Kraken, one of the world's biggest cryptocurrency exchanges, secured a regulatory licence from the Abu Dhabi Global Market (ADGM) to operate its virtual asset trading platform in the capital as demand for cryptocurrencies continues to rise globally.
Kraken will offer investors the ability to invest, trade, withdraw and deposit virtual assets including Bitcoin and Ether directly in local currency, ADGM said in a statement on Monday.
The US-based cryptocurrency exchange “has met all approval conditions from the Financial Services Regulatory Authority (FSRA) of ADGM to operate as a Virtual Asset Multilateral Trading Facility and custodian in Abu Dhabi and the wider UAE”, ADGM said.
ADGM introduced the world’s first comprehensive virtual asset regulatory framework in 2018. It has since attracted a number of major companies dealing with cryptocurrencies to set up base in its regulated financial free zone. In December, it granted regulatory permission to virtual asset trading platform Hayvn.
Binance, the world’s largest cryptocurrency exchange, has also received in-principle approval from the ADGM to operate as a broker-dealer in virtual assets in the UAE capital.
The Middle East is one of the fastest growing cryptocurrency markets in the world, according to Chainalysis. The region received $271.7 billion worth of cryptocurrency between July 2020 and June 2021, a 1500 per cent increase over the Middle East’s total activity during the previous year, it said in the report.
“The UAE is one of the most financially innovative jurisdictions in the world, with region-leading crypto participation rates by both consumer and professional investors,” said Curtis Ting, managing director for Europe, the Middle East and Africa at Kraken.
The Kraken group, founded in 2011, serves a client base of more than nine million across 60 countries. It is backed by investors including Tribe Capital, SkyBridge, Hummingbird Ventures, Blockchain Capital, Digital Currency Group, among others.
The UAE is quickly emerging as a preferred destination for crypto exchanges. Last month, global cryptocurrency exchange FTX said it received a virtual asset licence to set up regulated trading and clearing services in Dubai. Cryptocurrency exchange Bybit, which has more than two million registered users, also received in-principle approval to conduct virtual assets business in Dubai.
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.
In March, Dubai adopted a new law that regulates virtual assets including cryptocurrencies such as Bitcoin and non-fungible tokens in the emirate.
The Dubai Virtual Asset Regulation Law aims to create an advanced legal framework to protect investors and provide international standards for virtual asset industry governance that will promote responsible business growth in the emirate.
"It certainly seems that the UAE is becoming the hub of cryptocurrencies, and this is primarily due to the region presenting itself as an early adopter and also providing a transparent regulatory environment for the crypto space," said Naeem Aslam, chief market analyst at Avatrade.
Kraken's launch in the UAE is "only going to increase institutional capital flow, and we are likely to see more money going into bitcoin".
The Central Bank of the UAE does not presently accept or acknowledge crypto-assets or virtual assets as a legal tender in the UAE. The only legal tender in the country is the UAE dirham.
