The world’s largest cryptocurrency exchange, Binance, secured a virtual asset licence to operate in Dubai.
The company will operate within Dubai’s “test-adapt-scale” virtual asset market model and be “permitted to extend limited exchange products and services to pre-qualified investors and professional financial service providers”, it said in a statement late Wednesday.
Binance will operate as part of the Virtual Asset Regulatory Authority initial regulatory phase, which includes rigorous oversight and mandatory FATF [Financial Action Task Force] compliance controls.
“High standards of regulation and compliance are critical to the development and maturing of the global crypto and blockchain industry … our team has been working tirelessly to demonstrate how we meet and exceed the requirements of regulators such as the Dubai Vara,” said Changpeng Zhao, founder and chief executive of Binance.
It is the second licence for the crypto-asset provider in the GCC. Earlier this week, it won regulatory approval from the Central Bank of Bahrain to operate as a crypto-asset service provider in the kingdom.
The Middle East is one of the fastest-growing crypto markets in the world. It received $271.7 billion worth of cryptocurrency between July 2020 and June 2021, which represents 6.6 per cent of global activity, according to Chainalysis data.
Binance was founded in China in 2017. It has its headquarters in the Cayman Islands and Seychelles, and has faced increased scrutiny from regulators in the US, UK, Europe and China.
The company has taken steps to improve its relationship with the regulators and also sought to expand its presence in the Middle East as it seeks to cash in on the region’s interest in cryptocurrencies.
In December, it signed a preliminary agreement with Dubai World Trade Centre Authority to develop an industry hub for global virtual assets in the emirate.
“Onboarding Binance within the Vara is reflective of their commitment to the Dubai agenda to provide the global industry the certainty of governance, enabled by shared industry responsibility and legislative security for society,” said Helal Al Marri, director general of DWTC Authority.
The DWTC is setting up a specialist crypto zone, while becoming a regulator for virtual assets and cryptocurrencies.
This month, Dubai adopted the first law in the emirate that regulates virtual assets. Last week, the Dubai Financial Services Authority, the regulator of the emirate’s financial hub, published its regulatory framework overseeing crypto tokens, or cryptocurrencies, for public consultation.
Besides its exchange operations, Binance will start a blockchain technology hub in DWTC to “seed new talent and build a vibrant blockchain ecosystem”, it said.
The UAE government is taking concrete steps to establish a strong digital economy and make use of the advantages provided by digital transformation.
The digital economy contributes about 4.3 per cent to the UAE’s gross domestic product, which is equivalent to Dh100bn ($27.2bn), government figures show.
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Founders: Maaz Sheikh, Danny Bates
Based: Dubai, UAE
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Number of employees: 125
Investors/Investment amount: $125 million. Major investors include Starz/Lionsgate, State Street, SEQ and Delta Partners
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Starring: Siddhant Chaturvedi, Triptii Dimri
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
