Bahrain – and the world – needs a centrally-owned digital currency

The Bahraini government announced last month that it is working on a national strategy to develop the digital economy.

The strategy has noble aims – the government wants to support the transfer of knowledge, foster a digitalisation culture, assess Bahrain’s digital maturity and set a framework for the e-economy. 

It is something that should be celebrated. This move is an absolute necessity for any nation that wants to protect its economy and create jobs for future generations.

It also could not be more timely: the pandemic marks an important inflection point and has accelerated the pace of digitisation worldwide by between five and ten years.

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As a result it must be recognised that in developing such a strategy, the need for speed in delivery has never been more important. 

When the strategy is revealed, not only do I hope to see increased focus on integrated government services and training and job creation, but also specific policies relating to the country’s financial system. 

This is essential to ensure Bahrain attracts local, inter-regional and foreign direct investment.

The Central Bank of Bahrain has already done some great work in this space.

It launched its regulatory sandbox for fintech development back in 2017, putting a firm stake in the ground to protect the kingdom’s status as a financial hub. 

If Bahrain is to continue to lead by example, one element that the strategy would do well to address is the adoption of a Central Bank Digital Currency.

I may be biased here, as my great uncle Sayed Mahmood Ahmed Al Alawi played a role in helping to introduce the Bahraini Dinar back in 1965.

Given my family’s heritage, I feel strongly about playing some small part in the next transition of our currency, and in championing our digitalised financial future. 

While the market for digital currencies has been extremely volatile, there is no doubt that they will continue to evolve, and this evolution and subsequent stabilisation will inevitably involve central banks in the region and globally. 

I’m not alone in this view. The Deputy Governor of the Bank of England, Jon Cunliffe, while reflecting on the progress of the digitalisation of “private” money over the previous decade and the increase in cashless transactions during the pandemic, stated that if the British people can be expected to continue to use “public” money issued by the Central Bank, then it is essential that the Bank of England issue a public digital currency. 

I want to see my country take a regional lead on this.

If Bahrain is to capitalise on the opportunities provided by its digital economy strategy, it needs to take a fully holistic approach to the future of the economy in its entirety – as all elements of future growth will relate in part or in whole to digitalisation.

And having a stable and central bank-owned digital currency will not only cement our reputation for fiscal innovation but also protect the financial future of our nation and its people. 

Hussain Al Alawi is an international partner and member of the global advisory board at Zurich-headquartered M&A advisory Millenium Associates, which is currently advising the region’s central banks on digital currency adoption