Dubai improves crypto reputation as crypto firms move to the UAE

    12 Jul 2022
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    Crypto firms are flocking to Dubai despite local crypto trading regulations are tightening. A new law has been the most significant factor in generating interest in the UAE. Dubai is the financial hub of the Emirates, which has also encouraged cryptocurrency players to move to Dubai. The UAE has added a grey list to help clean up its reputation, which is helping to increase crypto trading volumes in the Gulf region.

    Lately, the cryptocurrency market met several issues, including lacking a regulatory framework to make the system work for many investors. Unlike many individual crypto investors, institutional investors have regulatory mandates that require specific laws to allow them to trade a particular asset.

    Why is Dubai so attractive? Dubai is the UAE’s most populated region with more than 10 million people in 2022, slightly up from 3 million in 2000. Dubai city has a population of nearly 3 million people, and the growth has accelerated sharply over the past decade. Dubai is also considered the financial hub in the region. Most of the inhabitants are expatriates, and only 15% are native residents. The official language is Arabic, but English is commonly used throughout Dubai.

    The higher level of scrutiny in the city makes Dubai more attractive for the crypto sector. Dubai is included on the Financial Action Task Force (FATF) grey money laundering watchlist. In March 2022, Dubai recently passed the Virtual Assets Law (VAL) that defines virtual assets as a representation of value that may be digitally traded or used as a payment device for investment purposes. The law, established by the Dubai Virtual Asset Regulatory Authority (VARA), also explains what can be considered a virtual key, defined as “A digital representation of a set of rights that can be digitally offered and traded through a Virtual Assets Platform.”

    UAE’s law established VARA as the supervising authority over digital assets. VARA is an independent authority tasked with regulating the different digital exchanges and tokens traded in Dubai. And the introduction of VARA has helped build a sense of confidence in the crypto industry ultimately.

    In March 2022, the FATF placed Dubai on a “grey list.” The grey list is a list of countries that have had issues monitoring anti-money laundering regulations. The addition to the grey list can be a double-edged sword for cryptocurrency volume. Adding Dubai to the list means that money launderers should tend to stay away from Dubai. Simultaneously, investors could be attracted since there will be more scrutiny. Several exchanges that flocked to Dubai help to show that these exchanges are more interested in a regulated environment that can attract investors than using virtual tokens for unlawful practices like cryptocurrency money laundering.

    Currently, the cryptocurrency markets are focusing on Dubai. As the crypto sector has faced issues related to criminal activity, this allowed investors to focus on improving a regulatory framework to make the system work for many investors.

    As a result, the upshot is the positives of the new law outweigh the negative aspects of reducing volumes because there is less of an ability for criminals to use cryptocurrency to commit money laundering. The new VARA laws implemented in Dubai will likely continue to add scrutiny to the crypto trading market, which could result in more confidence. Eventually, it may be possible for more institutional trading to come into the arena, especially if Dubai continues down its regulatory path.

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