high-income economy,” backed by the world’s third-largest natural gas and oil reserves. It has the third-highest GDP per capita in the world (by purchasing power parity), with very high human development. Similar to other Gulf Cooperation Council states, which also include the United Arab Emirates, Saudi Arabia, Oman, Kuwait and Bahrain. Qatar has had to deal with the decline in global oil and gas prices after they first collapsed in 2014, and the situation has been made even more difficult by a Saudi-led embargo of the nation that started in 2017.
Because Qatar has a small population, substantial financial reserves and favorable business conditions for investment, it is in a better position than most to withstand the pressure. It has been working toward lowering its reliance on the export of oil and gas in favor of economic diversification. On Dec. 3, 2018, the nation moved one step closer toward that goal by announcing its withdrawal from the Organization of Petroleum Exporting Countries in order to focus more on its natural gas export sector.
With the emergence of the COVID-19 pandemic, Qatar has also committed to a national financial technology strategy to diversify an economy that will be powered by the world’s second-cheapest solar energy in order to meet its goal of increasing the proportion of renewable energy in its total electricity generation to 20% by 2030.
Yousuf Al-Jaida, CEO of the Qatar Financial Center, explained: “[COVID-19 related challenges] not only highlight the importance of tech and fintech, but also accelerates adoption and development. We will continue in our efforts to enrich and develop the tech and fintech infrastructure in Qatar as an enabling platform and look forward to seeing more international FinTechs, including those from the US, easily integrate into Qatar’s thriving ecosystem via QFC’s FinTech license and wide range of benefits.”
The QFC has reported it grew by 35% in 2019, and according to its website, it now has over 900 clients from various sectors, both financial and non-financial.
As Qatar is a leading financial hub in the Middle East, it has been weaving Shariah-compliant blockchain technology into its existing financial and legal infrastructure through the sector’s emphasis on digital payments with Qpay, Qatar’s largest fintech company, as well as money management and lending, among others, to emerge as a regional fintech hub.
The fintech sector saw global investment grow from $50 billion in 2017 to $111.8 billion by the end of 2018, according to Big Four audit firm KPMG. In 2019, to attract foreign fintech investment and encourage large companies to launch subsidiaries in the country, Qatar established the Investment Promotion Agency, which introduced “free zone” incentive programs. Qatar’s sovereign wealth fund has also continually increased its investments in tech and fintech companies and in technology investment funds.
The ongoing coronavirus pandemic has brought dramatic changes to the world, forcing governments all around the globe to make bringing blockchain tech to their financial services a priority. This includes Qatar, which has developed a national fintech strategy set forth by the Qatar Central Bank, or QCB, which aims to support the fintech sector in partnership with several key local stakeholders including the QFC and Qatar Development Bank, or QDB, as the Qatari public sector aims to be the biggest spender on blockchain technology by 2021.
As part of its fintech strategy, the QCB is weighing issuing a central bank digital currency, as COVID-19 has led to an increased interest in digital currencies around the world. “The QCB greatly welcomes the safe use of technological advancements that promote financial stability and inclusion in Qatar,” said a representative from the QCB’s fintech section. “Issuing a CBDC certainly has its benefits in innovation and enabling users to significantly change the way they make payments.” The representative added:
“There is currently no definitive plan to issue CBDC, however, the QCB is assessing the opportunities that this technology presents for Qatar and will continue to research the matter before making a final decision.”
In March, the QCB launched its national QR-code-based “Qatar Mobile Payment System,” a project designed to increase financial inclusion and reduce the use of banknotes in the country. Its goal is to enable citizens to use an electronic wallet on their mobile phones, complete peer-to-peer transactions, and pay for goods and services. It also allows for instantaneous withdrawals and cash deposits.
“Qatar has demonstrated an incredible synergy among entities in the pursuit of becoming a global leader in FinTech,” said Mohammed Barakat, managing director of the U.S.–Qatar Business Council. He also added:
“Considering Qatar’s already existing large payment processing and remittance market and its strategy to become a regional gateway for a huge surrounding market, I foresee rapid growth in Qatar’s FinTech sector.”
“From Fintech’s early emergence as a challenger to a conventional financial services sector to its role today as a change catalyst and enabler, it is safe to say that our industry has come a long way,” explained Abdulaziz bin Nasser al-Khalifa, CEO of the QDB. ”Blockchain is following suit, with 10% of global GDP expected to be stored on blockchain by 2027.” He also added:
“In Qatar, blockchain and other emerging technologies can play a major role in Qatar’s overall economic transformation, especially in the digitisation of various sectors, where they can be applied in four key areas: government to citizen, business to consumer, government to business, and business to business.”
Qatar has joined a number of countries across the globe that are implementing stricter laws to combat the illicit use of cryptocurrencies in terrorist financing and money laundering.
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