With Bitcoin surging to unprecedented heights, the prospects of the cryptocurrency market have never been better. Better regulations, a growing influx of crypto players and a general acceptance of the future of finance are all supporting the market, analysts said, as the Bitcoin Mena conference begins in Abu Dhabi this week, bringing together some of the world's biggest names.
Speakers include Eric Trump, son of US president-elect Donald Trump, billionaire Steve Witkoff, the new White House envoy for the Middle East and co-founder of World Liberty Financial, Binance founder Changpeng Zhao, alias CZ, and David Bailey, co-founder and chief executive of BTC, among others.
Bitcoin, the world's first and biggest cryptocurrency, soared past the $100,000 mark last week, leaping 40 per cent in the two weeks after Donald Trump won the US elections, as the market embraced the incoming US administration's pro-crypto stance.
It was flirting at the six-figure mark as of Monday, now up by nearly half since the November 5 polls, leading a crypto sector whose market capitalisation is now at more than $3.67 trillion, data from CoinMarketCap shows.
Cryptocurrencies, while still in their infancy, have long been promoted to be safer and more cost-efficient alternatives to traditional money. Together with their underlying technology, blockchain, their economic effect could be sweeping.
In a scenario where cryptos become more mainstream, they could significantly affect the economy and reshape the financial landscape in several ways, Arun John, chief market analyst at Dubai-based Century Financial, told The National, noting that they could shake up finance in two ways: by improving global transactions and through the use of central bank digital currencies (CBDCs).
"Cryptocurrencies have lower transaction costs when compared to banks. Additionally, they are facilitated through a global platform, making cross-border payments faster and cheaper. This could benefit international trade and remittances,” he said.
"CBDCs, on the other hand, could coexist with traditional currencies or replace them. Such a move would potentially reshape monetary policy and financial stability.”
The UAE has emerged as the Mena region's third-largest crypto economy after Saudi Arabia and Turkey, receiving around $34 billion worth of cryptos between July 2023 and June 2024, a 42 per cent annual jump that is significantly higher than the Mena average of almost 12 per cent, data from New York-based Chainalysis shows.
The Mena region ranks as the seventh-largest crypto market globally in 2024, with an estimated $338.7 billion received between the same period, accounting for 7.5 per cent of the world’s total transaction volume, it added.
Mainstream crypto adoption could also contribute to the UAE's economic diversification. Blockchain and cryptocurrencies may enhance efficiencies, increase competition and position the UAE as a leader in financial innovation while maintaining economic stability, Jawad Ashraf, chief executive of Vanar Chain, told The National.
Given its history of updating already established frameworks to keep in step with market trends, "the UAE is expected to accelerate crypto regulations … [with] stronger regulations to ensure risk mitigation and boost investor confidence”.
The UAE has had a CBDC strategy in place since 2023, in addition to guidelines on stablecoins, virtual payment tokens pegged to stable assets such as the dollar.
"Global firms are taking notice … businesses in general, including crypto-specific companies and related industries, are attracted [to cities such as Abu Dhabi],” Arushi Goel, head of policy for the Middle East and Africa at industry tracker Chainalysis, told The National.
"As the ecosystem evolves, we will need to think about regulations more holistically. As we see newer players and business models enter the play, it is not just about putting in place a set of regulations, but making sure the regulations are also understood and implemented.”
The UAE's moves have attracted a number of major players in the global digital asset landscape. In October, OKX, one of the largest crypto exchanges in the world, launched a platform for retail investors in the UAE, while cryptocurrency and blockchain solutions company Ripple received an in-principle licence to operate as a payment services provider in Dubai.
In August, Tether, the world's largest stablecoin, announced plans to launch a dirham-pegged stablecoin in the UAE. In April, the Dubai-based subsidiary of cryptocurrency exchange Crypto.com, Cro Dax Middle East, secured a full operational licence from Dubai. Ledger, the French crypto and cyber security firm, recently told The National it was planning to expand in the Middle East in 2025.
Some sectors have also began accepting cryptos as payments. In real estate, for example, while cash remains the preferred method, cryptocurrency is gaining traction as an alternative, especially for tech-savvy and international investors who value speed and borderless transactions, according to Dubai-based Stat Global, which calls itself a digital estate agent.
"There is a particular focus on regulatory clarity in high-risk areas like crypto-based real estate transactions, where transparency and security are critical. By adapting quickly to market changes, the UAE can reduce risks like fraud and market manipulation while keeping in mind investor protection,” Egor Maslennikov, chief executive of Dubai-based developer Object1, told The National.
Risk management
As with any other asset, while cryptocurrencies hold promise, they also carry risks and are considered among the most risky given their high volatility, where wild swings are influenced by simple factors such as tweets.
A US-led crypto revolution, addressing its problems and loopholes, would bode well for the global sector, The National had reported earlier this year. Domestically, quick and transparent regulations are key to managing emerging risks and building confidence among stakeholders, including developers, investors and consumers.
However, a cyclical market means there can also be another crypto winter – a period of softening for the sector in which a substantial amount of its value is wiped out – which could be more severe than previous cycles, given the significant capital now tied to digital assets, said Ahmad Assiri, a research strategist at broker Pepperstone.
"The UAE’s substantial investments in the sector make it more resilient, but they also amplify the stakes. Maintaining a balanced approach – encouraging growth while preparing for potential downturns – is the key,” he told The National.
Meanwhile, the presence of regulated exchange-traded fund products and institutional involvement provides a cushion against extreme price swings, unlike during previous crypto winters, said Wael Makarem, financial markets strategists lead at broker Exness.
However, he cautioned that the higher market capitalisation, deeper integration with traditional finance and broader institutional exposure mean "any significant downturn could have far-reaching consequences”.
"The market's maturation through ETFs represents progress but doesn't eliminate volatility risks. This new landscape suggests future crypto winters might be less severe in percentage drops but potentially more impactful due to the broader economic connections,” he added.
