Saudi Arabia on Wednesday warned against fraudsters who are attempting to coax victims into investing into a "virtual currency" they claim is linked to the Saudi riyal and will be used to finance government projects.
A Singapore-based company is promoting 'CryptoRiyal' and 'SmartRiyal' cryptocurrencies, which make use of Saudi Arabia's official emblem, according to an Arab News report, citing the country's finance ministry.
The company has also claimed that the "ultimate goal" of the cryptocurrencies is to finance the kingdom's Neom smart city mega-project. Saudi is embarking on a $500 billion futuristic megacity, considered as a symbol of Crown Prince Mohammed bin Salman's ambitions for life after oil, in an apparent move to attract foreign investment and bolster non-oil revenues.
"Any use of the KSA name, national currency or national emblem by any entity for virtual or digital currencies marketing will be subject to legal action by the competent authorities in the kingdom," the ministry said.
The scammers take advantage of a victim's ignorance on investment in cryptocurrency, Dr Assad Rizq, an expert in cryptocurrency, was quoted as saying by the newspaper.
Negative consequences and high risks
"A lot of tricks can be played. Some of these companies are not regulated, they have no assets, and even their prospectus is sometimes copied from other projects," he added.
Last year, the Saudi Arabian Monetary Authority (SAMA) said that cryptocurrencies, including Bitcoin, are banned in the country due to its 'negative consequences' and 'high risks.' People who invest in any of these cryptocurrencies do so at their own risk.
But interest in cryptocurrencies has exploded globally, and the Gulf region is no exception. Some champion cryptocurrencies, while others rebuff it as the latest market bubble ready to haemorrhage.
As governments in the Gulf region look to diversify national economies, promote greater public and private sector experimentation in blockchain technology, and encourage enhanced contactless transaction payment system utilisation, the swelling interest in cryptocurrencies is unlikely to subside.
However, banking regulators across the world, especially in developed countries, have warned against the high risk associated with an investment in virtual currencies that are not fully regulated and are vulnerable to volatile trading.