London and Dubai are the cities most likely to attract future investment and become hubs for crypto-related start-ups, according to a study by crypto tax calculator Recap. The company examined a number of data points including research and development as a percentage of GDP, crypto ownership, crypto-specific events, capital gains tax rate and number of crypto companies in a location. The results, announced in January 2023, placed London and Dubai in first and second place, respectively.

Throughout 2022, the governments of both the UK and the United Arab Emirates (UAE) publicly lent support to their crypto communities and announced ambitions to become global crypto capitals.

London’s crypto embrace

As crypto markets plummeted in March 2022, signalling the start of a so-called ‘crypto winter’, former UK Chancellor of the Exchequer (and now Prime Minister) Rishi Sunak subsequently announced plans in April 2022 to make the UK a “global hub for crypto-asset technology and investment” to ensure the UK’s continued global competitiveness in the nascent sector. The timing was dubious but, as finance minister, Sunak was a vocal advocate of cryptocurrency and blockchain technology. As the UK’s current prime minister, many in the crypto community are counting on Sunak’s continued support and commitment to the UK’s financial digital future. So far, nothing has signalled a reversal on Sunak’s part.

Singapore-based crypto exchange Bitrue operates mostly in Europe with a user base of more than 15,000 in the UK. Bitrue chief strategy officer Robert Quartly-Janeiro contends that London has some unique advantages as a crypto-ready location; above all, the UK government’s will to embrace the sector. “What is important is that the UK government uses London’s position to build a well-respected and professional industry that creates new jobs – and, through it, gives a considerable boost to economic development,” he adds.

In addition, Quartly-Janeiro cites London’s crypto ecosystem’s sheer number of alternative investment and asset management companies as a huge advantage as well as the UK’s continued increases in crypto investments in general.

Dubai established as global crypto hub

Similarly, policymakers in Dubai have led the charge in positioning the emirate as a global crypto hub. Mohammed AlKaff AlHashmi, co-founder of the shariah-compliant Islamic Coin, the native currency of the Haqq community-run blockchain, says there are more accumulative crypto investments in Dubai than any other crypto hub in the world. “A vast infrastructure exists here around telecommunication, the internet and the urban environment,” he adds. “By investing in human capital, [investors] are also investing in the ecosystem that, in turn, attracts the creative minds to the emirate.”

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In June 2022, Islamic Coin was subject to a fatwa, issued by the world’s leading Muslim authorities. The intersection of cryptocurrency and shariah compliancy has long been a sticking point, but two months after the fatwa was issued, Islamic Coin went on to raise $200m (Dh734.62m) in a private sale. The controversy has not dampened Dubai’s ambitions to become a global crypto hub.

Institutional support in Dubai is significant. AlHashmi credits “visionaries” within the establishment helping to develop advanced technology initiatives that originate in Dubai. “For one, you will not find any other country that has a State Ministry of Future or of Artificial Intelligence,” says AlHashmi. “The UAE has also started a space agency, and Dubai has the first Virtual Assets Regulatory Authority for digital economy development.”

In 2022, Dubai attracted cryptocurrency companies including the world’s leading trading platform, Binance, and crypto exchange Bybit, which moved its headquarters from Singapore to Dubai. An influx of investment by foreign crypto companies is viewed by many as a direct result of the emirate’s forward-thinking stance on regulatory clarity for the sector. In February 2022, Dubai’s authorities announced a new raft of digital asset regulation, which was widely viewed as a foreign investment trigger.

As well as crypto industry players, AlHashmi says many crypto start-ups are being launched from Dubai because it is seen as a major global hub with geographic access to East and West. “There are many events happening here every day that take the industry to the next level, attracting the brightest minds of the Web3 industry,” he adds.

London and Dubai appear to be holding steady through the crypto winter and playing a long game. Despite crypto’s reputational problems after the collapse of trading platform FTX and the ensuing bear market, GlobalData research predicts that far from being dead, crypto’s current woes may simply illicit a culling of unrealistic use cases. When the shoots of economic growth finally reveal themselves, both cities will be well placed to cement their global leadership of the sector.