The UAE has established the Virtual Assets Regulatory Authority (VARA) to grant licenses to crypto firms looking to set up in Dubai and will begin to oversee activities related to cryptoassets. It is committed to developing a regulatory ecosystem for the growth of the domestic crypto sector.
There is proof that regulation is not always a deterrent, and the news has already drawn leading crypto firms such as Kraken, Binance, and Bybit to Dubai. Dubai will be competing with the likes of Singapore and the UK to become the global hub for crypto, and appears to be very well-placed to do so.
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Overseeing crypto rather than curbing it
Lawmakers across the world are beginning to navigate cryptocurrency regulations. The UAE is starting with a light-touch approach, which will attract crypto firms and boost the domestic crypto sector, rather than starting heavy-handed and backtracking when competition among rival crypto hubs intensifies.
Regulation is not always a deterrent and can mitigate some of the dangers of cryptocurrency, like its volatility, which may in turn facilitate more widespread adoption. The UAE’s regulation appears to be more about overseeing the crypto sector than curbing it. By comparison, Singapore, a rival crypto hub, is going as far as limiting crypto firms’ advertisements to protect consumers from the risks of trading volatile assets. Bybit, a crypto exchange previously based in Singapore, subsequently relocated to Dubai.
Consumers are increasingly using cryptoassets as a payment method, and their popularity is unlikely to wane any time soon. Rather than ignore this clear trend, it is safer for consumers and better for governments’ reputations if a precedent is set for government involvement in the domestic crypto sector. There is the risk that the UAE grants a license to an unscrupulous crypto firm, so the strength of its approach rests on the rigor of VARA’s investigations.
Will more crypto firms flock to Dubai?
Regulating crypto supports the UAE’s growing reputation of having a diverse investment landscape and being at the forefront of financial innovation. A herd mentality may be contributing to the growth of Dubai as a crypto hub, with the relocation of platforms such as Crypto.com and Bybit reassuring others thinking of following suit.
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By GlobalDataVARA has already granted licenses to Kraken, Binance, and FTX Europe—all prominent players within the sector. The adoption of crypto on a local level is noticeable in the UAE. For example, grocery delivery service YallaMarket is accepting payments in crypto and has floated the idea of paying salaries in crypto. Unlike much of the world, consumers in the region have a positive, optimistic sentiment towards the concept—in March 2022, YouGov found that trust in cryptocurrencies across the world was highest among adults in the UAE.
The government’s regulatory stamp of approval on virtual assets is likely to have driven this. Not only, then, is there popular demand for crypto services, but there is also a pool of enthusiastic, crypto-aware local talent for recruiters to tap into.
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