In his capacity as the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum launched Dubai’s new virtual assets regulatory law – and the corresponding new virtual assets regulatory authority (VARA) – to regulate, supervise, and control virtual asset services.
Under the new law, VARA will set the rules and controls that govern the conduct of virtual assets activities, including management, clearing, and settlement services, as well as classifying specifying types of virtual assets.
The legislation is meant to provide a regulatory framework for businesses dealing with cryptocurrencies in various formats, including tokens, decentralised finance (DeFi) projects, and non-fungible tokens (NFTs).
In conversation with Arabian Business, the executive chairman at Yoshi Markets, Mustafa Kheriba, explains what the new law and the authority means for businesses in the emirate.
What impact will this have on investors?
The recent announcement has provided businesses in the virtual assets (VA) industry reassurance to operate their business from the UAE with the right license.
We are confident that the outcome of the law will increase engagement with cryptocurrency across the UAE and in Dubai. This increase in engagement will be witnessed not only amongst the younger generation, but also among the older, wealthier group and institutional funds.
Abu Dhabi adopted virtual assets regulations a few years back. Now, with Dubai’s announcement, the end-user engagement and confidence will see higher levels.
We believe that the new law will provide trust and encouragement to new investors to enter the VA industry. We already have noticed an increased interest in both retail and institutional investors.
Will it open up additional opportunities?
There currently are more than 400 businesses operating in the crypto space in Dubai. The authorities have forecasted that the number will cross more than 1,000 by end of the year.
This will certainly add to the increased interest amongst investors, and we expect to see an explosion of Web 3.0 based start-ups, new jobs, and investment opportunities in the region.
Is the digital assets sector at an inflection point?
The war in Ukraine and rising levels of inflation are driving investors away from the stock market and pulling attention back on to other kinds of assets.
The crypto market has come a long way since 2021, but we expect to see much more investment flowing back into it as Web 3.0 technologies and the tokens that support them are increasingly adopted by the private sector.
Additionally, cryptocurrency has recently bounced back from solid support levels, and we feel that this trend may continue as adoption gets more and more proliferated with mainstream usage.
What are your reactions to the UAE being placed on the FATF Gray List?
The placement on the FATF Gray list is a very recent event and it is too early to provide a verdict on its impact on crypto trading amongst investors in the region.
The FATF has said they are encouraged by the measures taken by the UAE regulatory authorities in tackling any potential fraud or illegal investment.
The listing is not limited to crypto-related transactions and in our view, the regulations around crypto trading in the UAE is highly robust.
For instance, Yoshi is being a regulated Multilateral Trading Facility (MTF) that has very strict procedures for on-boarding customers and meets the requirements for anti-money laundering (AML) and combating the financing of terrorism (CFT) as prescribed by the regulators.
To put things in perspective, cryptocurrency was initially created as a way for people to have control over their own money and not have the value of their money altered by decisions made by banks, companies, and governments.
We are quite confident in saying that UAE being placed on the FATF Gray list in and of itself will not have a significant impact on the trading of VA in the region.
In recent history, we have seen the global cryptocurrency adoption increase by 190 percent between 2018 and 2020, and further grow to 280 percent from 2020 to 2021.
As we are seeing an exponential growth globally, we expect a similar growth if not more in the UAE.
Furthermore, even though cryptocurrency has been perceived to be used for hiding financial transactions in some markets, with the arrival of strong regulations and regulated entities such as Yoshi Market, this gap will be adequately filled – that’s our view.
The concept of crypto is built on the principle of transparency and traceability through the public ledger powered by the blockchain.
There is no better system for tracing payments. Increasing adoption of crypto could help improve the UAE’s positioning as part of its larger commitment to regulate the financial markets and cross border investments.
How can the main challenges to growth in the sector be overcome?
Consumer education is key. At the moment, there are more than 16,000 different tokens in existence, some of which are run by unscrupulous developers.
Helping consumers avoid these ‘shill coins’ with artificially inflated values, will help improve trust in the market overall and reduce volatility.
We are currently seeing governments around the world – including in the US, Europe, and the UAE – working towards that cause.
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