The Banking Executive Issue - October 2025 Issue

Onchain Finance In Arab Countries CHALLENGES FACING ONCHAIN FINANCE Onchain finance faces a complex set of challenges globally and within Arab countries, stemming from both technological and regulatory barriers. Worldwide, issues such as smart contract vulnerabilities, scala- bility limitations, and fragmented blockchain standards hinder seam- less adoption. Regulatory uncertainty remains a major obstacle, with in- consistent policies across jurisdic- tions posing compliance risks for developers and users alike. In Arab countries, these challenges are com- pounded by limited blockchain infra- structure, low public awareness, and the need to align onchain financial products with Islamic finance princi- ples. Additionally, the absence of unified regional frameworks and dig- ital identity systems restricts cross- border interoperability and trust. Overcoming these hurdles will re- quire coordinated efforts between governments, financial institutions, and tech innovators to build secure, inclusive, and Sharia-compliant on- chain ecosystems. REGULATION OF ONCHAIN FINANCE Regulation of onchain finance is evolving rapidly across the globe, with governments seeking to balance innovation with consumer protection and financial stability. In major economies like the United States (U.S.), European Union (EU), and Singapore, regulators are introducing frameworks for stablecoins, decen- tralized finance (DeFi), and tok- enized assets, while enforcing anti-money laundering (AML) and know-your-customer (KYC) stan- dards. In Arab countries, the regula- tory landscape is mixed: Gulf nations such as the United Arab Emirates (UAE), Bahrain, and Saudi Arabia are leading with sandbox programs and licensing regimes for crypto ex- changes and blockchain platforms, aiming to become regional fintech hubs. Meanwhile, other Arab states remain cautious, often lacking clear legal definitions for digital assets. Harmonizing regulations across the region and aligning them with global standards will be key to unlocking the full potential of onchain finance in the Arab world. ONLINE PLATFORMS OFFERING ONCHAIN FINANCE Several online platforms are leading the way in offering onchain finance services, ranging from decentralized lending to tokenized asset manage- ment. These platforms leverage blockchain technology to deliver transparent, automated, and border- less financial solutions. ISSUE 202 OCTOBER 2025 the BANKING EXECUTIVE 77 ONCHAIN FINANCE SWOT ANALYSIS Transparency: Transactions are recorded on public ledgers, reducing fraud and increasing accountability. Efficiency: Smart contracts automate processes, enabling faster settlements and lower operational costs. Accessibility: Open to anyone with internet access, promoting financial inclusion across borders. Security: Cryptographic protocols enhance data integrity and reduce reliance on centralized systems. STRENGTHES Tokenization of Assets: Real-world assets like real estate and commodities can be fractionalized and traded onchain. Cross-Border Payments: Enables fast, low-cost international transactions without intermediaries. Decentralized Lending and Insurance: Opens new models for credit and risk management. Integration with AI and IoT: Enhances automation and real- time financial decision-making. OPPORTUNITIES Scalability: Many blockchains struggle with high transaction volumes and network congestion. User Experience: Interfaces and workflows can be complex for non-technical users. Smart Contract Risks: Bugs or poorly written code can lead to financial losses. Regulatory Uncertainty: Legal frameworks are still evolving, creating compliance challenges. WEAKNESSES Regulatory Crackdowns: Governments may impose restrictions or bans on certain onchain activities. Market Volatility: Crypto assets are highly volatile, affecting stability and user confidence. Cybersecurity Risks: Protocols may be targeted by hackers or exploited through vulnerabilities. Centralization Risks: Some platforms may claim decentralization but retain control over governance or assets. THREATS