Governments need to develop regulatory frameworks for Web3 assets as early as possible and not wait until the sector has perfected itself, experts said during a panel discussion at the Dubai FinTech Summit on Monday.
In many developed markets, regulators are slower to respond as they are trying to understand different components of Web3, said Ebru Pakcan, Citi UAE's managing director for Middle East and Africa.
“The challenge with that is the innovation is not stopping; the innovation continues,” she said.
“So, the later the framework comes, the more exceptions are actually evolving and growing. I think moving fast is important.”
Web3 is the emerging third generation of the World Wide Web, with blockchain, decentralisation, openness and greater user utility among its core components.
Its market size is expected to be valued at about $6.2 billion in 2023 and grow at a compound annual rate of 44.6 per cent from 2023 to 2030, according to Market Research Future.
Although there is more work to do in the traditional finance space, it is important for governments and society as a whole to think about how to work on responsible digital asset development in Web3, Ms Pakcan said.
“The most recent examples are showing us that the most vulnerable are likely to be the consumers who are already challenged with lack of financial inclusion,” she said.
Explaining the fundamental differences between the current financial system and Web3, or decentralised finance (DeFi), Jonathan Hayes, head of digital assets development at Swiss private bank Julius Baer, said that while DeFi has been rich in innovation, it has fallen short in terms of financial responsibility and money laundering protection.
DeFi is a completely isolated world in which you can speculate in virtual assets, and it lacks any links to physical assets, Mr Hayes said.
However, financial services will help to tokenise assets and bring them on to the blockchain, he said.
“On the other hand, banks are not really the most innovative, but primarily set up for stability and to conduct business in a regulated manner,” he added.
“Financial services can profit from the decentralised finance system and bring more innovation to the offering, but I think it’s going to be a long process.”
The idea of a Web3 blockchain-based environment is to obviate the need for trust, according to Staci Warden, chief executive of Algorand Foundation.
“The stuff that has happened this year in crypto, I would argue, is really just about fraud. Like you'd see anywhere, just happens to be around digital assets,” she said.
“Fraudsters are fraudsters, maybe it's very important to go after those people wherever they are.”
Blockchain is different from traditional financial services because several parties record transactions on a single ledger, Ms Warden said.
Not one entity controls the ledger and that is where decentralisation becomes fundamental to Web3, she said.
Umar Farooq, chief executive of Onyx by JP Morgan and global head of financial institutional payments, said the vast majority of users were also not tech-savvy.
Although banks and regulators are fundamentally in the business of trust, lenders continue to find ways to mess up on a regular basis, he said.
“Therefore, regulation is key because otherwise people will continue to default back to centralised finance to interact with DeFi. Without proper regulation, oversight and clarity on a global level, you will continue to run into fraud,” Mr Farooq said.
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
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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.”
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Recipe: Spirulina Coconut Brothie
Ingredients
1 tbsp Spirulina powder
1 banana
1 cup unsweetened coconut milk (full fat preferable)
1 tbsp fresh turmeric or turmeric powder
½ cup fresh spinach leaves
½ cup vegan broth
2 crushed ice cubes (optional)
Method
Blend all the ingredients together on high in a high-speed blender until smooth and creamy.
