CAIRO: Fintech experts believe Saudi Arabia is positioned to lead the regional landscape in decentralized finance, and also solve some challenges on the horizon.<\/p>\r\n\r\n\r\n\r\n
With active support from the Saudi Central Bank, also known as SAMA<\/a>, and initiatives like Vision 2030, the Kingdom is creating an ideal environment for solutions to so-called DeFi to flourish.<\/p>\r\n\r\n\r\n\r\n In an interview with Arab News, Abdulrahman Al-Dakheel, CEO of Taskheer<\/a>, an online fintech platform that facilitates rotating savings and credit associations, emphasizes the government\u2019s backing for innovative financial technologies such as blockchain and Central Bank Digital Currencies.<\/p>\r\n\r\n\r\n\r\n \u201cOur government, through SAMA, is actively exploring and supporting innovative financial technologies. Recently, Saudi Arabia joined an international CBDC trial led by the Bank for International Settlements to enhance cross-border payments, making them more efficient and secure,\u201d he said.<\/p>\r\n\r\n\r\n\r\n This aligns with the broader Vision 2030 initiative aimed at diversifying the economy and enhancing digital financial inclusion, the CEO added.<\/p>\r\n\r\n\r\n\r\n Fintech Saudi, an initiative launched by SAMA, plays a pivotal role in developing the sector\u2019s ecosystem, Al-Dakheel explained.<\/p>\r\n\r\n\r\n\r\n It provides a comprehensive support framework for fintech entrepreneurs, including access to the regulatory sandbox, resources for training, networking, and funding.<\/p>\r\n\r\n\r\n\r\n \u201cThis ensures startups can test their products in a controlled environment, meeting regulatory standards while fostering innovation,\u201d Al-Dakheel adds.<\/p>\r\n\r\n\r\n\r\n Jamil Abuwardeh, co-founder of METKAF.com<\/a>, a Web3 advising company and crypto expert, highlights the transformative potential of DeFi in Saudi Arabia.<\/p>\r\n\r\n\r\n\r\n \u201cThe financial sector here is heavily reliant on traditional intermediaries, with limited access to financial services for many citizens. DeFi can change this by providing decentralized financial services accessible to everyone, regardless of their location or financial status,\u201d he told Arab News.<\/p>\r\n\r\n\r\n\r\n DeFi can facilitate affordable and accessible services such as lending, borrowing, and investing, and enhance cross-border transactions with instant speed and almost zero fees, he added.<\/p>\r\n\r\n\r\n\r\n Stefan Kimmel, CEO of UAE crypto exchange platform M2<\/a>, stated that collaboration across the board is another major catalyst for DeFi adoption.<\/p>\r\n\r\n\r\n\r\n \u201cOver the last decade, we have seen a rapid increase in both government and private investment in DeFi frameworks, incubators, and infrastructure across the GCC (Gulf Cooperation Council),\u201d Kimmel said.<\/p>\r\n\r\n\r\n\r\n \u201cWhether in the UAE or Saudi Arabia, we have also learned that true progress can only be achieved by genuine collaboration between traditional finance and banking institutions, fintechs, start-ups, technology providers, and regulators,\u201d he added.<\/p>\r\n\r\n\r\n\r\n Implementing DeFi in Saudi Arabia is not without its challenges. One of the primary hurdles is regulatory uncertainty.<\/p>\r\n\r\n\r\n\r\n Al-Dakheel underscores the need for DeFi innovators to work closely with regulators to ensure compliance and secure necessary licenses.<\/p>\r\n\r\n\r\n\r\n \u201cSecurity is a significant concern. DeFi platforms are frequent targets for cyberattacks, making it imperative to have robust security protocols and continuous audits,\u201d he said.<\/p>\r\n\r\n\r\n\r\n Abuwardeh adds that a lack of public awareness and understanding is another challenge.<\/p>\r\n\r\n\r\n\r\n \u201cOne of the major challenges is the lack of awareness and understanding of finance in general among the public. But, if they are to gain from using it, then they will use it without the need to understand it, just like people use mobile phones without understanding how the networks operate,\u201d he said<\/p>\r\n\r\n\r\n\r\n Additionally, the absence of clear regulations may deter investors and users from engaging with DeFi.<\/p>\r\n\r\n\r\n\r\n \u201cHowever, SAMA has announced its intention to regulate DeFi, which could help to overcome this challenge,\u201d Abuwardeh added.<\/p>\r\n\r\n\r\n\r\n Kimmel emphasized the importance of balancing innovation, evolution, and regulation across various projects related to DeFi, fintech, or cryptocurrency adoption. He noted that each market must evolve at a pace that maintains this equilibrium.<\/p>\r\n\r\n\r\n\r\n \u201cSome of the greatest strength of these solutions is that they are technologically more efficient, more secure, and more accessible than their traditional counterparts \u2013 but this can be easily undermined when attempts at innovation outpace regulation, or simply if best intentions fail to meet consumer needs,\u201d Kimmel said.<\/p>\r\n\r\n\r\n\r\n The opportunities for integrating DeFi with traditional financial systems in Saudi Arabia are substantial, the experts further highlighted.<\/p>\r\n\r\n\r\n\r\n Traditional banks can leverage the technology to offer more efficient, transparent, and accessible financial services.<\/p>\r\n\r\n\r\n\r\n \u201cCollaborating with traditional financial institutions can lead to hybrid models that combine the strengths of both worlds. The openness of the Saudi Central Bank to digital innovations provides a conducive environment for such integrations, potentially transforming our financial landscape,\u201d Al-Dakheel states.<\/p>\r\n\r\n\r\n\r\n Abuwardeh, however, believes that DeFi represents a new paradigm rather than an extension of existing systems.<\/p>\r\n\r\n\r\n\r\n \u201cDecentralized finance does not need to fit into a centralized banking system. It needs to be understood and seen as a new technology,\u201d he said.<\/p>\r\n\r\n\r\n\r\n He compares the integration of DeFi to the shift from traditional postal systems to email, highlighting that the technology, like online correspondence, is a completely different way of delivering services in a decentralized manner.<\/p>\r\n\r\n\r\n\r\n Kimmel highlighted the impressive nature of Saudi Arabia\u2019s DeFi evolution, noting how clearly it has been defined and well managed through Vision 2030 and the Financial Sector Development Program.<\/p>\r\n\r\n\r\n\r\n \u201cWhen an entire ecosystem shares a mandate to deliver on the tangible impacts that the technologies can offer their citizens \u2013 financial inclusion, economic diversification, and world-leading technological advancement \u2013 there is no doubt that they will end up one of the top DeFi markets in the world,\u201d Kimmel added.<\/p>\r\n\r\n\r\n\r\n \u201cThrough the work of SAMA and MCIT (Saudi Ministry of Communications and Information Technology)<\/a>, in particular, we\u2019re very confident of a regulatory-innovation-security balance that will deliver the best outcomes for fintechs, financial institutions, and customers in the Kingdom alike,\u201d he added.<\/p>\r\n\r\n\r\n\r\nChallenges and risks<\/strong><\/h2>\r\n\r\n\r\n\r\n
Opportunities for integration<\/strong><\/h2>\r\n\r\n\r\n\r\n