Many crypto companies have recently chosen Dubai, the most populous city in the United Arab Emirates, to establish a regional (or international) base there, including: Binance, FTX, Crypto.com and Bybit. Observers say the new virtual assets law has been a key move for companies seeking regulatory clarity, which could see Dubai grow in prominence in the months and years to come.
Dubai appears to have poached a good chunk of crypto businesses from Singapore, which was itself well known for its crypto-friendly regulatory approach. The Singaporean authorities seem to have made a 180° turn towards the crypto sector and few companies now receive the necessary authorizations to operate in the country.
Crypto Regulation in Dubai
Dubai’s first steps into the crypto sector date back to 2018 with the announcement of a blockchain strategy that articulated around three axes:
- Improving government efficiency by integrating 100% of government transactions into a blockchain network, with the goal of transferring cross-government paperwork to blockchain through a new local startup called ArabianChain ;
- Second, strengthening industrial activity by creating a new blockchain-based business model;
- Finally, this strategy aims to secure Dubai’s global leadership position in terms of adoption and implementation of Blockchain networks and transactions.
Dubai continued its momentum by strengthening the regulatory framework around cryptocurrencies with the introduction of the Virtual Assets Act (Virtual Asset Law, VAL). Adopted at the end of February and entered into force at the beginning of March, this law established the Virtual Assets Regulatory Authority (Virtual Asset Regulatory AuthorityVARA) as the primary body responsible for regulating the crypto industry. Paritosh GambhirFinancial Services Partner at KPMG Lower Gulftold Cryptonews.com :
“The Dubai Virtual Assets Regulatory Authority, an independent authority, was also established to oversee the regulation, licensing and governance of virtual assets, non-fungible tokens (NFTs) and cryptocurrencies. regulation adapts to the technology, it facilitates wide-scale adoption, and it is encouraging to see major exchanges leading the pack.”
VARA, a process to the acquisition of land in The Sandbox (SAND), an initiative which, according to the corresponding press release, is intended to facilitate “collaborative engagement” between virtual asset service providers, international regulatory authorities and industry leaders.
Paritosh Gambhir also notes that Dubai’s focus on innovation and development in finance contributes to its attractiveness. Dubai is well known for its “free zones” (free zones) – places where non-citizens and non-residents can easily form wholly-owned companies to obtain visas and business licenses. the Dubai Multi Commodities Center (DMCC) is one such zone which, in addition to gold, diamond, tea and coffee trading activities, hosts the DMCC Crypto Center. Here, blockchain companies pay no taxes and can easily sponsor residency visas for owners, employees, and their families.
A breakthrough that carries risks
At the beginning of March, the Financial Action Task Force (FATF) has added the United Arab Emirates to its “grey” list of countries to watch more closely for compliance with anti-money laundering regulations. Reports have also suggested that the country may have been lax in enforcing its own anti-money laundering laws.
However, some analysts believe that this FATF decision could push Dubai to be more vigilant in terms of money laundering. Dina MattarCEO of DVersea Dubai-based crypto marketing and PR firm, told Cryptonews.com :
“I don’t think it has a negative impact on the status of the country. They will be the first to work with the FATF to ensure they rectify any damage to their reputation, and according to the Paris-based FATF, the UAE has already made significant progress in this regard.”
For most in the industry, this greater compliance will only make the industry more attractive to Dubai.
Overall, the UAE has done the choice to position itself as a leader in digital assets, in a strategic diversification effort aimed at moving away from oil export. However, observers question the lack of uniformity of crypto legislation in the UAE: each emirate has several regulatory bodies, making a total of 30 regulators across the territory. For now, judging by the number of blockchain and crypto events that have been organized in the region, these details do not seem to bother industry players.
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Is Dubai the new Eldorado of the crypto sector?
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