The Growth and Regulation of the Cryptocurrency Market in Dubai
While many global markets are exercising caution around acceptance of cryptocurrencies, Dubai is capitalising and positioning itself at the forefront of this emerging industry.
The cryptocurrency industry is still very much in its infancy and though many acknowledge the potential blockchain technology has to disrupt traditional banking and finance systems, most of the investment at present is speculative and based on the perceived inherent value of cryptocurrency and the technology that underlies it.
What’s lacking for widespread adoption of virtual assets is increased consumer confidence and robust regulation.
Dubai is tackling this on both fronts and fast becoming one of the most attractive destinations for crypto investors and startups from around the world.
The UAE offers crypto investors much of what they are looking for, the most developed country in the region, a modern infrastructure, fast, cost effective company registration, flexible residency options and a government that nurtures innovation in all its forms. The UAE even provides financial incentives, such as low interest government loans and business accelerators for tech entrepreneurs to get their businesses off the ground and scale them quickly.
The UAE is Embracing Cryptos
The entire Middle East (ME) is embracing crypto and is one of the world’s fastest-growing crypto markets. According to Chainanalysis, the ME makes up 7% of total crypto trading volume, and the UAE has around $25
billion USD in crypto transactions. This amounts to a 500% increase in the single year between July 2020 and June 2021, and this volume puts the UAE third in the region.
What is driving the UAE’s crypto growth?
The key drivers behind the growth and the adoption of crypto in the UAE are increases in private wealth, a friendly regulatory regime, comparatively high consumer trust, and governmental support. The UAE is now considered one of the most progressive use case countries for cryptos in the world, with high profile international companies such as Emirates, Nakheel and Damac all accepting payment by cryptocurrency, and Dubai even has a blockchain-based government.
Friendly regulatory regim..
The UAE has always been ahead in the regulation of cryptos. In 2018 Abu Dhabi’s international Financial Center, the Abu Dhabi Global Market (ADGM), launched its regulatory framework to regulate spot crypto asset activities. The law provides proper governance of crypto activities and addresses some of the main concerns around virtual assets such as consumer protection, money laundering and vulnerability to security risks.
Building on these first steps, the UAE’s Sheikh Mohammed bin Rashid Al Maktoum issued Law 4 of 2022 which regulates virtual assets in the Emirate of Dubai, a move which exemplifies the UAE’s forward thinking attitude which is in stark contrast to the more hesitant approach of other international regulators.
The law seeks to establish Dubai as a key global player in the future of virtual assets by providing a legal framework with which to protect investors and businesses and supervise all activities relating to virtual assets. This new law came alongside the establishment of the Dubai Virtual Assets Regulatory Authority (VARA), which is affiliated with the Dubai World Trade Centre Authority (DWTCA), and is Dubai’s primary virtual asset regulator.
Where to set up a cryptocurrency business
At present, there are three jurisdictions within Dubai that offer cryptocurrency licences. These are:
Dubai Multi Commodities Centre (DMCC)
Located in the well-connected area of Jumeira Lakes Towers (JLT), DMCC has built a successful ecosystem for companies engaged in cryptographic, blockchain and distributed ledger technologies. It welcomes companies of all types and sizes to develop blockchain-enabled trading platforms and offer, issue, list and trade in crypto assets.
Its dedicated crypto centre offers access to capital, resources and opportunities to crypto startups and tech entrepreneurs from around the world.
The cost of a crpto licence in DMCC is approximately AED35,000 and includes licence application costs and all company formation expenses.
Dubai Airport Free Zone Authority (DAFZA)
DAFZA signed an agreement with the Security and Commodities Authority (SCA) in 2021 which supports the regulation, offering, issuance, listing and trading of virtual assets within the free zone. It offers licences for the proprietary trading of crypto commodities.
The cost of a crypto licence within DAFZA is 41,625 AED and includes 6 sqm office premises.
Dubai World Trade Centre (DWTC)
The DWTC offers crypto investors a prestigious business address in the heart of the city, with an established community of over 1,400 companies. It was one of the first free zones to issue crypto licences under supervision of
the SCA and offers licences for trading in crypto commodities and business involved in distributed ledger technology services. The cost of the crypto licence in DWTC is AED19,800 and includes a flexi-desk arrangement.
Taking a leading position
With the increasing popularity of virtual assets such as cryptocurrencies and NFTs and the growing usage and application of blockchain technology, the potential for the industry is enormous. However, governments wishing to foster crypto innovation must balance strides forward with regulation preventing the potential misuse of such technologies for fraud, money laundering, and terror financing. The crypto space was largely unregulated a short while ago, but the UAE’s regulatory moves and setting up of Dubai’s VARA make it evident that they want an environment that encourages crypto growth while also reducing the potential for financial crimes possible in this budding industry.
The Emirate’s actions have already shown promise, successfully attracting high-tech firms, including several high-profile cryptocurrency companies that have announced moves to the UAE this year.
Dubai is now poised to become a major player in the virtual asset market and now is a great moment to seize the opportunity and set up a crypto business. The companies that are attracted to Dubai will have a voice in the future of the crypto space.
How can Global Link help?
Global Link has over 16 years’ experience working with local and global business, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.
If you need advice on establishing a cryptocurrency business or for any other company incorporation, visa or PRO service, please get in touch with us on +971 4 553 9901 or email us at [email protected] and we will be happy to assist you.