UAE regulators concern over too hastily crypto approvals amid FTX collapse

As Bloomberg reported, many crypto hedge funds operating in the UAE had invested all their client money on FTX, giving them a hard time pulling funds out of the exchange. As a result, UAE officials expressed concerns over the pace of some approvals – that failed to identify meltdowns of FTX and Three Arrows Capital.

The collapse of the cryptocurrency exchange FTX continues to be felt worldwide, including in the UAE. Since last year, the country has opened its doors to the crypto industry’s largest players welcoming firms shunned elsewhere worldwide.

That approach is under greater scrutiny after the sound crashes of the crypto hedge fund Three Arrows Capital and the FTX exchange, both of which obtained initial licenses from Dubai’s Virtual Assets Regulatory Authority (VARA).

As Bloomberg News reported on Nov. 27, many in that country have begun to reassess their moves into the industry, such as Hazem Shish, a former Barclays banker who recently launched a crypto hedge fund in Abu Dhabi.

Sources told Bloomberg that many crypto hedge funds that recently began operating in the UAE had invested all their client money on FTX, leading them to scramble to pull out of the exchange before withdrawals were halted to prevent their downfall.

Lately, UAE officials have privately expressed concerns over the pace of some approvals – that they may have proceeded too quickly and failed to identify those meltdowns, Bloomberg sources said.

FTX’s collapse is now calling more attention to its rival Binance, whose share of global crypto trading volumes has increased to almost 50%, according to data from CryptoCompare. Binance’s CEO, Changpeng “CZ” Zhao, made Dubai his home last year, and he has referred to the emirate as one of the exchange’s headquarters.

However, despite the alert updates from the regulators, the UAE is still sticking to its conviction of becoming a hub for the crypto industry.

As reported earlier, the UAE was emerging as a leading Middle East crypto hub after already welcoming two of the largest financial centers in the Gulf region – the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Center (DIFC).

Both free-trade zones enjoy liberal tax laws and dedicated commercial courts that function independently of the emirate and federal systems, with each emirate’s regulator – the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) of the ADGM – charged with managing their respective financial services sectors.