LONDON: Dubai and Abu Dhabi are trying to win the cryptocurrency crown. Major crypto exchanges like FTX, last valued at $32 billion, are moving to Dubai. There are a number of reasons why this might be to their liking.
Crypto is growing rapidly: Total trading volume grew by more than 500% to $15.8 trillion in 2021, according to Chainalysis. Yet many Western regulators seem to hate it.
European Central Bank board member Fabio Panetta and U.S. Securities and Exchange Commission boss Gary Gensler have both likened the asset class to the “Wild West.”
As a result, even the two biggest cryptocurrencies, bitcoin and ether, do not yet have dedicated watchdogs in the US and UK.
Singapore has imposed stricter regulations, despite its interest in the market.
This leaves a void for an ambitious local willing to build its regulatory architecture around crypto, rather than the other way around. Advance Dubai and Abu Dhabi.
Over the past few months, the pair has handed out over 30 licenses and passed new laws for crypto exchanges to operate in cities.
The exchanges reacted. Binance is recruiting for over 100 positions in the Gulf, while boss Changpeng Zhao has moved from Singapore to Dubai and bought a house there. FTX and Kraken are also heading to the Gulf neighborhoods.
Mutual love has a certain logic. Total private wealth held in the UAE grew by $46 billion between 2019 and 2021, as some 5,600 millionaires moved to the country, according to the Global Citizens Report, and an influx of Russian oligarchs is expected to amplify the tendency.
Around 25% of Middle Eastern millionaires are already investing in some sort of crypto, according to data from consultant Knight Frank.
Meanwhile, local businesses like grocery delivery service YallaMarket and real estate companies are accepting payments in crypto, and the former pioneered the idea of paying salaries in the currency.
A global survey by YouGov found that trust in cryptocurrencies was highest among adults in the UAE.
A Gulf crypto hub also comes with obvious risks. The Financial Action Task Force recently said the UAE is not doing enough to address money laundering risks, and the popularity of crypto with criminal elements increases the risk that a crypto-fueled scandal could diluting the good reputation of the United Arab Emirates instead of improving it.
On the other hand, if these elements can be managed and regulated, it could also give the region what it really needs: a leadership position in a major financial growth sector.
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The Stars Are Aligning For The UAE To Become A Global Crypto Hub
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