A cryptocurrency banner in Davos, Switzerland. A World Economic Forum report shows the increasing acceptance of digital currencies poses challenges for capital markets, investors, regulators and tax authorities globally. Bloomberg
A cryptocurrency banner in Davos, Switzerland. A World Economic Forum report shows the increasing acceptance of digital currencies poses challenges for capital markets, investors, regulators and tax authorities globally. Bloomberg
A cryptocurrency banner in Davos, Switzerland. A World Economic Forum report shows the increasing acceptance of digital currencies poses challenges for capital markets, investors, regulators and tax a
A World Economic Forum report shows the increasing acceptance and decentralised nature of digital currencies pose unprecedented challenges for capital markets, investors, financial regulators and tax authorities globally.
Concerned about the elevated risk investors face, authorities have been stepping up cryptocurrency regulation. Watchers warn that more stringent crypto regulation may be just around the corner.
For crypto investors, it has become imperative to understand what regulation may look like and how to navigate a more regulated cryptosphere.
But first, let’s dive into why the market needs regulation.
Does crypto need regulation?
Crypto experts insist digital is the future of finance. Hence, the industry must be regulated in the same way as the traditional financial system.
“Within crypto, regulation can play a critical role to safeguard customer assets, protect investor interests and significantly limit cases of fraud,” saysJoseph Dallago, co-founder and chief executive of Rain Financial, which operates the Rain cryptocurrency exchange that is licensed by the Central Bank of Bahrain.
The decisions of governments to regulate crypto must be championed, says Nigel Green, chief executive and founder of deVere Group.
Digital currencies should be held to the same standards as the rest of the financial system, he adds.
Crypto has come of age and there is no greater proof of its mainstreaming than “the news that digital currencies are being brought into the regulatory tent in one of the world’s largest economies and most highly-regulated markets”, says Mr Green, citing the UK government’s recent decision to regulate the industry.
Since cryptocurrencies are set to have a bigger impact on the global financial system, “a strong regulatory framework will help protect investors, tackle criminality and reduce the potential possibility of disrupting financial stability”, he says.
Greater transparency and regulation of crypto will also “help attract the businesses of tomorrow — and the jobs they create — as effective regulation gives them the confidence they need to think and invest long-term”, Mr Green adds.
In March last year, 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.
It also established the Virtual Asset Regulatory Authority (Vara) as an independent body to regulate the sector throughout the emirate, including special development zones and free zones, but excluding the Dubai International Financial Centre.
Last September, the Financial Services Regulatory Authority (FSRA), the regulator of Abu Dhabi's financial hub, the Abu Dhabi Global Market (ADGM), published guiding principles on its approach to virtual asset regulation and supervision to outline its expectations for the asset class and service providers in the sector.
Investors are eager to know whether cryptocurrency should be regulated like securities or with new regulations specifically for digital currencies.
There is a pathway for cryptocurrency regulation through either central banks or capital market authorities, says Mr Dallago.
“This model can create a regulatory umbrella for use cases of crypto that go beyond securitisation of assets, investments or technological advances,” he says.
“We see great potential for synergies also between crypto asset regulations and capital market regulations.”
Governments’ decision to regulate crypto must be championed. Digital currencies should be held to the same standards as the rest of the financial system
Nigel Green, chief executive and founder, deVere Group
This model works in the GCC, specifically in Bahrain through the Central Bank of Bahrain and in the UAE's ADGM through the FSRA, Mr Dallago says.
Mr Green says new rules must be written and implemented for the crypto market, a relatively new asset class built on fast-changing technology.
“Older regulations, designed for other asset classes in the last century, are likely not adequate,” he says.
He also singles out meme coins, such as Dogecoin and Shiba Inu, for regulatory action.
“Regulation would also help crack down on useless meme tokens, which undermine the credibility of the crypto sector,” he says.
“More robust, enforceable regulation is the answer for crypto.”
He places particular emphasis on the importance of regulating crypto exchanges.
It is argued that if crypto transactions flowed through regulated exchanges, it would be much easier to thwart and prevent potential wrongdoing, such as money laundering, crypto hacks and tax evasion.
Regulation will help crack down on useless meme tokens such as Dogecoin, which undermine the credibility of the crypto sector, experts say. Reuters
Regulation should first tackle concerns surrounding anti-money laundering and counter terrorist financing, says Mr Dallago.
Crypto analysts also emphasise the need for regulators to join hands with leading industry participants to ensure new rules don’t stifle innovation.
Navigating the crypto regulation
Regulation of crypto is a matter of when, not if. The sooner investors accept it, the better.
Many fraudulent activities in the crypto space last year could have been avoided if there was regulatory oversight of crypto asset platforms in unregulated markets, says Mr Dallago.
“Greater crypto regulation would not impede investment in this space, but rather encourage it as there are regulatory mechanisms to safeguard investor interests and protect their capital,” he adds.
After a year of crypto company collapses, accusations of top-level fraud and prison sentences for wrongdoing, there’s no denying that greater scrutiny would help protect investors, says Mr Green.
