Should your business jump on the bandwagon?

Facebook/TheBhukkadCafe

From groceries to luxury properties, hotel stays to coffees, burgers to business licenses, consumers in the UAE can now buy it all using cryptocurrency.

But, even as several bricks-and-mortar businesses jump on the crypto bandwagon and regulations evolve, experts say the uptake is modest and widespread adoption in the Gulf state is still about five years away.

A whole range of sectors have announced plans to accept crypto payments. Earlier this year luxury real estate developer DAMAC Properties announced that it would take sales from holders of bitcoin and ethereum. 

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Day To Day Hypermarket said last month it would accept crypto payments at branches and on its website, while company formation specialists Virtuzone have also embraced bitcoin payments from new business owners.

A number of food outlets have been taking the new payment method, but The Bhukkad Café, the UAE’s first Indian restaurant to accept cryptocurrency in March, said adoption has been slow.

“We are still at less than one percent in terms of people actually making payments via crypto,” Reshmi Mukherjee, co-founder of the eatery, told AGBI.

“But for us to do this is more about creating the awareness and the education around it. Of course, in the long term it’s profitable for us to hold coins.”

The cafe, which hosts Money Mentorship workshops, uses the Bitpay app for transactions.

Deepak Bhatia, CEO of Snowbell Restaurant Management, said that requests for crypto payment acceptance across his restaurants have been “negligible” so far but he still plans to introduce the option to customers.

“With the upcoming tourist season and more expats coming in, we are expecting [demand for crypto payment options] to increase.” 

In a 2022 report, Checkout.com said about 54 percent of 18-35-year-old consumers in the UAE either hold or plan to hold crypto assets in the next 12 months.

“We are at the very early stages of adoption,” said Gaurav Dhar, CEO of Marshal FinTech Partners, and a MENA FinTech Association board member. 

“Crypto payments as a use case has long been deliberated but has yet to go mainstream for day-to-day payments.

“The sentiment among both businesses and consumers is clear: if it is secure and people would like to accept crypto in a secure manner, then why not allow it?” 

However, Dhar pointed out that the current regulatory standing for crypto payments is in its early stages of being built and is under review, and it is not as simple as just moving from cash to card.

Earlier this year Visa said digital payments such as cryptocurrency have the potential to disrupt $18 trillion of annual consumer spending with cash and cheques.

Creative Commons/Rob Pegoraro

Globally, more than $2.5 billion worth of crypto payments were made through Visa’s crypto-backed card in the first fiscal quarter of 2022.

Those merchants that embraced cryptocurrency payments experienced growth, with 82 percent of respondents telling a Visa survey that the new payment offerings allowed them to rapidly attract new customers and reach new demographics. 

“Digital currencies are very much top of mind for us,” Saeeda Jaffar, senior vice president and group country manager for Visa GCC, said. 

“We want to be able to help give our consumers and our partners the ability to spend wherever they want, in whichever currency – be it fiat or digital – and by whatever means they want.”

Visa’s crypto-linked cards – not yet available in the UAE or wider Gulf region – help consumers make use of their crypto when transacting at Visa-accepting merchants around the world.

For example, it is easy to buy bitcoin on an exchange, such as FTX, with a Visa card.

Visa said it is also seeing a trend of remote-first companies paying their employees in stablecoins – a digital currency that is backed by fiat – like USDC.

Through a crypto-linked card programme, employees can use their stablecoin balance to buy groceries or go out to dinner without having to send their earnings to a traditional bank account.

Asked when such crypto instruments would become available in the UAE and wider Gulf, Jaffar said Visa is working with regulators in the region and worldwide to help create the right ecosystem.

“All of these are options that are available for our partners in the region,” she said. 

“However, we have to be very mindful that whatever we do has to be inspired by the rest of the world but specific to this part of the world.

“Whenever partners and regulators are aligned and believe that the time is right, in a very responsible way, we will make sure that we bring the best of Visa to this part of the world.”

A Visa study found that more than 30 percent of small business merchants in the UAE, Hong Kong, Singapore and Brazil plan to offer customers the option to pay using cryptocurrency in the coming months.

In contrast, 19 percent of small businesses in the United States and just eight percent in Canada expect to offer it as a payment option in 2022.

“Regulation is young and protecting consumers and businesses is a primary concern for any ecosystem regulatory body that will allow it to be adopted,” Dhar said.

Thomas Vanhee, partner at Aurifer Middle East Tax, said the new currencies posed challenges for companies. 

“For one, the UAE has not yet taken a clear stand on the VAT treatment of cryptocurrencies,” Vanhee said.

“At the same time, there is an argument to consider that cryptocurrencies are equivalent to fiat currencies and therefore using cryptocurrencies to buy or sell goods or services should not entail any VAT consequences.”