This article will look at issues related to cryptocurrency in the United Arab Emirates. Note that the Emirates is a very progressive country in terms of cryptocurrency. For example, here you can buy real estate from one of the largest developers using this payment method.
- The UAE is one of the four most ready countries for the cryptocurrency implementation in the world
- Cryptocurrency in the United Arab Emirates
- The rapid growth of crypto-related activity in the UAE
- Acceptance of cryptocurrency in the UAE as a payment method is expanding: now the delivery company also accepts cryptocurrency
- Will it be possible to pay salaries in cryptocurrency in the UAE?
- The adoption of crypto tools is on the rise
- Salary part payment in cryptocurrency in the UAE
- Payment of utility bills in cryptocurrency in the UAE
- How to reduce the risks of cryptocurrency volatility
- Real estate payments with cryptocurrencies in the UAE will be controlled to combat money laundering
The UAE is one of the four most ready countries for the cryptocurrency implementation in the world
The United Arab Emirates belongs to four countries that are mostly ready to implement cryptocurrency in the world. The number of such countries has grown exponentially over the past five years, but the Emirates remains one of the leaders in this direction.
A recent study analyzed factors such as the number and availability of crypto ATMs in each country, crypto-related legislation and taxes, and the number of blockchain startups. Hong Kong, the USA, Switzerland, and the UAE are in the leading positions in the world speaking about these factors.
The UAE is in fourth place with three other countries having a crypto readiness score of 6.2 out of 10. Hong Kong, the US, and Switzerland scored 8.6, 7.7, and 7.5, respectively.
Not so long ago, cryptocurrency was considered only as a speculative asset. Now, many companies, governments, and individuals have realized its potential and embraced it as the future of financial technology. In 2021, El Salvador even made history as the first country to recognize Bitcoin as a legal tender.
According to the mentioned above study, the UAE ranked third in the list of countries with the most blockchain startups and ranked fourth in the list of countries with the most interest in cryptocurrency.
Ranked third after Switzerland and Hong Kong in the list of countries with the most blockchain startups, the UAE boasts some of the most forward-thinking entrepreneurs when it comes to fintech. According to statistics, there are 1.2 blockchain startups per 100,000 people in the United Arab Emirates.
Hong Kong, ranked first in overall crypto readiness, is in the top three in all categories examined in the study (including the number of blockchain startups per 100,000 people and the number of crypto ATMs). Due to its small area, the city has the smallest area per each crypto ATM. Hong Kong also does not impose a capital gains tax on cryptocurrency, which makes it attractive to investors.
The USA comes in second place thanks to the country’s massive crypto ATM count. There are ten times more of them than the closest competitors have.
Switzerland is in third place. World-famous as a financial center, this country ranks high with a huge number of crypto ATMs per 100,000 people and no capital gains tax, ranking in the top five for both factors. Switzerland is also one of the most entrepreneurial, with the second highest number of blockchain startups.
Cryptocurrency in the United Arab Emirates
Binance has been approved by the Abu Dhabi Global Market (ADGM) free zone to operate as a broker-dealer. ADGM is a pioneer in implementing a robust regulatory framework for virtual assets to support the growth of the global blockchain ecosystem.
Binance, the world’s largest cryptocurrency exchange by trading volume, stated it had received approval in principle from Abu Dhabi Global Market to operate as a virtual asset broker-dealer.
ADGM introduced the world’s first comprehensive and robust regulatory framework for VAs in 2018. Since then, it has established itself as a leading global hub and business platform for virtual asset activities for local, regional and international organizations.
On March 16, 2022, the Virtual Asset Regulatory Authority (VARA) issued a virtual asset license to Binance for specific operations in the UAE. The ADGM Registration Authority CEO stated that Binance had received ADGM’s approval in principle. He also confirmed supporting Binance in creating its foothold and presence in the emirate of Abu Dhabi.
ADGM is the largest VA regulatory jurisdiction in the Middle East and North Africa region. Binance’s participation will complement its vibrant and robust ecosystem of virtual asset trading platforms, global exchanges, and service providers. Binance is actively partnering with global regulators such as ADGM as part of its ongoing commitment to upholding global standards and collectively promoting the development and sustainable growth of the crypto ecosystem.
