UAE’s financial wealth is set to grow to $1 trillion by 2026, benefiting from crypto

According to a new report by Boston Consulting Group (BCG), the UAE’s financial wealth will grow from $700 billion currently to $1 trillion during the 2021-2026 period. BCG’s chief believes that UAE is very well positioned to benefit from crypto opportunities, thanks to the crypto-friendly regulatory environment and an emerging regulatory setup.

Mustafa Bosca, BCG’s Managing Director and Partner, noted during a virtual call: “The year 2021 has established UAE as a clear winner in the GCC and among one of the fastest growing markets globally.”

In 2021, the UAE’s financial wealth grew by 20%, compared to 11% globally. About 41% of the country’s wealth was derived from ultra-high net worth (HNW) individuals who are worth more than $100 million – this is expected to grow to 43% in 2026.

“We believe that UAE is very well positioned to win in both crypto and climate-related opportunities,” Bosca said. “We already see major digital asset companies and exchanges setup in the UAE, thanks to the crypto-friendly regulatory environment and an emerging regulatory setup.”

BCG’s report found that nearly 80% of the clients surveyed will consider increasing their crypto holdings if wealth managers offered advisory and education services. Two-thirds of clients who sourced their crypto investment with third parties said that they did so because they didn’t think their wealth managers offered such services.

“As it stands right now, the wealth managers both globally and in the region haven’t really formulated their strategy strongly to benefit from this,” Bosca noted. “We encourage them to do so and take the growing share of people allocating their assets towards these alternative venues.”

However, the rising volatility in the crypto market is prompting several UAE and Gulf investors to exit the market. In an economy affected by high inflation and rising interest rates, investors are becoming more selective about their investments.

“We do see some scaling back at the moment, but going forward, we do believe that this will be an important area of opportunity for banks and wealth managers in the GCC and globally to tap into,” Bosca added. “We are seeing exponential type growth in crypto assets, and we believe that this will continue to grow rapidly in the coming years.”

Per BCG data, around 75% of institutions have already bought or are planning to buy crypto assets, while crypto wallet holdings have grown by about 30 times in the last two years.

However, despite the crypto hype, most investors in UAE prefer investing in equities and debt. About 50% of the wealth generated in UAE goes into equities, followed by 42% into currency and deposits. About 2% is allocated to debt securities and an even smaller percentage to life insurance and pensions.