Family offices need to understand the risks before investing in decentralised finance and cryptocurrencies, DeFi industry leaders told the Wealth Today Summit in Dubai on Tuesday.
DeFi, which experts say is a more secure way of managing financial transactions as it relies on blockchain, is a viable alternative as the world quickly moves towards a digital world that requires safeguarding investor assets and portfolios, they said.
“From the financial institutions’ perspective, the challenge is to adopt DeFi in a way that keeps to their regulatory obligations to customers,” Wai-Lum Kwok, senior executive director for authorisation and FinTech at the Financial Services Regulatory Authority of Abu Dhabi Global Market, told The National.
“From the customers’ standpoint, they need to understand the risks before investing in the DeFi space.”
Family offices are private wealth management advisory firms that cater to ultra-high net worth individuals. They are distinct from traditional wealth management companies as they offer more holistic solutions, including insurance, tax services, wealth transfer and charitable giving.
More than 200 of the world's single largest family offices cover a total net worth of around $493 billion, with individual families’ net worth averaging about $2.2bn, Swiss bank UBS said in a 2022 report on the sector.
However, family offices are not immune to the current economic environment. Soaring inflation and central banks' moves to increase interest rates are forcing them to reconsider their strategies and asset allocations, UBS said.
They are reducing fixed-income allocations and sacrificing liquidity for returns, as they increase investments in private equity, real estate and private debt, it said.
“The risk of a further sell-off cannot be ruled out as tighter Federal Reserve expectations, the global sell-off in risk assets and the fact that the massive outflows in cryptocurrencies started showing some cracks in the freshly born crypto industry make cryptocurrencies increasingly less appetising,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note on Tuesday.
The Wealth Today Summit panel also acknowledged the risks in investing in digital assets, such as cryptocurrencies, but sought to allay fears by emphasising the importance of being educated and assuring investors that regulators oversee market activity.
“It’s extremely safe, especially if you know the kind of product, platform and protocol you’re using — especially with a heavily regulated exchange — and when the custody of your forms is being taken care of by the regulator,” said Benjamin Ampen, managing director for the Middle East and North Africa at Kraken Crypto Exchange.
“You can have a real advantage if you are in the know. The more you research, the more advantage you will have.”
Technologies influenced by blockchain are running at a fast pace, forcing investors, regulators and companies to keep pace, said Bijan Alizadeh Fard, co-founder and partner at Dubai-based venture capital firm Cypher Capital.
“As technology starts evolving, we started to see that the industry was shifting and going at a very fast pace. We have seen three cycles already,” Mr Alizadeh Fard said, referring to the three major crashes the cryptocurrency sector has experienced to date.
“A couple of times we thought it was finished, but then realised there's nothing to worry about as it’s just a cycle.”
Bitcoin, the world's first and largest cryptocurrency, crashed below the key $20,000 psychological level on Saturday as investors continued to shy away from riskier assets amid concerns of rising interest rates as central banks try to rein in inflation.
The digital token has since pared back its losses and was trading at $21,069.91 as of 5pm UAE time on Tuesday, according to CoinDesk. Still, it is down more than two thirds from its peak of almost $68,000 last November.
“Traditional investors would only invest in asset classes that are regulated, but there's clearer guidance on how to conduct business today,” said Stefan Kimmel, chief commercial and operating officer for Mena at Kraken Crypto Exchange.
Investors should not deal with unregulated companies, which are risky and major sources of unproven digital assets that can potentially ruin asset portfolios, Mr Kimmel said.
The sector is also grappling with threats to the digital asset ecosystem, with money laundering, market manipulation and online theft the biggest threats globally to DeFi, blockchain data platform Chainalysis said in a recent study.
Crypto has not experienced an extremely aggressive micro-environment as we have not been dabbling with the fear of recession and inflation
Karim AbdelMawla,
research associate at 21 Shares
The spectre of the so-called “crypto winter” — a prolonged period in which prices stay low for an extended period of time — is apparently settling in, with the panel uncertain how long it would last given the uncertainty of market conditions and perceptions to the cryptocurrency industry.
The latest crash, however, “needed to happen” because the market was “overleveraged and filled with overhyped products”, said Karim AbdelMawla, a research associate at Swiss crypto platform 21 Shares.
The crypto winter “could last anywhere from a year to two years, or more than that”, he said.
“Crypto has not experienced an extremely aggressive micro-environment as we have not been dabbling with the fear of recession and inflation,” Mr AbdelMawla said.
“In order to have a clear vision of how long this will last, we need to know the rules and how to protect assets.”
What is dialysis?
Dialysis is a way of cleaning your blood when your kidneys fail and can no longer do the job.
It gets rid of your body's wastes, extra salt and water, and helps to control your blood pressure. The main cause of kidney failure is diabetes and hypertension.
There are two kinds of dialysis — haemodialysis and peritoneal.
In haemodialysis, blood is pumped out of your body to an artificial kidney machine that filter your blood and returns it to your body by tubes.
In peritoneal dialysis, the inside lining of your own belly acts as a natural filter. Wastes are taken out by means of a cleansing fluid which is washed in and out of your belly in cycles.
It isn’t an option for everyone but if eligible, can be done at home by the patient or caregiver. This, as opposed to home haemodialysis, is covered by insurance in the UAE.
RESULT
Liverpool 4 Southampton 0
Jota (2', 32')
Thiago (37')
Van Dijk (52')
Man of the match: Diogo Jota (Liverpool)
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Suggested picnic spots
Abu Dhabi
Umm Al Emarat Park
Yas Gateway Park
Delma Park
Al Bateen beach
Saadiyaat beach
The Corniche
Zayed Sports City
Dubai
Kite Beach
Zabeel Park
Al Nahda Pond Park
Mushrif Park
Safa Park
Al Mamzar Beach Park
Al Qudrah Lakes
WORLD CUP SEMI-FINALS
England v New Zealand
(Saturday, 12pm UAE)
Wales v South Africa
(Sunday, 12pm, UAE)
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Stuck in a job without a pay rise? Here's what to do
Chris Greaves, the managing director of Hays Gulf Region, says those without a pay rise for an extended period must start asking questions – both of themselves and their employer.
“First, are they happy with that or do they want more?” he says. “Job-seeking is a time-consuming, frustrating and long-winded affair so are they prepared to put themselves through that rigmarole? Before they consider that, they must ask their employer what is happening.”
Most employees bring up pay rise queries at their annual performance appraisal and find out what the company has in store for them from a career perspective.
Those with no formal appraisal system, Mr Greaves says, should ask HR or their line manager for an assessment.
“You want to find out how they value your contribution and where your job could go,” he says. “You’ve got to be brave enough to ask some questions and if you don’t like the answers then you have to develop a strategy or change jobs if you are prepared to go through the job-seeking process.”
For those that do reach the salary negotiation with their current employer, Mr Greaves says there is no point in asking for less than 5 per cent.
“However, this can only really have any chance of success if you can identify where you add value to the business (preferably you can put a monetary value on it), or you can point to a sustained contribution above the call of duty or to other achievements you think your employer will value.”
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