In fact, ADGM is a pioneer in implementing a robust regulatory framework for virtual asset regulation to support the growth of the global blockchain ecosystem.
Upon successfully completing its application to the Financial Services Regulatory Authority (FSRA) of ADGM free zone, Binance will be able to offer its services in the form of providing virtual assets to customers throughout the Middle East and North Africa region through its subsidiary Binance (AD) Limited.
The rapid growth of crypto-related activity in the UAE
The UAE is at the forefront of innovation and new technologies. Therefore, more and more global players will appear in the country to start their operations with cryptocurrency and related activities, providing investors with an ever wider range of options when choosing exchanges.
As the world’s leading companies, such as Binance and Bybit, already have a regional footprint, investor sentiment is undoubtedly at its peak, and the UAE is witnessing new breakthrough investment opportunities.
Abu Dhabi Global Market (ADGM) free zone currently has over ten fully licensed and approved in principle virtual asset players in its community. ADGM introduced its VA guidelines in 2017 and launched the world’s first fully comprehensive VA regulatory framework and regime in 2018. Since then, there has been an increase in the number of local, regional, and global players establishing their presence and carrying out activities related to virtual assets and providing related services in Abu Dhabi, the UAE, and the whole region of the Middle East and North Africa.
This, in turn, generated increased interest and investment flow from retail and institutional investors. In addition, ADGM introduced its regulatory sandbox and fintech lab Digital Lab to encourage and help fintech companies test their products in a live environment. Another goal of these initiatives is to ensure that fintech companies understand and comply with the strict standards of anti-money laundering and know-your-customer principles.
ADGM is also currently examining market feedback on its proposed enhanced virtual asset regulatory framework. It allows the regulated multilateral trading structure (MTF) and custodial groups within ADGM to transact non-fungible tokens (NFTs).
Over the years, the UAE has redoubled its efforts to create an enabling environment and regulatory framework for digital assets and blockchain. The country prioritizes the development of activities and attraction of investments related to virtual assets in the United Arab Emirates, as well as promoting innovation and the adoption of blockchain. Such strategic and collective efforts have attracted new players and more investors to the UAE and the region as a whole.
Also, the FSRA published a discussion paper on DeFi. This was done to engage industry players and investors in exploring the potential of decentralized finance (DeFi), all possible risks, and discussing what the future regulatory framework might look like.
DeFi is a rapidly developing part of the global financial ecosystem that promises to deliver more efficient and customized financial services. DeFi possible risks must be identified and appropriately addressed to realize the potential.
The Financial Services Regulatory Authority (FSRA) is pleased to share its views on DeFi and its potential future direction as part of an ongoing community discussion with industry practitioners. The FSRA also looks forward to collaborating and engaging in dialogue with the industry players to make informed policy choices to mitigate risks and thereby realize the potential benefits of DeFi and any future regulatory changes.
A global study was conducted to understand consumer perceptions of cryptocurrency. As part of this study, experts interviewed 9,000 people aged 18 to 64 from four regions and 17 countries, including the UAE. It showed that the overall prospects for investing in cryptocurrency in the UAE are much better compared to global markets. Almost 78% of investors expect an increase in the share of investments in crypto assets in the UAE. Concerning world markets, this is only 67% of investors.
The UAE cryptocurrency local market is also growing at an unprecedented rate. For example, 16% of all company registrations in the Dubai Multi Commodities Centre (DMCC) free zone in Q1 2022 were related to cryptocurrencies. The number of companies in the Crypto Oasis ecosystem has approached the target of 1,000.
In 2022, estimates of venture capital investments in the sector across all GCC countries will exceed USD 500 million.
According to the latest statistics from the Dubai Digital Economy Chamber, the digital economy accounts for about 4.3% of the UAE’s GDP, equivalent to EAD 100 billion (USD 27 billion).
Acceptance of cryptocurrency in the UAE as a payment method is expanding: now the delivery company also accepts cryptocurrency
Dubai-based grocery delivery service YallaMarket has stated it will accept cryptocurrency as a form of payment in its mobile app. The YallaMarket payment system accepts stablecoins USDT (Tether) and USDC.
