With 1,400 cryptocurrency companies like Binance and Huobi settling in, what is the appeal of Dubai?

Author: Xu Cihua

Source: Caixin News

Recently, Saudi Arabia announced an investment of 6.4 billion USD in metaverse and blockchain technology.

In fact, the United Arab Emirates, also a major oil-producing country, has been one of the most supportive and embracing nations of blockchain in the world, with Dubai becoming one of the hubs for blockchain enterprises.

According to local news reports from the UAE, the digital economy contributed approximately 100 billion dirhams (27.25 billion USD) in 2021, accounting for 4.3% of the UAE's GDP. The country has over 1,400 blockchain and cryptocurrency startups, with a total valuation of 90 billion dirhams (24.5 billion USD). According to government data, more than 90 investment funds and 12 business incubators are also supporting the country's digital industry.

Industry insiders analyzed to the reporters of "Blockchain Daily" that blockchain, as a new technology, is treated differently around the world; while Dubai, through its open policies, attracts global blockchain enterprises and talents, gaining an advantage in the future development of the blockchain industry.

1. 1,400 Cryptocurrency Enterprises Settled

The United Arab Emirates, abbreviated as "UAE," is a federal country composed of seven emirates: Abu Dhabi, Dubai, Sharjah, Fujairah, Umm Al-Quwain, Ajman, and Ras Al Khaimah. The UAE is often referred to as the "flower in the desert" due to its abundant oil resources.

However, oil-rich countries also have a sense of crisis, which is that oil resources are not inexhaustible, and the flower in the desert can wither. They must find new opportunities for wealth.

The blockchain and cryptocurrency industry, represented by Bitcoin, has provided new vitality for some small countries, including the UAE, Saudi Arabia, and El Salvador.

Dubai in the UAE is on its way to becoming a Bitcoin trading center. Hundreds of companies, including Binance, ALPEX, and Metahero (over 90 investment funds and 12 business incubators), have chosen Dubai as their operational center.

In 2021, China launched a round of regulation on virtual currency mining and trading, prompting many Chinese blockchain and cryptocurrency companies to relocate to Dubai to seek compliant operations. This includes exchanges like Huobi, which completed the exit of users from mainland China by the end of 2021, as well as Tiger Brokers and CoinW.

A person related to Huobi informed reporters from "Blockchain Daily" that Huobi currently has an office in Dubai, staffed with both domestic and local employees.

"Dubai has always been quite positive regarding policies for blockchain enterprises," the aforementioned Huobi representative stated.

Additionally, on December 20, 2021, the cryptocurrency exchange Binance signed a cooperation agreement with the Dubai World Trade Centre Authority (DWTCA) to jointly promote the establishment of a new international cryptocurrency ecosystem in Dubai.

An anonymous insider from an exchange told reporters from "Blockchain Daily" that given Dubai's open policies towards exchanges, they are also actively seeking a virtual asset trading license in Dubai, planning to relocate operations there when the time is right.

Due to the UAE's open policies towards cryptocurrencies, many enterprises have settled there. According to local news reports, the digital economy contributed approximately 100 billion dirhams (27.25 billion USD) in 2021, accounting for 4.3% of the UAE's GDP. The country has over 1,400 blockchain or cryptocurrency startups, with a total valuation of 90 billion dirhams (24.5 billion USD).

2. Dubai's Open Policies

Reporters from "Blockchain Daily" learned that the regulation of cryptocurrencies in Dubai is overseen by the FRSA (Financial Services Regulatory Authority), SCA (Securities and Commodities Authority), and DFSA (Dubai Financial Services Authority).

To provide cryptocurrency services in the UAE or Dubai, a license must be obtained from the SCA or FRSA, depending on the operational location. Cryptocurrency trading is regulated by the SCA and FRSA, and licenses may be granted based on the nature of the cryptocurrency being traded.

At the end of 2020, the UAE Securities and Commodities Authority (SCA) issued Decision No. (21/RM) regarding the regulation of crypto assets.

This regulation aims to establish a clear licensing system for any provider wishing to offer crypto asset services within the UAE, including initial token offerings based on or utilizing crypto assets, exchanges, markets, crowdfunding platforms, custody services, and related financial services.

The "Crypto Regulation Decision" states that providers wishing to offer crypto asset services (or any related services) must be registered within the UAE or in one of the UAE's financial free zones (i.e., Dubai International Financial Centre or Abu Dhabi Global Market), and must obtain a license from the SCA. As part of the process, applicants must demonstrate that they will strictly comply with the UAE's anti-money laundering and counter-terrorism financing laws, cybersecurity compliance standards, and data protection regulations.

3. Dubai's Blockchain Layout

Marwan Alzarouni, CEO of the Dubai Blockchain Center, stated in a media interview that the UAE, especially Dubai, has always been forward-looking and rapidly developing in any future technology, and crypto assets and blockchain are no exception.

As early as 2013, the UAE launched the "Smart Dubai initiative," which aims to improve government efficiency through the use of blockchain technology. This includes promoting the development of blockchain from 1.0 (payment tools) to 2.0 (financial industry applications), and then to 3.0 (applications in other industries and government management), with the goal of making Dubai a global leader in this field.

In 2016, Dubai established the Global Blockchain Council, which currently has over 30 members, including government entities, international companies, and blockchain startups. Tech giants like Microsoft, SAP, and Cisco are members of this council.

The Global Blockchain Council held an industry-themed conference in 2016, announcing seven new blockchain concepts for validation, including: medical records, jewelry transaction assurance, ownership transfer, business registration, digital wills, tourism management, and improving freight. It can be said that Dubai is currently the blockchain R&D center in the Middle East.

In 2017, the Dubai government announced that Emcredit, a subsidiary of Dubai Economy, would collaborate with the US-based startup Object Tech Grp Ltd to create a cryptocurrency called emCash.

In 2018, Dubai's Prime Minister Sheikh Mohammed announced that the Dubai government would achieve half of its government operations using blockchain technology by 2021.

In 2020, according to the vision of the "Dubai Blockchain Strategy 2020," Smart Dubai fulfilled its commitment to establish a prosperous blockchain ecosystem in Dubai, launching numerous use cases, a joint blockchain platform, and Dubai's blockchain policy. Government and private sector institutions are committed to achieving 24 blockchain use cases, covering eight sectors: finance, education, real estate, tourism, business, health, transportation, and security.

Reports indicate that the UAE has completed a digital KYC project called the "UAE Pass," which will allow users to interact with various aspects of legal procedures from remote locations, and has already adopted blockchain technology in its judicial notarization and certification services.

The UAE has also proposed a plan to transform Dubai into the world's first fully blockchain-driven city—the "Dubai Blockchain Strategy," aiming to make Dubai the happiest city on Earth.

Professor Hu Jie from Shanghai Jiao Tong University's Shanghai Advanced Institute of Finance told reporters from "Blockchain Daily" that as an oil-rich country, the UAE and Dubai actually have relatively singular and fragile resources, and the Dubai government has been contemplating how to find opportunities in the new economic system.

Hu Jie stated that blockchain, as a new technology, is still in the exploratory and sedimentation stage globally, and Dubai, through its open policies, attracts global blockchain enterprises and talents, gaining an advantage in the future development of the blockchain industry.