A day after the UAE’s Securities and Commodities Authority (SCA) of the UAE said that a new framework will assure Anti Money Laundering (AML) compliance across the region, Dubai’s Ruler and UAE’s Prime Minister Sheikh Mohammed bin Rashid Al Maktoum, appointed establishment of Dubai Virtual Assets Regulatory Authority to supervise the cryptocurrency sector.
The UAE is the economic power house of the Middle East along with Saudi Arabia and is the third-largest crypto market in the region, behind Turkey and Lebanon, according to US-based Blockchain data platform Chainalysis.
Sheikh Mohammed said the decision aimed at creating an advanced legal framework to protect investors” and designing “much-warranted international standards for virtual asset industry governance that will promote responsible business growth, under prudential regulations.”
Moreover, the Dubai Virtual Asset Regulatory Authority will be the licensor and regulator of the crypto sector in Dubai Mainland and most other Free Zone territories. It will work with the Central Bank of the United Arab Emirates as well as the Securities and Commodities Authority.
The Dubai Virtual Asset Regulatory Authority will oversee the issuance and trading of virtual assets, and companies providing crypto services will first have to gain its approval. Among other things, the new regulatory entity will also monitor transactions and prevent virtual asset price manipulation.
In a tweet, Mohammed bin Rashid noted that the goal was to establish the UAE and Dubai’s position as a key player in designing the future of virtual assets globally.
Dubai has been in the forefront in developing the eco system for digital banking and the Dubai International Financial Center established the Court of Blockchain in 2018. Last summer, the first Bitcoin Fund in the Middle East began trading on Nasdaq Dubai.
In December 2021, the Dubai World Trade Centre Authority entered into a deal with Binance to help establish the country’s most populous city as the digital assets hub of the world. In February, a Bloomberg report noted the United Arab Emirates’ plans to issue licenses for crypto service providers.
According to Chainanalyis, the Cryptocurrency market in the Middle East grew by 1500% in 2021 compared with the previous year making it one of the fastest growing crypto markets in the world. It has received $271.7 billion worth of cryptocurrency between July 2020 and June 2021, which represents 6.6% of global activity.
Research suggests that many in the Middle East have turned to cryptocurrency to preserve their savings against currency devaluation, a trend we see in other emerging markets like Africa and Latin America.
According to Reuters, this phenomenon in Turkey last March, at a time when the Turkish lira’s value had fallen 13% following President Tayyip Erdogan’s decision to fire the governor of Turkey’s Central Bank.