The United Arab Emirates ranks third worldwide in the region by transaction volume, just behind Lebanon (approximately $26 billion) and Turkey ($132.4 billion), according to Chainalysis data analyzed between July 2020 and June 2021.
In the Middle East, the financial services sector is expected to undergo a radical transformation in 2022. These changes are reflected in the development of cryptocurrencies and digital payments.
Globally, the cryptocurrency market is booming and is ultimately expected to replace traditional financial systems.
Dubai and the Emirates in general, with their numerous policies supporting blockchain technology, are emerging as one of the best markets for cryptocurrency trading in the region and worldwide.
First of all, what is crypto?
Cryptocurrency is digital money (it does not exist in the form of banknotes or coins) designed to be used on the Internet. It uses a decentralized system for transactions and has no central regulatory authority like traditional currencies. Cryptocurrency is managed by peer-to-peer networks that allow anyone, wherever they are, to participate in cryptocurrency transactions (these transactions take place online). The first cryptocurrency, called
Bitcoin, was introduced in 2008 and achieved tremendous success among enthusiasts. Today, there are more than 10,000 cryptocurrencies worldwide, the most popular of which are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
How does cryptocurrency work?
Cryptocurrencies are based on a technology called
blockchain. Blockchain is primarily a technology; it is a ledger that allows information to be stored and exchanged securely, reliably, and immutably (in the form of code). You can purchase cryptocurrencies through cryptocurrency exchanges (platforms) or brokers. By using cryptocurrency, you can conduct transactions with other people without involving a third party. Many people also invest in cryptocurrencies, just as they do in bonds, stocks, real estate, and so on.
The status of crypto in the United Arab Emirates
So far, the
Central Bank of the United Arab Emirates has neither granted licenses to cryptocurrencies nor recognized them as legal tender. In other words, the central bank does not recognize cryptocurrencies.
However, it is important to know that crypto assets are not prohibited and may legally be traded on cryptocurrency exchanges. Citizens of the United Arab Emirates may own, deposit, and trade cryptocurrencies freely.
The government has also authorized certain cryptocurrency exchanges to operate in certain financial Free Zones. In May 2021, the DMCC registry (or Free Zone) launched the
Crypto Centre to promote cryptographic and blockchain technology in Dubai. Today, there are at least 100 organizations in the crypto sector that are part of DMCC. According to the DMCC executive chairman, the United Arab Emirates should host more than 1,000 crypto companies by the end of 2022.
The future of cryptocurrencies in Dubai
Although the Central Bank of the United Arab Emirates does not recognize cryptocurrencies, it has announced that, by 2026, it will launch its own digital currency as part of the 2023-2026 strategy.
Having decided to develop its own cryptocurrency, the UAE central bank hopes to rank among the world's top 10 central banks. In Dubai, the FRSA (Financial Services Regulatory Authority), the SCA (
Securities and Commodities Authority), and the DFSA (
Dubai Financial Services Agency) regulate cryptocurrencies. As a company, you will need a license from the SCA or FRSA to provide cryptocurrency services in Dubai.
The authority of the
Dubai World Trade Centre (DWTC) and the United Arab Emirates Securities and Commodities Authority have created a plan to make the Dubai World Trade Centre a crypto zone and regulator for cryptocurrencies and other virtual assets. This will attract new crypto opportunities to Dubai and contribute to a capable future for the UAE in the cryptocurrency industry.
In 2020, the Central Bank of the United Arab Emirates (CBUAE) and the Saudi Central Bank (SAMA) published a report on their joint effort, called "
Project Aber: Joint Digital Currency and Distributed Ledger Project", which sought to validate the viability of a single jointly issued digital currency as a national and cross-border settlement instrument between the two countries. The results of Project Aber were positive, as they confirmed that it was possible for central banks to create payment systems at both national and cross-border levels.
With their cryptocurrency-friendly policies, the United Arab Emirates are attracting many new and established companies. Some are even choosing to move their headquarters to the United Arab Emirates, including, most recently, Ripple, an American technology company.
The limitations of cryptocurrency in the Emirates
Since the Central Bank does not recognize cryptocurrencies, it is not possible to open a business bank account related to these activities. However, there are many solutions in Europe and Asia for opening a bank account.
Please contact us for more details about cryptocurrency licenses in the United Arab Emirates:
support@merritt.group.
