Dubai’s crypto industry leaders commented on how the FTX collapse will affect the crypto sector within the UAE. Among them, various professionals gave their perspectives on how Dubai and the UAE’s crypto landscape will be affected by the FTX debacle – from stricter regulations to better projects leading the way.
Kokila Alagh, the founder and CEO of KARM Legal Consultants, suggests that the FTX collapse will lead to more scrutiny and diligence in Dubai’s licensing process.
“With the misuse of funds or limited disclosures by FTX, these licensing authorities now need to deep dive into the technology. Mere financial documents submission won’t be enough, continuous and real-time monitoring of these platforms might be one of the ways forward,” she said.
She also added that the FTX collapse may lead to better projects taking the lead within the space. “Any major setback in a growing sector makes way for stronger projects to lead and clear the projects which do not have a strong foundation,” she said.
Irina Heaver, a partner at Keystone Law Middle East, believes that tighter regulations are on the way. She said that founders must be prepared for greater scrutiny from the authorities as well as from users and investors.
“They also each must implement stricter internal compliance and audit functions, consult a lawyer if in doubt, and take additional steps, beyond those currently required, to prove to the users that the project is doing the right thing,” she explained to Cointelegraph.
In her words, the authorities must also consider taking a good look at influencers who promote “rug pulls, pump and dump schemes, and bogus token sales.”
Heaver believes that promoters must also face scrutiny, citing shark tank star Kevin O’Leary’s promotions of the FTX exchange that may convince people may have put their funds in FTX.
Further, Talal Tabbaa, the CEO of CoinMENA, a trading platform that secured a provisional license from VARA, said that Dubai’s history is full of examples of big challenges and rising to the occasion.
“The collapse of one company won’t change the vision of the UAE to become a global crypto hub. In fact, the FTX incident confirms how important it is to have a comprehensive regulatory framework in place,” he commented.
Tabbaa also pointed out that Luna, Voyager, Celsius, and FTX incidents were failures of governance and effective risk management and not a failure of crypto. “They were institutional failures rather than technical failures,” the CoinMENA CEO said, noting this distinction as very important.
He also compared the incident to the dot-com bubble. In his words, when the dot-com bubble burst, it was not a problem of the internet but a failure of companies building on the internet. Tabbaa noted that the same thing applies to the crypto space at the moment.
Previously, FTX was among the first exchanges to secure an approval from the Dubai Virtual Asset Regulatory Authority (VARA), a local crypto regulator overseeing virtual asset service providers aiming to operate in the emirate.
The exchange was approved under the Minimum Viable Product (MVP) program in July to proceed with testing and operations. However, following the recent FTX collapse, VARA has revoked the approvals for FTX’s local subsidiary, FTX MENA.