These are blockchain-based cryptocurrencies whose tokens in circulation are backed by the equivalent amount of US dollars. This makes them stablecoins with a price pegged at USD 1.00.
In addition to launching a new payment method for its customers, the startup is also set to receive crypto investments from partners and is considering paying salaries with digital assets in the future.
The adoption of specific cryptosystems in the UAE is growing exponentially. Dubai-based Bake N More cafe, owned by Emirati businessman Mohammed Al Hamadi, has become the first cafe to accept cryptocurrency as a form of payment in the UAE.
67% of the UAE residents said they are interested in investing in cryptocurrency over the next five years. At the same time, the UAE is one of the leading markets in the world, with 40% of consumers saying they trust cryptocurrency.
Now the world is increasingly introducing blockchain and cryptocurrency technologies. And YalaMarket could not stand aside being a company based in the UAE – the global center of financial technologies. YallaMarket clients value their time and actively implement technology into their lives. Undoubtedly, they are one of the pioneers in using crypto payments for everyday needs.
To launch the new payment method, YallaMarket has partnered with CoinMena, a digital asset exchange licensed by the Central Bank of Bahrain.
The adoption of cryptography is happening rapidly in the Middle East region. As the digital economy grows, using cryptocurrencies in the UAE as a means of exchange and payment is becoming commonplace. Like most businesses that started using the Internet 20 years ago, now most will inevitably begin to use crypto technologies.
Will it be possible to pay salaries in cryptocurrency in the UAE?
As virtual assets become more widespread in the UAE and worldwide, industry leaders believe that more and more companies will pay salaries in cryptocurrency. This will become possible when the industry becomes less volatile due to improved regulation and legal framework.
Some countries are already accepting digital currencies, and some tech companies are paying their employees in cryptocurrency. As Dubai also introduces a legal framework and establishes a virtual asset regulatory body, industry leaders believe it is possible that companies here will also pay wages in digital currencies. In addition, residents will pay utility bills and buy goods with this new form of currency.
Abu Dhabi Global Markets free zone (ADGM) became the first jurisdiction in the world to implement a comprehensive and individual regulatory framework to regulate spot transactions in virtual assets (including those carried out by multilateral trading institutions, brokers, asset managers, and other intermediaries). Dubai also announced the adoption of a law on virtual assets and the creation of the Dubai Virtual Asset Regulatory Authority (VARA), which issued a license for FTX and Binance exchanges.
Reflecting the growing adoption of cryptocurrency in the UAE, Emirates Draw and YottaChain International Holding Limited (DIFC), which specializes in decentralized storage solutions, have signed an agreement that allows crypto instrument holders to participate in Emirates Draw. The first stage will enable payments in USDT, a well-known and stable token, through a decentralized application (dApp).
An interesting factor is the growth of metaverse projects that implement their own cryptocurrencies.
Recent events have also shown the world how crypto tools can be used for charitable purposes.
In general, the crypto industry’s growth is still in its infancy, but it can be assumed that it will become the main form of investment for the general public.
The adoption of crypto tools is on the rise
The adoption of crypto technology has been fast. Between 2018 and 2021, the number of crypto investors has grown by more than 500 percent.
CEO of the Financial Services Regulatory Authority (FSRA) noted that the opportunities for using virtual assets, as well as the underlying blockchain technology or distributed ledger technology, will continue to expand in the future. He also said that given the different types of cryptocurrency use cases such as payments, savings, management, etc., it looks like it will be an interesting five years. It is also essential that there is potential to expand the use of blockchain in various financial services activities (payments, trading, settlements, etc.).
Salary part payment in cryptocurrency in the UAE
Given the widespread adoption of cryptography, it can be assumed that the current options for virtual assets using will evolve and expand.
Salaries are already paid in cryptocurrency in many countries, such as New Zealand, Japan, the UK, Denmark, and others. But in general, this is still a rare occurrence, as many people will not feel comfortable with the lack of knowledge, limited opportunities for use, and the volatility of some currencies.
