UAE is coining a stable approach to cryptocurrency

Among billionaire businessman and philanthropist Warren Buffet t’s more famous quotes is his advice for would-be investors to “never invest in a business you cannot understand”. Nevertheless, the complexity of cryptocurrencies has not deterred governments, companies and individual investors from embracing digital assets. Indeed, their growing importance to the global economy was on full display in Abu Dhabi this week. At the Bitcoin Mena conference in the UAE capital on Tuesday, Eric Trump – son of US President-elect Donald Trump – championed the booming digital currency in a high-octane speech, calling it the “future of finance” and promising that the coming administration in Washington would be led by “the most pro-crypto president ... the first president to ever embrace crypto”. Mr Trump’s enthusiasm for Bitcoin is shared by many individuals making personal investments; last month The National spoke with one such investor, Nikita Sachdev, who seven years ago invested all her savings in crypto. “Our grandkids will be living in a blockchain-based world where the currency will be cryptocurrency,” she said. “Like our parents pass down gold to us, we'll be able to pass down Bitcoin to our future generations.” The challenges seen in some other parts of the Middle East have led more people to adopt cryptocurrencies. Some Lebanese faced with an ailing national currency, banking restrictions and spiralling inflation have transferred any spare wealth they have into digital currencies such as Bitcoin. These alternative currencies can circumvent capital controls, end the need to store cash at home and are often perceived to be more transparent than the country’s banking sector. However, as with any asset that is booming – and Bitcoin blasted past the $100,000-mark last week – there is always the possibility of bust, despite the endorsement of even its most earnest proponents. The continuing battle over crypto regulation could yet jeopardise investor confidence in digital assets; earlier this year US President Joe Biden's federal budget contained proposals for a 30 per cent tax on crypto miners' electricity costs, leading to accusations that Mr Biden would wipe billions in value from people’s crypto investments. Digital currencies enjoy a high profile in several dynamic economies, including the UAE, an emerging crypto hub. Therefore, it is not surprising that the chief executives of crypto exchange Binance and global financial technology firm Circle announced a strategic partnership for USD Coin at Abu Dhabi Finance Week yesterday. But the UAE is also showing there are ways of weaving digital currencies into a balanced investment portfolio. This week, AE Coin, the stablecoin that was the first regulated digital currency in the UAE, was granted final approval by the Central Bank. Scheduled to be launched soon, AE Coin is backed by reserves held in the Emirates, something that mitigates volatility, leads to consistent valuation and – most importantly – engenders trust. In another important development this week, it was announced that two UAE companies are teaming up to build the country's biggest solar farm dedicated to cryptocurrency mining . Moves to make this energy-intensive process greener and more sustainable while maintaining profitability are important to embedding confidence in the crypto sector. Coupled with the UAE’s measured regulatory approach and reputation for anti-money laundering measures and know-your-customer rules, the country is trend setting – showing that it is possible to embrace future currencies responsibly. That may not make crypto any easier to understand, but it should reassure those who want to invest in the future.