Tuesday, 5 March 2024

UAE aims to become crypto hub of the Middle East

5 min read

By Namir Kaissi

The UAE has succeeded in luring international crypto exchanges to operate such as Kraken, eToro, Alvexo, Coinbase, Binance, and Coinmama out of the ADGM, and is looking to attract more, especially those from Asia to set up base.

The United Arab Emirates (UAE) is the first country in the Middle East to embrace the current global crypto revolution and join Singapore, Switzerland and others as a leading hub. The country’s regulators are planning to create a crypto-friendly market in its capital city Abu Dhabi. It is building the foundation for an open market for cryptocurrency exchanges,  becoming the leading cryptocurrency centre in the Middle East. Moreover, Abu Dhabi is investing in a cryptocurrency ecosystem and blockchain technology to enhance the financial services industry. It is providing the private sector with a fintech sandbox to experiment and test products in a live environment to ensure they meet the UAE’s anti-money-laundering (AML) and other regulatory standards.

In 2020, the Securities and Commodities Authority (SCA) in the UAE issued a  framework to regulate the offering, issuing, listing, and trading of crypto assets in the country and related financial activities. In 2018, the Abu Dhabi Global Market (ADGM) established a crypto framework designed to address the full range of risks associated with crypto asset activities, such as financial crime, consumer protection, technology governance, custody, and exchange operations. According to the ADGM, this is part of the free zone’s ongoing commitment to strengthen the economic diversification of Abu Dhabi through innovation and sustainable initiatives.

Currently, UAE has succeeded in luring multinational firms such as Kraken, a bitcoin exchange based in the US which obtained the licence to operate out of the ADGM and others like eToro, Alvexo, Coinbase, Binance, and Coinmama. Meanwhile, the government is negotiating with Asian firms to relocate to the UAE.

As of January 2022, three digital assets platforms are regulated by ADGM. Matrix Exchange, Midchains, and DEX are authorised and licensed by the Financial Services Regulatory Authority (FSRA) in ADGM.  In a media interview  Mohamed Al Hammadi, chairman of the Abu Dhabi Department of Economic Development (ADDED)  remarked that the ecosystem in Abu Dhabi is working together to make it easy for all participants in the crypto space to operate. It intends to develop a robust legal and regulatory framework by identifying and removing common pain points associated with other jurisdictions to attract and secure the relocation of these players.UAE’s journey to become a key participant in the still nascent crypto market has been relatively early. The ADGM introduced its legal framework for spot crypto asset trading in 2018.

In December 2021, the managing director and group CEO of Mubadala Investment Company, the state investment company, announced that Abu Dhabi Mubadala sovereign wealth fund (SWF) has invested in the crypto sector, reflecting the capital’s aspiration. The drive towards realising the country’s vision of a crypto hub among global leaders will not only help transform the digital asset and payment landscape but also increase innovation and competition in the bigger financial services industry. Mubadala has $243 billion in assets under management (AUM), which puts it behind other sovereign wealth funds in the country such as Abu Dhabi Investment Authority ($829 billion AUM) and Investment Corporation of Dubai ($302 billion AUM), however, Mubadala is still the only fund to invest in cryptocurrency in the UAE. Globally, Singapore’s SWF Temasek invested an undisclosed amount in digital asset trading platform operator Binance to develop a cryptocurrency exchange in the country. On the other hand, in September 2021, Switzerland approved the first SWF that invests primarily in crypto assets.

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