Anyone who has lived in or visited the UAE will know how optimistic the country is. This positive outlook becomes very powerful when aligned with a clear direction, which is exactly what the ‘We the UAE 2031’ vision outlines.
One of the core pillars of this vision is creating a forward thinking economy and this is particularly relevant to the work of digital assets businesses as a staple of the financial ecosystem of the future.
By 2031, in line with the UAE’s vision, companies and consumers will have fully embraced digital assets, including cryptocurrency, stablecoins and digital tokens, and their transformational power across savings, investment, transactions and trade.
Choosing the UAE – acceleration of business set-up
Over the past three years, the UAE has become central to the global Web3 and cryptocurrency community. This is part of a wider, welcoming attitude towards business establishment, with positive policies, easy setup for offshore companies and a time zone that’s convenient for global entrepreneurs and investors.
There are huge advantages for businesses who choose the UAE, with an attractive environment for investment, supportive facilities (both government and private sector) and a true ecosystem of incubation, that nurtures the best out of fledgling brands and platforms.
Driving this uplift in the private sector is a desire from the very top ranks of the UAE, to shift strategically towards diversification, with particular focus on technology and finance as a way to reduce dependence on oil and gas reserves.
This is not a new phenomenon, but one which collectively the seven Emirates have been striving to achieve for many years. In 2015, Sheikh Mohamed bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi, said: “In 50 years, when we might have the last barrel of oil, the question is: when it is shipped abroad will we be sad? If we are investing today in the right sectors, I can tell you we will celebrate at that moment.”
In the subsequent years, Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, launched the UAE Centennial 2071 plan, to ensure that at its 100th anniversary, the UAE was considered the best country in the world. With such ambitions, it’s easy to understand why the Emirates is so open to innovation and transformation.
Comprehensive and clear guidance on regulation of digital assets
The most important aspect of the UAE’s digital assets growth is that it is well ahead of the curve in regulation, with an open-minded approach that has large organisations and new start-ups flocking to the Emirates.
These sophisticated regulations have been collaborative, consulting the businesses that operate in the digital assets space. Government authorities recognise the potential of digital assets and are proactively creating a robust and flexible regulatory environment.
In 2022, Dubai established the Virtual Asset Regulatory Authority (VARA) with an exclusive focus on virtual/digital assets. Its responsibility is to regulate and oversee virtual assets activities, including the publishing of a comprehensive rule book.
This is a huge help to businesses, as they can transparently set their objectives, plan their technological approach and launch products, safe in the knowledge that they are doing so under a clear and logical framework. This has attracted established and new businesses, catalysing a vibrant digital asset ecosystem, which is expected to grow even further in the coming years.
The 2023 Crypto Oasis Ecosystem report showed that already, more than 1,800 organisations and 8,650 employees were active in the digital asset industry in the Middle East and North Africa. In Dubai, VARA is set to regulate a further 100 new entities this quarter (Q1 2024).
Regulations came into effect in February 2023, with specialised businesses (known as Virtual Asset Service Providers, or VASPs) requiring licensing, and enforcement measures taken on companies who had not met the demands of the framework by November 2023. This push towards greater compliance provides confidence, with greater safety and security across the board, for institutions and investors.
UAE – A nexus point for billions of people and a truly global financial centre
Around a third of the world’s population is within a four-hour flight from the UAE, making it a convenient hub for the digital economy. It has also strengthened its global appeal, with Abu Dhabi and Dubai established as financial hubs in the upper echelons alongside New York, London, Paris, Singapore and Hong Kong.
The Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) have brought in the world’s biggest regulated financial institutions and now, with a view to the future, adding quality digital assets businesses to their rosters.
There has also been a proactive collaboration between the Department of Economy and Tourism and the Dubai Free Zone Council, to attract more businesses from overseas over the past 12 months. With changes to the regulatory regimes in other jurisdictions, businesses have already started to shift operations.
Tokenization of real-world assets – a huge opportunity
With conflicts and economic disruptions happening across the world, with its steady GDP growth, safety, and typically neutral geopolitical stance, the UAE is an attractive destination for both institutions and high net-worth individuals (HNIs).
Estimates from the Henley Private Wealth Migration Report suggested that by the end of 2023, an additional 4,500 millionaires would have moved to the UAE, bringing significant real-world assets. This represents a huge opportunity for banks and asset managers – the market for digital tokenization of real-world assets is estimated to be more than $290 trillion.
Tokenization, enables physical and traditional financial assets such as cash, commodities, real estate, equities, bonds, artwork and intellectual property, to be bought, sold and traded through digital tokens based on the blockchain. This provides advantages, such as increasing the liquidity of assets, transacting at typically lower costs and improving the speed of settlements.
UAE and the future of finance
Institutions, investors and digital assets specialists all see the appeal of the UAE, from economics to innovation. By taking a proactive regulatory approach and providing the right ecosystem for businesses to thrive, the UAE is well positioned to be the world’s next great financial hub, powered by the rapid growth and adoption of digital assets.
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