The United Arab Emirates as a Global Digital Asset Powerhouse
The UAE’s crypto market is rapidly growing, thanks to a progressive regulatory environment and strong demand from both individual and institutional investors.
Between July 2023 and June 2024, the UAE received over $30 billion in crypto inflows, with a year-on-year growth rate of 42%. This places the country among the top 40 globally for crypto adoption.
More than 74% of young adults aged 25-34 in the UAE are interested in cryptocurrency.
Over 93% of the region’s crypto inflows came from large, institutional transfers, which signals a move from speculative trading to stable, long-term investment strategies.
Clear regulations have successfully reduced risk investors.
Institutional confidence is also shown by the high use of stablecoins, which make up 66% of all on-chain transactions in the region.
With over 500,000 daily crypto traders and a market projected to grow from $5.35 billion by 2030, the market is robust and positioned for sustained expansion.
The Central Bank of the UAE (CBUAE) and the Securities and Commodities Authority (SCA) are the main federal regulators. The CBUAE oversees “Payment Tokens” used for domestic payments and, as of August 31, 2024, has banned the issuance of “Algorithmic Stablecoins or Privacy Tokens” in the UAE.
Concurrently, the SCA oversees “Virtual Assets for investment purposes,” which fall under its existing legislative framework. The SCA’s regulations cover a wide range of activities including exchange, brokerage, custody services, and fundraising platform operations, with specific requirements for licensing, minimum capital, and technology governance. When a crypto asset is determined to be a security, it must adhere to existing SCA regulations, ensuring investor protection and clear disclosures. This federal approach of distinguishing between asset types at the outset provides businesses with targeted regulatory guidance, thereby avoiding the protracted legal ambiguity that has plagued other major markets.
The Emirate of Dubai has set itself apart with the establishment of the Virtual Assets Regulatory Authority (VARA) in 2022. VARA is the world’s “first independent regulator for virtual assets” and holds the mandate to regulate and oversee all virtual asset activities in and from Dubai, with the exception of the Dubai International Financial Centre (DIFC). By creating a dedicated, expert body, Dubai demonstrated its foresight in anticipating the industry’s need for a tailored regulatory framework rather than shoehorning virtual assets into outdated financial laws.
VARA has published its comprehensive “Virtual Assets and Related Activities Regulations 2023” with the explicit goal of creating an “easy to replicate framework” to be used as a global standard.
A key component of VARA’s strategy is its public register, which lists licensed Virtual Asset Service Providers (VASPs) and firms with In-Principle Approvals, providing transparency and building consumer confidence. This public list includes major global players such as Binance FZE, Crypto.com, and Deribit FZE, showcasing VARA’s success in attracting leading market participants.
But there is a UAE Free Zone designed exclusively for next-gen innovators in the virtual assets space”. It’s strategic focus is on emerging sectors like Web3, AI, and gaming, and it offers a range of licenses tailored for freelancers, remote companies, and standard enterprises in this space.
It provides a “robust legal wrapper, bridging the gap between the decentralized on-chain innovation and the off-chain world”. This is a groundbreaking innovation that addresses a core legal problem for Decentralized Autonomous Organizations (DAOs) by providing them with a legal identity, enabling them to operate within the traditional financial and legal system. This is an essential step for the operational scalability of DAOs. It also actively nurtures its ecosystem through initiatives like the US$2 million accelerator program, which provides funding and mentorship to Web3 startups. The free zone also assists with essential business services such as obtaining bank accounts and residency visas, simplifying the operational landscape for entrepreneurs.
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