Every day more and more companies offer to pay in cryptocurrency. Even mayors of future crypto centers like Miami and New York are exploring ways to pay salaries in cryptocurrency, as well as converting their personal salaries into Bitcoin.
There is a possibility that some organizations in the UAE will pay part of their salaries in stablecoins, given that Emirates is looking to increase the number of businesses operating in the virtual asset industry. Some crypto service companies are already paying wages in Bitcoin, USDT, and Ethereum.
An excellent way to integrate cryptocurrency into an organization would be to enable employees to receive a certain percentage of their salary in such a way.
Payment of utility bills in cryptocurrency in the UAE
Thanks to the growing acceptance of cryptocurrency in the UAE, it has become possible to pay utility bills using this method. Digital currency is already being used to pay utility bills in Germany, Romania, and New Zealand.
It is also possible to get a crypto debit card to pay bills. The digital coins will be converted into fiat money for a small transaction fee.
The high adoption level and the willingness of world governments to regulate cryptocurrency are indicators that virtual assets as a means of payment can become widespread in many countries.
UAE digital exchange Dhanu X has launched the Dhanu digital coin. Due to the growing popularity of virtual currencies and assets, it allows its customers to pay utility and credit bills in India. Dhanu X exchange has received UAE licenses from licensing authorities outside the free zones and in DMCC free zone. The exchange was launched with five digital currencies, and the number of coins grew to 15.
The use of digital currencies is gaining popularity in both developing and developed countries. For example, Mauritius is becoming one of the friendliest countries for virtual assets. At the same time, some utility providers in Germany, New Zealand, and Romania accept Bitcoin as a payment method.
How to reduce the risks of cryptocurrency volatility
Cryptocurrencies are among the most volatile assets. Therefore, retail investors need to exercise caution and do due diligence before investing their money in some digital assets. The crypto industry is quite risky, so investors should conduct due diligence on each new project.
People often tend to fall for scammers and buy trending things, losing their hard-earned money. To reduce risk, it is necessary to use a diversified portfolio of confident projects.
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market free zone seeks to reduce volatility and risks with such mechanisms:
- Firstly, exchanges must have the tools and controls to manage such risks in their markets.
- Secondly, the FSRA also monitors these markets in real time.
- Thirdly, only certain virtual assets are allowed to be used in ADGM. And it requires specific tools to ensure that virtual assets in use can be controlled and linked appropriately to global markets. ADGM markets combine retail and institutional participants, allowing for greater mitigation and management of such volatility.
The correct regulation principles and broader ownership of cryptocurrencies can reduce market volatility.
Real estate payments with cryptocurrencies in the UAE will be controlled to combat money laundering
The authorities plan to increase tracking of UAE cryptocurrency payments made in Bitcoin and Ethereum as the country develops as a crypto hub.
The United Arab Emirates government stated real estate agents will be required to alert anti-money laundering authorities of any real estate sales paid in cryptocurrency.
With companies such as Bybit, Kraken, Binance, and Crypto.com seeking to establish themselves in the emerging crypto hubs of Dubai and Abu Dhabi, some property developers in the country have announced that they will start accepting payments in Bitcoin (BTC) and Ethereum (ETH). The government is now seeking to tighten measures to ensure that any real estate transactions will be reported to anti-money laundering regulators if virtual assets or funds derived from virtual assets are used (even if they pay a small part of the property value).
The new UAE crypto regulation will prevent the possibility of manipulation or illegal activities that could adversely affect the working environment, the economy, and investments in the real estate and legal sectors, the UAE Minister of Economy said.
The rules will also require brokers, agents, and law firms to file reports with the Financial Intelligence Unit responsible for tracking illegal money flows. Also, such rules will apply when the buyer tries to pay in cash for more than AED 55,000 (about USD 15,000). The government has not specified any threshold for virtual assets, implying that even the smallest Bitcoin transactions will be investigated.
In addition, the global anti-money laundering standards setter, the Financial Action Task Force on Money Laundering (FATF), is also trying to stop using cryptocurrencies for money laundering and terrorist financing.
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