The Kingdom of Saudi Arabia has expressed its interest in adopting blockchain and other technologically forward practices. Saudi Arabia is always looking to expand development and make its cities more efficient. Adapting new technology serves as a way to help private firms thrive, which will help liberalize the economy.
The legality of cryptocurrency in Saudi Arabia
However, despite this extremely forward stance of the government, the Kingdom is still extremely apprehensive when it comes to cryptocurrencies. This is specifically with regards to popular currencies like Bitcoin. There are no central authorities that keep cryptocurrencies in check- leading to extreme volatility in value on their part. Due to this, the Saudi Arabian government refuses to accept it as legal tender.
The government has placed an outright ban on banks processing any transactions involving cryptocurrencies. It has also declared cryptocurrency trading illegal in the country. Despite this statement, the government has not made any penalties clear for people choosing to still dabble in this trade. The country also still allows its few cryptocurrency exchanges to operate without any issue. The Saudi government has not given permission to major exchanges like Coinbase and Binance to operate in the country yet. However, there are exchanges specific to the Middle East like BitOasis that provide Saudi Citizens with the means to trade in cryptocurrencies.
Acting on its statement, the government of Saudi Arabia declared that they would not provide any provisions or protection for citizens dealing in virtual currency. All the risks will be borne exclusively by the cryptocurrency platform users. Hence, though the government has declared bitcoin to be illegal it has more of a quasi-legal status in the country. With four out of every ten people in Saudi Arabia investing in crypto, it does not seem that its popularity is going to die down anytime soon.
In fact, Saudi Arabia may follow in the footsteps of Bahrain and the UAE and soon roll out its own digital currency. The Saudi Central Bank has already started work on a digital Riyal, that citizens can link to their bank accounts. It is planning to jointly introduce this system with the UAE.
Where can citizens buy Bitcoin in Saudi Arabia?
Though people can buy Bitcoins in Saudi Arabia, there is currently nowhere for them to actually spend it. The government has banned all financial institutes from processing any transactions using virtual currencies like Bitcoin, Litecoin, and other popular coins due to their volatile nature. The only way for Bitcoin traders based in Saudi Arabia to actually trade their coins is to have contact with overseas vendors and buyers.
As of now, people are using centralized cryptocurrency exchange platforms like BitOasis, CoinMama, and Paxful to fulfill their virtual currency needs. However, these platforms come with added risks. Many of them levy high transaction fees on the customer, especially if the transaction is in foreign currency. Few platforms may also allow people to trade without verifying their identity first. This is quite dangerous as it can lead to the occurrence of fraud. However, due to the lack of trading options in the area, the people of Saudi Arabia have no choice but to either adhere to the high fees or risk being scammed on illegitimate platforms.
Taxation of Cryptocurrency in the Country
Due to the government’s hostile stance on cryptocurrency, there are no clear rules on its taxation yet. In fact, taxes on cryptocurrency are considered non-existent in Saudi Arabia due to their volatile nature. People may trade in digital assets freely. However, there are no regulations in place to keep their funds safe as they do so. Though no penalties have been set yet, the government is still quite strict when it comes to cryptocurrency ownership. Due to this, people may refrain from reporting any malpractices to the government in fear that their crypto assets will be seized.
Conclusion
The legal status of major cryptocurrencies like Bitcoin still remains unclear in Saudi Arabia. The Saudi government as well as the Saudi Central Bank have issued warnings against investing in cryptocurrencies because of their volatile nature. Many people in Saudi Arabia put money in various assets like stocks, property, and cryptocurrency to diversify their investment portfolios. The sudden fluctuation of crypto coins can lead to a massive loss of savings.
If many people suffer losses in this way, it can negatively affect the economy. Due to this, the government is currently not taking any steps to encourage the growth of cryptocurrency in the Kingdom. This includes providing measures for protection against online financial crime, and taxation of crypto earnings. Hence, there are currently no rules on taxation for crypto earnings in Saudi Arabia.
