As the crypto space in the Middle East continues to evolve and disrupt traditional financial systems, the longstanding debate around the importance of regulatory policies looms large.
Some players have dodged regulation, saying it isn’t compatible with DeFi – or decentralised finance – while others have set up companies in line with regulation, and yet others, including exchange platform Binance, are actively trying to work with regulators to create frameworks and comply.
The UAE has been at the forefront of this global revolution, positioning itself as a likely contender to become a global hub for cryptocurrency in the Middle East. It vies for that spot alongside Singapore and Switzerland.
Dubai World Trade Centre (DWTC) this week announced its plans to become a hub and regulator for virtual assets and crypto including digital assets, products, operators and exchanges. The move is part of the Dubai government’s efforts to create new economic sectors, DWTC said in a statement.
The announcement has been welcomed by key industry players, who viewed this as a much-awaited signal for the global industry.
“The latest announcement by DWTC further solidifies the UAE’s progressive stance towards digital innovation. This move comes at a time when the transformative power of blockchain technologies and crypto is being felt far and wide in the financial world. We see a huge potential for mass-adoption of crypto assets within the MENA region, and having a supportive regulatory framework will definitely help drive that,” shared Srinu Chowhan, VP of marketing and growth at BitOasis.
The world’s largest crypto trading platform, Binance, the next day said it has signed a cooperation agreement with Dubai World Trade Centre Authority (DWTCA) to help advance Dubai’s commitment to establishing a new international virtual asset ecosystem.
Binance has run up again regulatory walls in a number of countries, from Singapore, Japan and Malaysia to South Africa all imposing restrictions or issuing warnings against the exchange.
Binance has been floating its plans to set up a global headquarters for some time now, having held recent discussions with regulators in the UAE about a potential headquarters in the Gulf Arab nation, and the exchange has listed around 16 Dubai-based job openings in its careers page, both onsite or remote.
Evolving regulation, fears
Regulation is catching up to rapidly evolving technology, but the crypto space is still largely unregulated around the world. Several countries have developed regulatory frameworks, while several others have begun issuing licenses to firms.
Alongside the paradigm shift towards crypto-related financial services, attitudes are changing, and crypto is becoming an integral part of the existing financial system and regulatory frameworks, as opposed to representing an existential threat.
But those in the space who advocate heartily for regulation fear what will happen if the space remains unregulated.
“My biggest fear in the industry is the collapse of somebody like Binance or Kraken or one of those [largely] unregulated sort of exchanges, because I think it will send such shockwaves through the industry it will take the rest of us months and months and months to recover,” Christopher Flinos, CEO of Abu Dhabi-based digital currency institution Hayvn told Arabian Business in an earlier interview.
“Because if Binance goes dark tomorrow, what are you going to do? If they go down, where do you go to get your money? These things don’t have homes. They’re decentralised autonomous organisations.”
While adopting and implementing advanced regulatory frameworks for cryptocurrencies could take decades, an interplay between regulators and crypto industry players could help expedite the process, according to Changpeng Zhao, founder and CEO of Binance, the world’s largest cryptocurrency exchange in terms of daily trading volumes.
“When Binance was founded in 2017 the crypto industry was still in its infancy. There was relatively little guidance on how crypto should be regulated, Know Your Customer (KYC) technology was yet to be fully developed, law enforcement agencies were not educated on crypto, and policies such as those that govern anti-money laundering were broadly not fit-for-purpose for the crypto space,” said a Binance spokesperson.
Through its partnership with DWTCA, Binance aims to share its experience in collaborating with global regulators to aid the development of progressive virtual asset regulations. With that, it intends to help crypto exchanges or businesses that offer blockchain and DLT services or a wide range of digital currencies and assets to become licensed in Dubai.
“Regulation in the virtual asset sector is rapidly evolving, which has led to a lack of clarity and a disparate set of requirements across the world, with regulators still debating their stances now. Binance’s mission is to be the most compliant exchange in the world. We have had many constructive discussions with regulators worldwide, regarding regulations and licensing,” the Binance spokesperson said.
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