Dubai’s new virtual asset law can become a global model for governments and central banks to regulate cryptocurrency and protect investors while also boosting economic growth and innovation, the co-founder of blockchain data platform Chainalysis said.
“There's lots of environments and conversations happening internationally about creating a best-in-class approach to the asset class and there's really an opportunity for Dubai to take a lead in that,” Jonathan Levin, who is in Dubai to speak at this week’s World Government Summit, told The National.
“As [Dubai] goes into implementation and building the regulatory environment for crypto businesses to operate, it has the potential to become a model of how this regulation of the sector should be performed," said Mr Levin, who is also the chief strategy officer at Chainalysis.
“It will allow for a much more tangible example that people can look to as a regulatory architecture for the industry … and gets the balance right between economic growth, encouraging innovation behind the sector and protecting investors and public safety.”
This month, Dubai adopted the Dubai Virtual Asset Regulation Law, which aims to create an advanced legal framework to protect investors and provide international standards for virtual asset industry governance that promotes responsible business growth in the emirate.
Dubai also established the Virtual Asset Regulatory Authority (VARA) as an “independent authority” to regulate the sector throughout the emirate, including special development zones and free zones, but excluding the Dubai International Financial Centre.
The authority, which will also be responsible for licensing, has legal and financial autonomy over the virtual asset sector, which includes cryptocurrencies such as Bitcoin and non-fungible tokens, and will be linked to the Dubai World Trade Centre Authority (DWTCA).
Central banks around the world have been reluctant to endorse cryptocurrencies because of their high volatility, speculative nature, use for illicit activities, as well as the lack of value and regulatory oversight.
The Central Bank of the UAE also does not recognise cryptocurrencies as legal tender.
The Middle East 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.
The region is one of the fastest-growing markets in the world. Turkey has the highest transaction volume at $132.4bn from July 2020 to June 2021. The UAE is in third place, trailing Turkey and Lebanon, with a transaction volume of $25.5bn.
New York-based Chainalysis, which Mr Levin founded with chief executive Michael Gronager in 2014, works with government agencies, exchanges, financial institutions, and insurance and cyber security companies in more than 60 countries. The company provides them with data and market intelligence software that is used to help solve some of the world’s biggest financial crimes.
These crimes include the DarkSide ransomware attack on Colonial Pipeline in May last year, in which the operator of the American oil pipeline system paid 75 Bitcoin to regain control of the system.
In June last year, the US Department of Justice managed to recover part of the ransom paid by Colonial Pipeline – 63.7 Bitcoin valued at about $2.3 million – by gaining access to DarkSide’s systems, it said in a statement.
Cryptocurrency-based crime hit a high in 2021, with illicit addresses receiving $14bn over the course of the year, up from $7.8bn in 2020, according to Chainalysis’ 2022 Crypto Crime Report.
However, those numbers do not reflect the “full story”, the report said.
Across all cryptocurrencies tracked by Chainalysis, the total transaction volume surged to $15.8 trillion in 2021, up 567 per cent compared with the previous year.
“Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency,” Chainalysis said in the report.
“But the fact that the increase in illicit transaction volume was just 79 per cent – nearly an order of magnitude lower than overall adoption – might be the biggest surprise of all,” it said.
All of that becomes a more sophisticated financial system that actually can help broaden the adoption and power general financial instruments beyond what we've typically considered to be the cryptocurrency industry
Jonathan Levin,
co-founder of Chainalysis
“With the growth of legitimate cryptocurrency usage far outpacing the growth of criminal usage, illicit activity’s share of cryptocurrency transaction volume has never been lower.”
The future of the cryptocurrency sector lies in the widespread adoption of digital coins and the “financialisation” of the asset class, Mr Levin said.
This would entail more sophisticated financial products – such as offering interest on cryptocurrency deposits or borrowing against cryptocurrency deposits – being offered to consumers, he said.
“All of that becomes a more sophisticated financial system that actually can help broaden the adoption and power general financial instruments beyond what we've typically considered to be the cryptocurrency industry."
However, the financialisation of the industry would take time, Mr Levin said.
“It's affecting the lives of hundreds of millions of people at this point, but not like billions of people. We need to get to the point where there are billions of people that are actually accessing crypto technology in their lives [for this to happen].”
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.”
Four-day collections of TOH
Day Indian Rs (Dh)
Thursday 500.75 million (25.23m)
Friday 280.25m (14.12m)
Saturday 220.75m (11.21m)
Sunday 170.25m (8.58m)
Total 1.19bn (59.15m)
(Figures in millions, approximate)
The details
Heard It in a Past Life
Maggie Rogers
(Capital Records)
3/5
2019 Asian Cup final
Japan v Qatar
Friday, 6pm
Zayed Sports City Stadium, Abu Dhabi
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
WRESTLING HIGHLIGHTS
Racecard
6.30pm: Mazrat Al Ruwayah Group Two (PA) US$55,000 (Dirt) 1,600m
7.05pm: Meydan Trophy (TB) $100,000 (Turf) 1,900m
7.40pm: Handicap (TB) $135,000 (D) 1,200m
8.15pm: Balanchine Group Two (TB) $250,000 (T) 1,800m
8.50pm: Handicap (TB) $135,000 (T) 1,000m
9.25pm: Firebreak Stakes Group Three (TB) $200,000 (D) 1,600m
10pm: Handicap (TB) $175,000 (T) 2,410m
The National selections: 6.30pm: RM Lam Tara, 7.05pm: Al Mukhtar Star, 7.40pm: Bochart, 8.15pm: Magic Lily, 8.50pm: Roulston Scar, 9.25pm: Quip, 10pm: Jalmoud
More from Neighbourhood Watch:
World Cricket League Division 2
In Windhoek, Namibia - Top two teams qualify for the World Cup Qualifier in Zimbabwe, which starts on March 4.
UAE fixtures
Thursday February 8, v Kenya; Friday February 9, v Canada; Sunday February 11, v Nepal; Monday February 12, v Oman; Wednesday February 14, v Namibia; Thursday February 15, final
Company profile
Company name: Suraasa
Started: 2018
Founders: Rishabh Khanna, Ankit Khanna and Sahil Makker
Based: India, UAE and the UK
Industry: EdTech
Initial investment: More than $200,000 in seed funding
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
RESULT
Huddersfield Town 2 Manchester United 1
Huddersfield: Mooy (28'), Depoitre (33')
Manchester United: Rashford (78')
Man of the Match: Aaron Mooy (Huddersfield Town)
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
Citadel: Honey Bunny first episode
Directors: Raj & DK
Stars: Varun Dhawan, Samantha Ruth Prabhu, Kashvi Majmundar, Kay Kay Menon
Rating: 4/5
Mohammed bin Zayed Majlis
More on animal trafficking
EPL's youngest
- Ethan Nwaneri (Arsenal)
15 years, 181 days old
- Max Dowman (Arsenal)
15 years, 235 days old
- Jeremy Monga (Leicester)
15 years, 271 days old
- Harvey Elliott (Fulham)
16 years, 30 days old
- Matthew Briggs (Fulham)
16 years, 68 days old
The specs: 2018 Jaguar F-Type Convertible
Price, base / as tested: Dh283,080 / Dh318,465
Engine: 2.0-litre inline four-cylinder
Transmission: Eight-speed automatic
Power: 295hp @ 5,500rpm
Torque: 400Nm @ 1,500rpm
Fuel economy, combined: 7.2L / 100km
Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
