UAE regulators are looking to develop a comprehensive crypto governance framework as part of its 2021 business agenda.
For a long time, the United Arab Emirates has been one of the most progressive crypto countries in the world. For example, government-owned licensing firm Kiklabb allows clients to pay for their visa and trade license fees via various digital assets to the Dubai Financial Services Authority, which announced its decision to work on a holistic crypto regulatory framework as part of its 2021 business plan.
In fact, as a result of Dubai’s crypto-friendly policies, Ripple, a firm that has recently been in murky waters with the United States Securities and Exchange Commission, announced its decision to open an office in the region. Furthermore, the UAE and Saudi Arabia are reportedly working on a joint central bank digital currency research initiative that has been dubbed “Project Aber.”
Commenting on why the UAE is fast becoming the destination of choice for some crypto/blockchain startups, Mazdak Rafaty, managing partner for Ludwar International Consulting FZC, told Cointelegraph:
“If you ask anyone from the tech and startup sector anywhere in the world about the speed of regulations of the authorities, you will get the same answer: ‘It could definitely be faster.’ However, UAE has always been a pioneer in the adoption of new technologies and building support regulatory frameworks for their development.”
He further opined that blockchain as a novel disruptive tech was recognized very early by UAE regulators, as a result of which many governmental organizations were instructed not only to facilitate its development but actually utilize its advantages within a comprehensive e-government strategy.
Hadi Malaeb co-founder & CEO of the Agora Group and host of the Global Blockchain Congress told Cointelegraph that companies are attracted to the country due to the government’s openness to hold the dialogue with the companies: “In 2019, the SCA consulted with the industry and the public on the wording of the draft text. Because of this, we see a lot more activities in crypto in the UAE with many new and well established companies choosing the UAE as their headquarters.”
Lastly, Rafaty added that while blockchain adoption was swift, cryptocurrencies definitely took more time to understand, utilize and regulate. Even in terms of crypto adoption, Abu Dhabi was one of the first regions to introduce a well-thought-out framework for exchanges and different types of tokens back in 2018.
The UAE already has the base
At a time when many countries are still struggling to formulate comprehensive strategies to adopt crypto-enabled technologies in a streamlined fashion — with some even looking to implement blanket bans — the UAE is seemingly laying the foundation for a digital ecosystem.
Providing his insights on the subject, Mohammed Abbas, project manager for TDeFi Accelerator, the firm that co-hosted the Dubai Global DeFi Congress, told Cointelegraph that many projects, such as decentralized ride-sharing platform Drife and blockchain-based fantasy sports ecosystem DeFi Eleven, have been able to attract interest from the private offices of UAE’s Royal Families as well as other big-name players, such as San Francisco-based VCs like the Draper Walled Garden, adding:
“In a bid to set the pace and become a leader in blockchain technology, UAE launched Blockchain Strategy 2021 — pursuant to which 50% of government transactions will have been conducted using blockchain technology by 2021. This, in turn, will further attract talent and spur innovation in this region.”
Similarly, on the subject, Marwan Alzarouni, CEO of Dubai Blockchain Center, opined that the UAE — Dubai, in particular — has always been forward-thinking and fast-moving when it comes to any futuristic technology, with cryptocurrencies and blockchain being no different.
He highlighted that Dubai launched its “Blockchain Strategy 2020” in 2016 and is already achieving its goals. Alzarouni further pointed out that when it comes to cryptocurrency regulations, the UAE Securities and Commodities Authority issued its regulation in 2020, which was swiftly followed by the country’s central bank revealing the Stored Value Facilities regulation, which seeks to provide clarity as to how crypto and other digital assets may be used as a stored value when purchasing various goods and services.
The aforementioned regulations are quite in-depth and seem to help to position the UAE as a leader in the cryptocurrency adoption space. Not only that, but it also stands to provide a solid foundation for startups and investors in the UAE with the right and safe environment in which to operate.
The UAE regulatory difference
Elucidating his thoughts on why the UAE regulatory landscape is different than most other nations today, Abbas pointed out that the Know Your Customer, Anti-Money Laundering and Counter-Terrorist Financing laws that are currently in place in the region are progressive when compared to those of other “global financial hubs.”
On the subject, Saeed Al Darmaki, co-founder of Alphabit crypto fund, told Cointelegraph that the UAE has been forward-looking with its adoption of crypto-enabled technologies for a long time, with the Arab powerhouses’ regulatory outlook looking very positive at the moment, adding:
“Regulated crypto exchanges will launch in the next few months. With ESCA regulation, local banks should be more open to crypto transactions on local bank accounts. Incubators and accelerators are supporting crypto companies here now and will continue to do so. The government is very supportive of blockchain technology.”
A similar sentiment is shared by Austin Alexander, managing director for the MENA region of the cryptocurrency exchange Kraken, who believes that to date, the UAE has been among the most proactive locations globally in regulating cryptocurrency. In this regard, he pointed out that Abu Dhabi Global Markets was one of the first regulatory jurisdictions to draft a framework from the ground up specifically for digital asset exchanges, adding:
“No regulations are perfect, and as crypto businesses launch and expand in the UAE, the FSRA or other regulators may come to find that there is room for improvement. That being said, the UAE is clearly establishing itself as one of the world’s most forward-thinking governments in regard to cryptocurrency and innovative industries broadly.”
Are locals supportive?
On the subject of how the local UAE population views the country’s tech-friendly stance, Rafaty opined that most residents have acknowledged the government’s blockchain initiatives. However, he did add that it will be some time before these projects actually start to bear fruit.
Additionally, he also shared that on the crypto side of things, most of his private and professional contacts in UAE are, to some degree, involved and/or invested in various crypto and altcoin offerings thanks in large part to the bullish growth that has happened in the sector over the course of the last few months.
Similarly, Alexander believes that UAE residents and businesses tend to embrace new innovation more enthusiastically than most, and cryptocurrency has been no exception. However, he added that for some time now, UAE residents have had some difficulty investing in digital assets, as there have been few legitimate local gateways for crypto exchange, adding:
“This has delayed adoption and reduced the ability for local businesses to build on the technology. With recent new regulations onshore that will help to further foster innovation, we should soon see access to virtual assets increase markedly. With domestic virtual asset markets in the UAE, which have been the missing piece of the puzzle until now, we should see a massive boom in economic growth surrounding virtual assets.”
Lastly, Abbas believes that local residents and businesses in the UAE have quickly warmed up to the utility of the blockchain ecosystem and have been looking at cryptocurrencies as not just another financial instrument for monetary gains but also as a means to exchange and settle transactions among users operating within this domain.
In his view, the barriers for entry are getting lower by the day and that soon, mainstream retail crypto offerings will flourish within the country. “UAE is probably the only country that has been able to host some of the largest blockchain summits and bring crypto pioneers, think-tanks and investors on a common platform to address the global issues concerning financial inclusion and neo-banking solutions”, Abbas added.