Cryptoassets and their capabilities are becoming very popular topics of discussion in boardrooms. Many of these discussions also include the regulatory requirements for cryptoasset firms wanting to operate in different countries and how these regulations vary. In recent media reports the UK government indicated that they want to become a ‘global hub’ for the cryptoasset industry which is not unexpected since the UK has always been viewed as a leading global financial hub with a well-established regulatory framework. However, media reports also suggest that Dubai wants to establish itself as the crypto kingpin of the globe and therefore recently passed legislation and established a regulatory body to attract cryptoasset firms. Published information indicate that the digital component of Dubai’s economy contributes an estimated 4.3% or about $27.2 billion to their gross domestic product. Sheikh Mohammed Bin Rashid, Vice President, and ruler of Dubai, announced in early March that the emirate had passed the first law to govern virtual assets.
Based on this, the Dubai Virtual Asset Regulatory Authority (VARA) will regulate the sector throughout the emirate, including special development zones and free zones, but the Dubai International Financial Centre will be excluded. This body has legal and financial autonomy over the virtual asset sector, will be issuing licences and be linked to the Dubai World Trade Centre Authority (DWTCA) as an attractive proposition for cryptoasset firms. This proposition seems to be working as Bybit and Crypto.com, two of the world’s leading cryptoasset platforms, announced at the end of March, that they will be creating a presence in Dubai with Bybit moving headquarters from Singapore and Crypto.com establishing a regional hub in the city. Binance, the world’s largest cryptocurrency exchange, has also been awarded a licence to conduct operations in Dubai and plans to carry our regional business from there. Expanding the attraction With firms looking to expand their footprint to Dubai, there is bound to be an increase in the demand for properties. That being said, not too long ago, Dubai was identified as an attractive destination for Russian oligarchs and according to credible media reports, a number of real estate-brokers have reported that Russians are indeed flocking to Dubai to purchase luxury properties. In fact, the number of Russians who bought properties in Dubai soared in March, especially in the $250 000 to $500 000 price bracket.
Furthermore, Damac, one of Dubai’s luxury real estate developers, recently indicated that, going forward, they plan to accept cryptoassets as payment for real estate; as a further push towards the UAE becoming a ‘global crypto hub’. With real estate developers planning to adopt cryptoassets as payment for properties, particularly from sanctioned Russian oligarchs, will lead to a sharp rise in illicit transactions, especially in countries that have not sanctioned Russia or any other high-profile individuals as per the latest sanction lists. The race is afoot With the UK and Dubai both indicating that they aspire to become cryptoasset hubs in the world, there are numerous aspects which new and existing cryptoasset firms will have to consider. One of the most important aspects would be the value linked to their reputations. Reputations are established over many years and customers put a great deal of trust in firms which they perceive as credible and having the customer’s best interest at heart.
Therefore, cryptoasset firms which operate in a regulated market, are obligated to protect their customers and stakeholder, in line with regulatory requirements, and by doing so, their reputations are also protected. Equally important, is the fact that regulations also protect the greater market and its sustainability in the long run. Therefore, when cryptoasset firms choose to operate in a market with limited regulations or in a completely unregulated market, the opposite is very likely to happen. This generally includes very little or no protection of the customer or the market itself. Equally important, should these firms choose to expand their footprint to countries which have strong regulatory frameworks, the regulatory authorities of these countries will be extremely stringent in their approach when these cryptoasset firms want to register and operate in a regulated market. This is simply because of their operating history within counties that have limited or completely unregulated markets where credibility and transparency are not necessarily valued. Sustainability and credibility go hand in hand Although the cryptoasset transaction chain is relatively transparent, it is only transparent up to a point because the individual or entity that holds the key, or owns the asset, might not be known and this can be problematic.
This is where a regulated market with effective standards and controls could make a significant difference to ensure that customers, stakeholders, the firm’s credibility, and the market itself, are protected. Also, in a regulated market, cryptoasset firms have effective financial crime frameworks which support their sustainability and profitability in the long run. Nothing can beat experience and since Lysis Group has assisted many cryptoasset firms to obtain registration in various jurisdictions, they are uniquely qualified and understand the exact requirements needed to prepare for a registration application. They also have the capacity and integrated approach to assist cryptoasset firms to not only obtain registration from regulators, but to also establish the financial crime framework needed to remain compliant while operating in a regulated market.