MGX's $2bn Binance investment likely to drive more regulatory clarity for crypto

This year expected to be tipping point as hedge funds, exchanges and asset managers commit meaningful capital into digital assets, analysts say

More investors are expected to take a leap into the cryptocurrency sector in 2025, according to analysts. Reuters

The milestone investment by Abu Dhabi's MGX into Binance is expected to boost institutional investor interest in cryptocurrencies, as it is widely viewed as a vital driver for regulatory clarity, analysts have said.

The technology investment company said last week that it will invest $2 billion in Binance, getting a minority stake, marking the first institutional investment in the world’s largest cryptocurrency exchange.

Institutional interest in crypto has been building for years, but 2025 marks a "tipping point", as the MGX investment is part of a larger trend that would see hedge funds, exchanges and asset managers committing "meaningful capital" to digital assets, said Sebastien Badault, vice president at French cryptocurrency and cyber security company Ledger.

"Risk frameworks have matured, regulatory clarity is improving and new financial products like spot Bitcoin exchange-traded funds have made access easier. The volatility that once kept institutions on the sidelines is now viewed as a feature rather than a bug," he told The National.

"Sophisticated investors see crypto as a high-growth asset class with uncorrelated returns, deepening liquidity and an emerging derivatives market. The real question is no longer if institutions should invest, but how they can do so securely and at scale."

Binance chief executive Richard Teng previously told The National that the exchange would focus heavily on working with regulators in the aftermath of a 2023 legal case that resulted in previous boss Changpeng Zhao stepping down. Mr Teng was the former chief executive of Abu Dhabi Global Market's Financial Services Regulatory Authority, which oversees digital assets.

Binance's VIP user base doubled in 2024, while the number of its registered institutional users nearly doubled, showing a trend that "highlight[s] crypto’s expanding reach and deepening integration with traditional finance", a company representative told The National.

"Institutional interest continues to rise, as evidenced by strong ETF inflows, with new applications being filed regularly. Regulatory momentum remains strong in key markets such as the United States, creating a clearer path for mainstream adoption. Market cycles come and go, but the fundamental indicators of crypto’s strength – adoption, liquidity, and institutional participation – are only getting stronger."

The exchange's focus on security, compliance and collaboration with regulators, particularly in the UAE, "helps build trust among market participants", said Hamza Zraimek, chief executive of US-based tech consultancy Iguodar.

"As Binance and MGX collaborate on scalable blockchain solutions, they set a standard for meeting global regulatory frameworks, with the UAE’s progressive regulations serving as a model for other regions, helping to create a more secure and credible crypto ecosystem," he told The National.

'Global crypto hub'

The UAE is taking steps to boost the adoption of digital assets and has launched several initiatives to support the sector.

Abu Dhabi's ADGM has attracted global cryptocurrency players such as eToro and M2, allowing these companies to operate as a brokers for securities, derivatives and crypto assets, and platforms for institutional and retail investors to buy, sell and hold custody of virtual assets.

Dubai also adopted a law in 2022 to regulate virtual assets to support investors and streamline the offerings from exchanges. The emirate also set up the Virtual Assets Regulatory Authority under the Dubai Virtual Asset Regulation Law, to create an advanced legal framework.

The UAE Central Bank also issued a regulation on stablecoins in June that will only allow businesses and sellers in the Emirates to accept cryptocurrencies for goods and services if they are dirham-backed stablecoins.

"Institutional adoption is a mark of crypto’s maturity and clear regulatory frameworks are a key driver. This is evident in recent regional developments with this investment as well as with Emirates NBD’s strategic entry into the space leveraging regulated channels," Arushi Goel, head of policy for the Middle East and Africa at blockchain company Chainalysis, told The National.

Emirates NBD, Dubai's biggest bank by assets, earlier this month announced its entry into the digital asset space with the launch of cryptocurrency trading services on its Liv lifestyle banking unit.

"This relationship is bidirectional. Clear regulations attract institutional players who subsequently drive regulatory advancements through their rigorous compliance standards, resulting in a positive sum outcome for all stakeholders," Ms Goel added.

The UAE has emerged as the Mena region's third-largest crypto economy after Saudi Arabia and Turkey, latest data from New York-based Chainalysis shows. The country received 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.

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"Along with retail participants, institutional investors are also witnessing the industry’s growth in the Emirates, which is slowly turning into a global crypto hub," Vijay Valecha, chief investment officer of Dubai-based Century Financial, told The National.

"Such a development could encourage more crypto exchanges to set up shop in the UAE, leading to an enhanced level of institutional investment activity for the region."

In January, the Dubai Multi Commodities Centre and Reit Development also unveiled plans for Crypto Tower, aimed at demonstrating the practical use of blockchain, as it will use the technology for real estate, and tenant management and ownership, on-chain voting and smart contracts.

At last month's Dubai Boat Show, it was revealed that demand for luxury yachts in the region is rising as more cryptocurrency investors enter the market, and those who bought property during the pandemic have cashed in on their long-term profits, experts told The National.

"A key trend is the rise of tokenised assets, where things like real estate, stocks and bonds are turned into digital tokens on blockchain networks. This makes transactions faster and unlocks more liquidity, attracting institutional investors," Mr Valecha added.