Global cryptocurrency exchange Binance has received a full operational licence to operate in Dubai, in a move expected to accelerate the adoption of digital assets and solidify the reliability of the UAE's regulatory environment.
The virtual asset service provider licence granted by the Virtual Assets Regulatory Authority will allow Binance to extend its current services beyond spot trading and fiat services, and expand its services to retail investors, the company said on Thursday.
The Vasp licence follows the operational minimum viable product licence given to Binance in July 2023, which allowed it to provide exchange and broker-dealer services in Dubai.
The decision will be critical to Binance's strategy of growing its global user base. It expects to cross the 200 million user mark “quite shortly”, Richard Teng, chief executive of Binance, told The National on Thursday.
That would cement its status as the world's biggest crypto exchange by number of users, almost double Coinbase's 108 million, according to the latest data from Statista. Crypto.com, which received its Vasp licence last week, says it has more than 80 million users.
That would also be about half of the estimated 420 million users with exposure to crypto assets, according to Binance data.
Binance currently has about188 million users, having added about 16 million in the first quarter, said Mr Teng, who replaced Changpeng Zhao as chief executive in November.
“We're seeing much greater institutional adoption and institutional money coming into this space … [on] much greater regulatory clarity and a lot more jurisdictions approving [digital asset] products that bring in new investors classes,” he said.
Binance also expects the adoption of digital assets to be “much faster” in the next five years compared to the last five, when the industry experienced the so-called crypto winter, according to Mr Teng.
“As of now, we stand at about 5 per cent crypto adoption globally, but that will become much faster moving forward,” he said, while acknowledging that the crypto sector is still at a very early stage of development.
But the company is “very bullish with all these key developments with regulatory clarity, institutional adoption and embracement, as well as Bitcoin's halving [this week]”, Mr Teng said.
Dubai and the UAE are heavily supporting technologies such as digital assets, and have launched several initiatives to increase adoption as it positions itself to become a leader in the economy of the future.
In March 2022, the emirate adopted a law to regulate virtual assets to support investors and streamline the offerings from exchanges.
The emirate also set up Vara under the Dubai Virtual Asset Regulation Law, to create an advanced legal framework to protect investors, provide international standards for the virtual asset industry management and enable responsible business growth.
“Global crypto regulation is currently showing diverging signs. Some developed countries have long suffered from crypto-related frauds and illegal exchanges. On the other hand, emerging nations like the UAE and Singapore have enacted crypto laws at faced pace,” Vijay Valecha, chief investment officer of Dubai-based Century Financial, told The National.
“The UAE has recognised the need to attract stable and long-term investments in the digital assets space,” said Mr Valecha, who noted the country's strict compliance checks and anti-money laundering regulations to protect investors.
In February last year, Vara also issued fresh regulations as the global cryptocurrency sector was left reeling after the collapse of several large platforms, including Celsius, Three Arrows Capital and FTX, led by Sam Bankman-Fried, who was sentenced to 25 years in prison for fraud and conspiracy last month.
The regulations aimed to offer certainty and greater clarity on the expected level of operator responsibility, and also mitigate market risks.
The UAE aims to establish itself as one of the next high-growth crypto capitals of the world, with institutional investors, hedge funds and financial majors moving in and setting up operations, also bringing along talent.
Investors in the Emirates realised capital gains worth $204 million from cryptocurrency investments last year, blockchain data company Chainalysis reported last month.
The global cryptocurrency investor community achieved total gains worth $37.6 billion last year, it said.
Dubai's position as a technology hub is crucial in “acknowledging and embracing the financial potential that blockchain technology brings”, said Alex Chehade, general manager of Binance.
“To a lot of extent, the regulatory approach [in the UAE] is evolving and dynamic in nature. The nations' laws can potentially look to provide regional benchmarks for other GCC nations to follow suit,” Mr Valecha said.
