Dubai expects more than 1,000 cryptocurrency businesses to be operational by 2022, as it accelerates efforts to boost its digital economy.
Free zones in Dubai and Abu Dhabi have implemented an advanced framework to encourage entrepreneurs in the crypto space to set up exchanges while laying out rules to protect consumers.
"Five years ago you wouldn't see people coming to Dubai to do the cryptocurrency business ... we're open-minded, and we're willing to change regulations with reason," Dr Marwan Al Zahrouni, chief executive of the Dubai Blockchain Centre, said at a conference held during Gitex Global in Dubai on Monday.
Interest in cryptocurrencies and blockchain is growing, especially in the UAE, as consumers and investors flock to digital assets with online payments gaining pace. A growing number of institutional investors and wealth managers in the UAE plan to increase their exposure to cryptocurrency assets between now and 2023, according to a survey by Nickel Digital Asset Management, based in London.
Cryptocurrencies are not licensed by the UAE Central Bank although a number of cryptocurrency exchanges have been given permission to operate within the financial free zones. The UAE dirham is the only legal tender in the country that is recognised by the Central Bank.
The DMCC Crypto Centre – launched in May to promote cryptographic and blockchain technologies in Dubai – is home to more than 100 organisations operating in the crypto space, with a further 900 more having applied for licences. There are more than 400 crypto businesses operating in the UAE.
Ahmed bin Sulayem, executive chairman and chief of the DMCC, is confident that there will be "well over" 1,000 crypto businesses in the UAE by the end of 2022.
Digital assets – built around the secure blockchain database infrastructure – are also enjoying heightened interest from investors owing to their potentially high returns. However, experts have also criticised assets such as Bitcoin – the world's largest cryptocurrency – for its volatility.
Ralf Glabischnig, founder and board member of Swiss crypto hub CV Labs, said that the market in Dubai will "grow faster compared to anywhere else", and attributed the current interest from investors and entrepreneurs to the emirate's business environment.
"The most important thing when you create a new industry is talent. A lot of smart people came to Dubai and stayed here," he said. CV Labs also has a crypto centre at the DMCC.
Five years ago you wouldn't see people coming to Dubai to do the cryptocurrency business... we're open-minded, and we're willing to change regulations with reason
The UAE has introduced various measures to boost digital assets trading amid rising interest. Last month, the Securities and Commodities Authority signed a deal with the Dubai World Trade Centre Authority to support the trading of crypto assets.
Last week, Dubai also hosted the first Crypto Expo Dubai. This comes as investor interest in crypto assets soars in the region.
MidChains, a virtual asset trading exchange based in Abu Dhabi backed by Mubadala Investment Company, said it completed its first trades on Bitcoin, Ethereum, Litecoin and Bitcoin Cash in September. Bahrain cryptocurrency platform Rain Management said earlier this year that trading volumes crossed the $1 billion mark.
BitOasis, another UAE crypto asset exchange, earlier this month said it raised $30 million in a Series B funding round, which it will use to expand in the Middle East and North Africa.