“Regulation could provide a potential long-term, sustainable economic boost to those countries which introduce it, as crypto is widely regarded as the future of finance,” he adds.
Crypto watchers, though, warn of increased market volatility as new rules are rolled out.
A shakeout of the market, as a result, would see many unproven coins with little utility fall to the ground.
Investors should also expect a large-scale industry consolidation when crypto regulation becomes a reality.
Therefore, crypto assets that have strong developer communities, security safeguards and infrastructure are the safest bets.
Is regulation bad for crypto prices?
Many investors mistakenly believe greater regulatory scrutiny is harmful for crypto prices.
Mr Dallago says growing regulation is a positive sign for crypto.
“As the industry grows, we are seeing more and more regulators jumping on the ship to regulate it,” he says.
“This means, beneath the rhetoric, governments recognise the value of this technology and the benefits it can unlock for their constituents,” he adds.
However, for regulation to be a positive force for the industry, it should focus on key risks without crimping customer access or adoption.
Growing regulatory oversight is the mark of a maturing industry.
“Regulation will further shore up the crypto sector and instil trust and confidence among investors,” says Mr Green.
Cryptocurrencies — in pictures
The crypto market, which includes currencies such as Bitcoin, pictured, has lost $2 trillion of its value in six months. Unsplash
The price of Ethereum, the second largest cryptocurrency by market size, has fallen by 70 per cent this year. Investors and analysts are watching to see if it will dip below $1,000. Unsplash
Dogecoin, supported by Elon Musk, is about 90 per cent down from May last year, yet it is outperforming Bitcoin and Ethereum in the current crash. Unsplash
The government of El Salvador has invested $105 million in Bitcoin. President Nayib Bukele's embrace of the cryptocurrency as legal tender is being questioned as the market crashes. Getty
Changpeng Zhao, founder of crypto exchange giant Binance, has compared the current market turmoil to the dotcom bubble of the early 2000s. Still, the company is aggressively pursuing licensing in international jurisdictions and introducing new products. Getty
Tether is the biggest issuer of stablecoins, a type of cryptocurrency pegged to a traditionally stable asset like the US dollar. Most stablecoins are meant to maintain a constant price of $1 and are backed by real reserve funds, making it easy to convert crypto investments into cash. But Tether's financial statements show that may not be true, leaving the issuer and its investors vulnerable. Unsplash
The recent crypto crash can in part be attributed to the collapse of TerraUSD, a stablecoin pegged to the US dollar through algorithms and linked to a "sister" cryptocurrency named Luna. When the price of Luna plummeted, TerraUSD also fell, creating a “death spiral” to practically zero for both coins. Unsplash
On June 12 crypto lender Celsius Network said it had paused customer withdrawals, saying it needed “to stabilise liquidity and operations”. Investors are still waiting, with no signs that the current meltdown will let up. Getty
A regulated crypto industry will attract more institutional investors — including pension funds, mutual funds, investment banks, commercial trusts and hedge funds — as well as individual investors.
“This will have a beneficial impact on the price trajectory longer term,” says Mr Green.
Regulation is key to creating an environment for crypto that adheres to robust standards, safeguards customers’ interests and creates a platform for the private sector to grow.
“All of this will ultimately reflect upwards on price as adoption increases and use-cases for crypto materialise,” Mr Dallago adds.
Other must-tries
Tomato and walnut salad
A lesson in simple, seasonal eating. Wedges of tomato, chunks of cucumber, thinly sliced red onion, coriander or parsley leaves, and perhaps some fresh dill are drizzled with a crushed walnut and garlic dressing. Do consider yourself warned: if you eat this salad in Georgia during the summer months, the tomatoes will be so ripe and flavourful that every tomato you eat from that day forth will taste lacklustre in comparison.
Badrijani nigvzit
A delicious vegetarian snack or starter. It consists of thinly sliced, fried then cooled aubergine smothered with a thick and creamy walnut sauce and folded or rolled. Take note, even though it seems like you should be able to pick these morsels up with your hands, they’re not as durable as they look. A knife and fork is the way to go.
Pkhali
This healthy little dish (a nice antidote to the khachapuri) is usually made with steamed then chopped cabbage, spinach, beetroot or green beans, combined with walnuts, garlic and herbs to make a vegetable pâté or paste. The mix is then often formed into rounds, chilled in the fridge and topped with pomegranate seeds before being served.
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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.”
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
You can report an incident to HR or an immediate supervisor
You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
What is blockchain?
Blockchain is a form of distributed ledger technology, a digital system in which data is recorded across multiple places at the same time. Unlike traditional databases, DLTs have no central administrator or centralised data storage. They are transparent because the data is visible and, because they are automatically replicated and impossible to be tampered with, they are secure.
The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.
Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.
However, one of the major problems that has come to light has been the presence of illicit material buried in the Bitcoin blockchain, linking it to the dark web.
Other blockchain platforms can offer things like smart contracts, which are automatically implemented when specific conditions from all interested parties are reached, cutting the time involved and the risk of mistakes. Another use could be storing medical records, as patients can be confident their information cannot be changed. The technology can also be used in supply chains, voting and has the potential to used for storing property records.
