Dubai IFC: an exodus to (financial) heaven?
Citywealth interviewed experts from Dubai, Jersey and London who boast extensive expertise and knowledge on this IFC to understand what is currently attracting UHNWIs to Dubai.
24 October 2022
The recent Citywealth Forum discovered that Dubai and the DIFC have an English, common law court, which is improving business dealings and enforcement across the UAE. Dubai is also attracting UHNW clients from around the world because of sanctions and immigration attractiveness in Golden Visas which have served the purpose in attracting wealthy foreign investors who want to live, work, study and invest in the UAE.
Dubai boasts an eclectic digital asset community which is fastly growing, especially after China’s cryptocurrency ban. Tim Searle, Chairman at Globaleye, based in Dubai states that “there is a large community of entrepreneurs in the digital asset space. Along with the lifestyle benefits of the region and how they tackled Covid, China banned the mining of coins which attracted investors to the UAE. There is a vibrant digital asset community with many seminars and conferences coupled to the government deploying a virtual asset regulatory authority.”
Sunita Singh-Dalal, together with Jennifer Abou Fadel, Associate at Hourani & Partners, comment that “the UAE’s share in the global crypto market has increased by 500% between July 2020 and June 2021 according to a PWC report and is now over USD 25 billion in transaction value, as stated in ‘Crypto exchange Kraken is set to launch in UAE as regional competition heats up’ by Dan Murphy and Emma Graham, CNBC (26 April 2022).”
They also provide a detailed analysis of the new developments in place in regard to digital assets. “The UAE is perhaps one of the biggest jurisdictions in the world for virtual assets: the SCA issued a regulation on crypto assets on 1 November 2020. SCA’s Decision No. 23 of 2020 concerning Crypto Assets Activities Regulation (CAAR), regulates the offering, issuing, listing, and trading of crypto assets in onshore UAE including initial coin offering (ICO), exchanges, marketplaces, crowdfunding platforms, custodian services, and related financial services based upon or leveraging crypto assets;
Law No. (4) of 2022 on the Regulation of Virtual Assets in the Emirate of Dubai, referred to as the Virtual Assets Law, establishes the Dubai Virtual Assets Regulatory Authority (VARA) affiliated with the Dubai World Trade Centre Authority (DWTCA), as the primary virtual assets regulator in Dubai. VARA aims to promote Dubai’s position as a regional and international destination in the virtual assets sector. It will provide a full range of services in coordination with CBUAE and SCA and is mandated with organising and setting the rules and controls for conducting activities related to virtual assets. This includes cryptocurrencies, tokens, non-fungible tokens, and any other virtual asset determined by VARA. The latter seeks to facilitate collaborative engagement between global Virtual Asset Service Providers (VASPs), industry thought leaders, and international regulatory authorities.
Regulatory oversight is substantially increasing across all jurisdictions and requirements to be compliant are high. The underlying blockchain technology is clearly seeing much interest with variety of players such as the DTCC operating a private blockchain business and private markets heavily investing in this technology such as Peregrine Digital and Securrency in ADGM. The Dubai Multi Commodities Centre (DMCC) opened a new Crypto Centre to companies developing various crypto and blockchain technologies. The DMCC houses companies offering, issuing, listing, and trading crypto assets, as well as those developing blockchain trading platforms, fully supported by the national government.
On 18 July 2022, as reported in the Arabian Business, Rakbank has announced a partnership with Kraken that will allow UAE residents to fund crypto accounts through local transfers from any bank in the country. Such integration with mainstream financial services offered by local banks will drive user adoption and market growth. The UAE is considered one of the most progressive use cases for crypto. Mass use cases for crypto in the UAE are airlines and real estate firms, some of which are now accepting payments in crypto.
VASPs are becoming more and more regulated: VARA has given approval in March this year to Binance, the world's largest cryptocurrency exchange, and FTX, which will set up a regional headquarters in Dubai, in a statement released on 15 March 2022. Substantial institutional engagement with regulators is progressing such as with the Travel Rule.
By consequence, much institutional interest in virtual assets is now seen, almost 45% of hedge funds are now investing in this area, while the NFT marketplace, which at one point in time was bigger than the traditional art market, is now plumbing new depths (Source: pwc).”
See also comments from the latest Citywealth Forum on the usability of the law courts in UAE by James Ramsden KC, Astraea Group - who acted in the Tulip Trading Ltd v Bitcoin Association for BSV & Others case.