After a long market cycle, digital assets are experiencing a recovery, driven by greater institutional participation, regulatory transparency and a challenging macroeconomic environment.
The region has entered the golden path and is now poised to benefit from a new wave of digital asset investment, driven by institutional investors seeking regulatory transparency and a supportive market environment. According to the Crypto Oasis Ecosystems Report 2023, there are more than 1,800 organizations employing 8,650 people in the digital asset industry in the Middle East and North Africa.
Although historically the UAE has been fueled by oil reserves, in recent years it has made a strategic shift towards technological and financial leadership. Recognizing the potential of digital assets, the UAE government has sought to create a strong and flexible regulatory environment. Over the past two years, the region and individual emirates (with Abu Dhabi and Dubai making the biggest changes) have stepped up regulatory efforts to attract companies focused on digital assets, attracting talent, investment and positive exposure. The region.
The UAE has become a thought leader in digital assets, quickly adapting to the challenges and opportunities this new paradigm creates, reflecting its ambition to become a global hub of innovation and technology.
I will talk about the major efforts being led by the UAE and how the collective efforts of the UAE have enabled the UAE to become a leader in the digital asset ecosystem - creating a strong and flexible regulatory framework to which the world will commit. Companies that guarantee consumer protection and financial stability.
Abu Dhabi is the future of TradFi
Abu Dhabi Global Markets was one of the first to issue guidelines on cryptocurrencies and digital assets, the first guidelines on the regulation of crypto-assets published in 2018 (and dynamically updated since then) by the Financial Services Regulatory Authority.
In many areas, the Financial Services Regulatory Authority has expanded the existing regulatory framework for traditional financial products to include digital assets. An example of this is that the Financial Services Regulatory Authority has taken a similar approach to the other protections allowed in the ADGM to ensure that the same protection is provided to "traditional" custodians. Accordingly, the regulator has expanded the definitions to include the definition of digital assets for the provision of custody services, client assets and client investments in its recently published guidance, which includes virtual assets, digital securities, stable currencies and derivatives/funds.
Another area in which ADGM is expanding is the regulation of digital asset exchange, regulation of multilateral trading facilities, licensing of MidChains, M2, Matrix and other companies operating in the region.
Recently, ADGM has also focused on original digital asset activities, introducing the world's first DLT system, providing a framework for cooperation with industry participants, creating a legal framework for blockchain companies and decentralized autonomous organizations that allow creating organizations without internal rules. . Enabling various governance mechanisms, including token voting and the use of smart contracts.
Dubai - Innovation on the move
Dubai stands out for its dynamic and progressive approach to digital assets. The 100% foreign-owned entity in the DIFC tax-free zone has been a magnet for financial services for more than a decade, followed by digital asset companies. The Dubai Financial Services Authority, the independent regulator of the Dubai International Financial Centre, is the first to develop a regulatory framework that balances risk and innovation. DIFC Legal Director Jack Visser said in September that the DIFC is proposing to introduce a new Digital Assets Act and a new Securities Act, working closely with industry stakeholders to "determine the legal nature of digital assets and their characteristics". Recently the Dubai International Financial Center accepted Toncoin.
In addition to the DIFC, Dubai will also establish a new regulatory body focused exclusively on digital assets in 2022, the Virtual Assets Regulatory Authority, which will be responsible for monitoring and regulating the supply, use and exchange of virtual assets. Last year, VARA published a set of rules that define the general scope of activities involving digital assets, including the development of authorized activities and services for clients and investors, as well as the provision of protection and advisory services. Brokerage, distribution, exchange, etc. services. Leading the way as the world's first independent virtual asset regulator, VARA continues to grow by attracting a large number of existing and new companies to the region, creating a vibrant ecosystem of digital asset companies. To date, there are several companies managed by VARA, ranging from exchange service providers such as Binance (operating MVP license), management and investment services including Laser Digital, and custodians including Komayu. (my employer). VARA is expected to oversee more than 100 new units in the coming quarters, further strengthening Dubai's expanding digital asset ecosystem.
The other emirates are new contributions
While Dubai and Abu Dhabi are leading the way, other emirates such as Sharjah and Ras Al Khaimah are also starting to embrace digital assets. For example, Sharjah is exploring a wide range of blockchain applications, while Ras Al Khaimah is positioning itself as an attractive location to attract blockchain businesses by creating the first Web 3-based free space in the UAE, called RAK DAO.
Finally, at the federal level, the UAE Cabinet decided to introduce new regulations on virtual assets and virtual asset service providers, adding a layer of oversight to the virtual asset sector. The new rule came into effect on January 15 and is the main regulatory framework for virtual assets in the UAE, designed to protect investors and regulate the industry.
The UAE regulatory authorities have a unique opportunity to create a single umbrella in the Emirates that will ensure consistency, cooperation and interoperability between local authorities and the federal regulator - the UAE Securities and Commodities Authority. This will increase her competitiveness in the long run and give more clarity to her proposition and to others who really want to build their future financial position.
It is clear that the UAE is best positioned to take advantage of the next phase of growth in the digital industry.