Crypto Firms Flock to Dubai for Regulatory Clarity as UAE Cleans Its 'Grey' Reputation – Cryptonews

Crypto Firms Flock to Dubai for Regulatory Clarity as UAE Cleans Its 'Grey' Reputation – Cryptonews

Blockchain Crypto Market Technology
June 6, 2022 by Coinvasity
22
 If you’re in the crypto industry, it seems that Dubai is the place to be right now. Not only is the most populated city in the UAE and one of the world’s biggest tourist hotspots, but it has recently seen an influx of crypto firms looking to establish a regional (or global) base, including Binance,
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If you’re in the crypto industry, it seems that Dubai is the place to be right now. Not only is the most populated city in the UAE and one of the world’s biggest tourist hotspots, but it has recently seen an influx of crypto firms looking to establish a regional (or global) base, including Binance, FTX, Crypto.com, and Bybit.
Given that Dubai also happens to be among the most important financial centers in the world, it may come as little surprise that crypto-related companies are moving to the city. Yet according to industry observers, it’s not only Dubai’s rising financial status that’s attracting crypto, but also the fact that it passed a law on virtual assets which provides the kind of regulatory clarity that crypto firms are desperate for elsewhere.
As such, Dubai might rise in importance within the crypto sector within the coming months and years, even if its inclusion on the Financial Action Task Force (FATF)’s ‘grey’ money laundering watchlist will result in it facing greater scrutiny.
What’s important to note about Dubai’s emerging status within crypto is that most crypto-related firms established a presence after it passed the Virtual Assets Law (VAL) in late February and brought said law into effect in early March. This law also established the associated Virtual Asset Regulatory Authority (VARA), which granted Binance one of the first licenses under the new legislation.
“Dubai recently issued a Law on virtual assets which is a significant regulatory development at both local and global levels: the Virtual Assets Law, issued on 28 February 2022, establishes VARA (the Virtual Asset Regulatory Authority) as an independent regulatory body that sits within the Dubai World Trade Centre (‘DWTC’) tasked to regulate exchanges, wallets, issuers and all activities related to cryptos,” summed up Serena Sebastiani, the Director of Financial Services Advisory at PwC Middle East.
Other commentators agree that the recently introduced law is possibly the single biggest factor at work in attracting crypto firms. This includes Paritosh Gambhir, a Partner in Financial Services at KPMG Lower Gulf, who suggests that such laws and regulations are necessary if cryptocurrency adoption is to gain significant traction.
“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 cryptocurrency. When regulation embraces technology, it facilitates large-scale adoption, and it is encouraging to witness major exchanges leading the charge,” he told Cryptonews.com.
But more generally, it isn’t only the VAL that has resulted in an influx of firms, but also Dubai’s open approach toward innovation and development in finance.
“The UAE is one of the most fast-paced countries when it comes to digitization and new technology. They have always been several steps ahead of the game, and I think that Binance and FTX saw this, and capitalized on this opportunity, along with many other attractive features that come along with moving to Dubai, like the lifestyle, the stability, and of course, the attractive tax rates,” said Dina Mattar, the CEO of Dubai-based crypto-focused marketing/PR firm DVerse.
Paritosh Gambhir also notes that Dubai “is hyper-focused on innovation,” as evident from the numerous innovation hubs that have been set up over the years by various banks, financial institutions, and government departments.
That Dubai — and the UAE — are more open to innovation than other jurisdictions is also apparent in the fact that the new VAL also creates a framework for NFTs and other kinds of crypto. Meanwhile, the Dubai Police even went to so far as releasing 150 free NFTs in early April, highlighting the friendly stance taken by local authorities towards crypto.
“What is also being seen as an exceptional and pioneering move by Dubai VARA’s establishment in the metaverse (Sandbox): the nascent regulator is paving the way for others to experiment in the virtual world and to facilitate discussions with players in the field with the ultimate objective to protect customers,” Serena Sebastiani told Cryptonews.com.
According to her, such developments indicate Dubai’s commitment to become a leading hub for crypto and blockchain technologies. Basically, big firms are reassured that new developments in the crypto sector will largely be welcomed and nurtured, whereas elsewhere they may not always receive a fair hearing.
‘Grey’ Dubai
At the start of March, the FATF added the UAE to its ‘grey’ list of countries to monitor more closely for compliance with anti-money laundering regulations. Reports have also suggested that the country may have been lax in enforcing its own AML laws.
However, while a critic could argue that crypto is attracted to Dubai largely because of money laundering (e.g. in total, criminals laundered USD 8.6bn using crypto in 2021, per Chainalysis), the UAE’s addition to the FATF grey list means that it will be subject to much more scrutiny. For most industry figures, this greater compliance will only strengthen the industry’s attraction toward Dubai.
“In my opinion, I don’t think this would strongly impact the country’s status in a negative way. They will be the first to collaborate with the FATF to ensure that they rectify any reputation damage, and according to the Paris-based FATF, the UAE has already made significant progress in that regard,” said Dina Mattar.
What the addition to the watchlist means is that the UAE will now face ratings adjustments, more controls in obtaining global finance, and higher transaction costs. At the same time, it has to demonstrate progress on facilitating international anti-money laundering investigations, on managing risks in certain industries, and on identifying suspicious transactions in the economy.
It will also have to step up its use of financial intelligence against money laundering, while increasing investigations and prosecutions of money laundering cases, and proactively identifying and combating sanctions evasion.
Such measures are interesting, if only because of reports that Binance pulled out of Malta because the exchange — the largest in the world by trading volume — was worried about strict anti-money laundering regulations. That said, the exchange has recently made efforts to become licensed in Germany and France, nations that most people would imagine are strict with regulations.
While it is curious that Binance and other exchanges have seemingly moved their bases around so much in the past, commentators say that this is more to do with seeking clearer regulation, than with avoiding regulation altogether.
“As cryptocurrency usage increases, the crypto landscape is constantly evolving. Unlike the traditional financial sector, there are not very clear and specific hubs for crypto, but more jurisdictions that are establishing themselves as pioneers in the virtual assets space, such as Switzerland, The Bahamas, Europe, the UK, Singapore, Dubai, to mention some,” said Serena Sebastiani.
Dina Mattar makes the point that, if Binance and other exchanges wanted to avoid regulation and oversight, they would not have built a presence in Dubai, which has introduced new frameworks for the regulation of virtual assets and is ramping up its AML compliance.
She said, “I believe that they move from one jurisdiction for the sake of greater regulatory clarity. The UAE has been receiving an influx of companies coming into the region, as it is one of the fastest-growing crypto markets in the world, ranking third in the world with 7% of the global trading volumes.”
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Learn more: 
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Binance, FTX Expand To Arab Gulf States With New Licenses
State-Owned Investment Giant Mubadala Invests In Crypto, Blockchain-Based Ecosystem
Surveyed UAE Nationals Keener to Invest in Crypto than Western Expats
The Crypto Industry Needs to Unite to Bring Together a Global Regulatory Framework
This Is Why ‘the Government’ Is Not Going to Ban Digital Assets
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