Will The Dubai Cryptocurrency Bet Pay Off? Investment Monitor – Tech Tribune France

The news that the United Arab Emirates (UAE) national airline, Emirates, plans to accept payment in Bitcoin is a watershed moment in the country’s long-standing ambition to become one of the leading hubs of digital assets. in the world. At a trade show in May, Emirates COO Adel Ahmed Al-Redha publicly stated that the airline would not only accept Bitcoin, but was planning to add collectibles. NFT on the company’s website for commerce.

This decision is a clear message to the world that the UAE’s efforts to become one of the most digital-friendly countries in the world are gaining momentum. The Emirate of Dubai further demonstrated this commitment to the virtual economy with historic regulatory advances in early 2022, in stark contrast to the more cautious approaches of some Western regulators.

Dubai’s Timely Crypto Move

Dubai’s focus on digital assets and cryptocurrency means the emirate is well positioned to capitalize on the sector’s massive growth. Total venture capital investment in crypto and blockchain startups exceeded $30 billion, with more than $10.5 billion in the last quarter of 2021 alone, according to Gemini’s 2022 report on the global state of cryptography. The market capitalization of cryptocurrencies reached nearly $3 billion in 2021 and Bitcoin hit an all-time high of over $65,000, making crypto the best performing asset class in the last ten years, according to the report.

In February 2022, Dubai announced a regulatory framework for virtual assets, including cryptocurrencies, in what many see as the emirate’s accelerated bid to become a leading digital asset hub. In addition, a new regulatory body, the Virtual Assets Regulation Authority (VARA) in Dubai, has been created. In May 2022, VARA became the first regulator to have a presence in the metaverse with the creation of its metaverse headquarters. VARA’s virtual presence will serve as a primary channel to engage global virtual asset service providers to launch applications, welcome new licensees, share expertise and foster global interoperability.

While the new regulatory framework is designed to increase foreign direct investment (FDI) in the crypto sector, the UAE’s ultimate attractiveness as a center for crypto investment will depend on the details contained in the framework when ‘it will be available, according to Caroline Malcolm, head of international policy at crypto analytics platform Chainalysis. “What’s clear is a sort of top-down message about a holistic framework with government support to be able to do this – and that’s key to moving forward,” she says.

Malcolm uses the example of the European Commission’s proposed regulation on crypto asset markets to pose the question of whether this type of over-licensing network model can apply in the UAE. “We don’t know yet if a company that invests in the UAE will have passport rights to operate in all UAE states or if it has the right to offer services in other parts of the region,” she says. .

Regulatory Clarity Boosts Dubai Crypto FDI

After regulatory announcements in the United Arab Emirates in February 2022, crypto exchange Bybit announced plans to move its headquarters from Singapore to Dubai. Additionally, crypto exchange Crypto.com has launched an aggressive hiring drive in the emirate and controversial crypto exchange Binance has announced plans to move its regional headquarters to Dubai. Binance in particular has become the litmus test for determining how open an economy is to developing a cryptocurrency ecosystem. FDI from cross-border Binance expansions has become a polarizing issue among global regulators. In May 2022, France granted the crypto exchange a license to operate in the country, while US and UK regulators conduct ongoing investigations into the company’s financial conduct.

Malcolm sees a change in the UAE’s focus on compliance and welcomes the regulatory framework proposals. She warns, however, that Dubai’s financial regulator needs to pay close attention to compliance under the new crypto framework. “The message is clear that this is what they intend to do,” she says. However, to attract business, jurisdictions must have a strong commitment to compliance.

Binance’s domestic investment is an important step in the emirate’s bid for global crypto supremacy, says Mohamed Al Nuwais, trade analyst at Deloitte. When Binance opens its new offices in Dubai, it will become the largest cryptocurrency exchange in the Middle East. Al Nuwais says Binance and other exchanges including FTX, Kraken, Crypto.com and ByBit have all committed to investing in Dubai. The ripple effect will be that Dubai will start attracting the world’s top talent, allowing a crypto ecosystem to grow. “Add to that the UAE’s blockchain strategy and you see that we are a nation that thrives on innovation,” says Al Nuwais.

In line with this national focus on innovation and its futuristic economic aspirations, Dubai has fully embraced the concept of the metaverse, establishing a digital twin city in a virtual world called One Human Reality.

According to Al Nuwais, all of these innovations find their way into one of Dubai’s top three players in the crypto ecosystem. These are the Dubai World Trade Center Free Zone, where Binance will set up its headquarters in the Middle East; Dubai International Financial Centre, a financial center free zone established in 2004; and the Dubai Multi Commodities Centre, established in 2002 as a global commodity trading hub.

Although Al Nuwais is seeing huge growth and massive adoption of crypto in Dubai, he says the currency “still needs time”. Dubai has yet to fully roll out its central bank digital currency (CBDC) and Al Nuwais sees this as a key test for the emirate’s digital money as a whole. The UAE CBDC ranked seventh globally in PwC’s Global CBDC Index and Stablecoin Preview 2022. The country’s central bank is currently exploring and testing the possibility of issuing a CBDC of wholesale.

With the recently announced political will and regulatory clarity already attracting crypto FDI, the Emirate of Dubai is betting hard on continued global business and consumer interest in cryptocurrencies. While many national regulators have balked at the volatility and regulatory challenges that cryptocurrencies present, Dubai, it seems, is addressing these challenges head-on.

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Will The Dubai Cryptocurrency Bet Pay Off? Investment Monitor – Tech Tribune France


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