The UAE, a nation long synonymous with oil wealth and futuristic architecture, is now emerging as a frontrunner in a different kind of revolution – virtual assets. From the early adoption of blockchain technology to the establishment of its most recent virtual assets regulatory body VARA (Virtual Asset Regulatory Authority), the GCC country’s adoption of virtual assets has been quick and rapidly evolving.
This article delves into the UAE’s key milestones in virtual assets, what shaped their evolution, and the exciting possibilities that lie ahead.
Early adoption
The global emergence of Bitcoin in 2009 sent shockwaves through the financial world. While the initial years saw a cautious approach towards cryptocurrencies worldwide, the UAE displayed a forward-thinking approach. Recognising the potential of the underlying technology – blockchain – to revolutionise various sectors, the UAE government began exploring its applications in areas like trade finance and supply chain management years ago.
In 2017, after years of growing and waning attention, the interest in cryptocurrencies surged globally when Bitcoin went from $1000 to $13000. The UAE, already primed with its early forays into blockchain technology, was ready to capitalise on this growth.
Growing confidence
One of the early adopters in the region was the Dubai Multi Commodities Centre (DMCC). In 2016, DMCC launched the visionary ‘Crypto Centre’, a dedicated ecosystem designed to attract businesses focused on blockchain technology and digital assets.
ADGM, the Abu Dhabi-based international financial centre, became the first UAE-based body to take charge of crypto regulations in the country. They started publishing relevant material on virtual assets in 2017 and have been developing regulations since 2018.
Consequently, other bodies have taken the cue and followed suit including the Central Bank of the UAE and the Dubai International Financial Centre. This has been followed by the formulation of the virtual assets law and the establishment of VARA in Dubai.
However, the regulatory framework of all of these governing bodies is different from one another and businesses in the virtual assets space tend to work with a different set of regulations depending on where they operate from in the UAE.
Another significant milestone took place in 2018 with the establishment of the Securities and Commodities Authority’s (SCA) Regulatory Framework for Offering and Trading of Marketable Instruments by Means of Initial Coin Offerings (ICOs). This framework, while cautious, provided a much-needed regulatory structure for the nascent industry. It was aimed at striking a balance between fostering innovation and deterring fraudulent activities, attracting legitimate players and instilling a sense of security in investors, and propelling the responsible growth of the virtual asset space in the UAE.
The listing of the first cryptocurrency, Bitcoin Cash (BCH), on a UAE exchange – the Abu Dhabi Global Market (ADGM) – in 2020 marked a pivotal moment and signaled the growing acceptance of digital assets within the UAE’s established financial ecosystem.
Looking to the future:
The regulatory framework in the UAE is somewhat fragmented and still in its nascent stages, like the rest of the world. But the progress has been extremely promising. Between 12 months of July 2020 and June 2021, the UAE’s share in the global crypto market has increased by 500% to cross US$ 25 billion in transactions which hints towards quickly growing investor confidence in blockchain in general and UAE specifically. The country’s friendly regulatory regime, government support, and integration with mainstream financial services give a clear indication that the UAE is headed in the right direction.