Dubai Presses for Crypto Companies to Set Up Shop
Dubai Cryptocurrency
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DubaiPresses for Crypto Companies to Set Up Shop
Dubai isheavily recruiting crypto companies to establish themselves there, but the Middle Eastern nationisn't quite ready for them. Regulations aren't clear yet, and getting somethingas basic as a bank account isn't a smooth process – at least for now.
Dubai'sVirtual Assets Regulatory Authority (VARA), a dedicated regulator for the industry, hasn't yetreleased a comprehensive regulatory framework that companies can use to createor launch products, but officials have assured local companies that it willcome by the end of the year, two people told CoinDesk. The regulator,established just seven months ago, has previously issued some guidelines onmarketing and advertising for virtual assets.
Wealth fundsin the wider region, the greater United Arab Emirates, are investing in crypto,and a large number of funds already reside in Dubai. Companies arehopeful that VARA will be friendlier to them than other jurisdictions wherelicensing can be slow. After all, the city is already a center for businesstourism. It's often praised for its low tax rate, its location near talent hubslike India and Pakistan, and the ease of obtaining visas for staff.
The city'smaking a play to welcome the crypto industry. It stated its intentions tobecome a top metaverse economy and create 40,000 virtual jobs. At the sametime, the UAE is working to get off the gray list of the Paris-based financialwatchdog, the Financial Action Task Force. While it beefs up its anti-moneylaundering regime, it's under increased monitoring.
Withoutregulation, less savory elements of the crypto industry have moved to the city,including YouTubers shilling altcoins to their audiences and other projectscarrying out scams or rug pulls. The UAE has numerous free zones, which Heaversaid makes it "easy to navigate and hide, unfortunately."She'd like to see the industry cleaned up.
VARA hasalready handed out MVP (minimum viable product) licenses to some of crypto's biggestexchanges. Notably, Binance, which has withdrawn applications in otherjurisdictions, received an MVP license in September.
The licenseallows exchanges to offer a "full suite" of services,including spot, leverage and futures. There are some excluded services, such ascrypto loans offered by exchanges
Theregulator is actively courting companies. James Bernard, founding partner ofconsultancy JBLV and founding member of the Dubai Global Blockchain Counciltold CoinDesk that VARA is "inviting some of the top companies around theworld to be part of its MVP," he said, whether that be exchanges,decentralized finance (DeFi) or non-fungible token (NFT) projects. "VARAwill start discussion groups that will look to create the best practice in regulationsof oversight for each of those verticals," Bernard said.
VARA wasestablished in a law issued by Sheikh Mohammed bin Rashid Al Maktoum, Dubai'sruler. Industry representatives pointed to the significance of creating aregulatory authority just for virtual assets.
"It'sthe first government to regulate crypto under a new regulatory body solely forcrypto," Talal Tabbaa, CEO of CoinMENA said, adding that he was"super bullish" on the regulator.
According toMohammad Hans Dastmaltchi, chairman of FTX MENA, many other regulators havetried to fit virtual assets into traditional regulatory models.
"[VARA]understands the business, but they're also extremely tough," he said.
"Theyreally want to hear what the issues are and how they can be solved," Byunsaid. For him, "the big elephant in the room for the entire cryptoexchanges industry is the FATF travel rule."
Discussionscurrently revolve around issues like whether technologies are compatible.
"Notall [virtual asset service providers] are equal," Byun said. He said thatcentralized exchanges need to be careful about who they are sending informationto. In his view, regulators could take a more proactive stance by startinglocally and having exchanges send information between each other.
Cryptocompanies may find support from the regulator, but it's taking longer for themto find acceptance with traditional players. Opening bank accounts has provendifficult.
"Someexchanges have obtained non-objection letters saying that they can operate bankaccounts, but they have insane restrictions," Tabbaa said.
Applicantsmay find they can only open accounts in the local currency of UAE dirham andcannot accept other currencies. That, or they can only serve professionalinvestors and not retail customers.
But changeis afoot. Heaver told CoinDesk she is working with a jurisdiction within theregion and its main bank to offer bank accounts to crypto companies. If cryptocompanies meet the criteria set, they may be able to open bank accountsspeedily.
Dubai is quickly becoming the most important crypto-city in the Middle East, with a growing number of exchanges and companies. The city has opened its doors to crypto entrepreneurs, and is encouraging the creation of new trading platforms and other technology ventures based on blockchain.