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The Middle East, particularly the United Arab Emirates (UAE), is experiencing a paradigm shift as the region’s interests shift from oil to crypto, NFT, and Metaverse, among other blockchain innovations. The United Arab Emirates is establishing a legal framework to assist crypto-based companies and blockchain companies in their efforts to become blockchain capital.
In an interview with the Chairman of the Abu Dhabi Department of Economic Development, H.E. Mohamed Ali Al Shorafa Al Hammadi said the government of Abu Dhabi had set itself a deadline by the end of this year to “ease passporting between digital cryptocurrency exchanges to ‘normal’ instruments.”
Because of the potential in the crypto sector, the Middle East established a supervisory body called the Securities and Commodities Authority (SCA) as early as 2018.
This measure was critical in the establishment of several free zones throughout the United Arab Emirates, including Abu Dhabi and Dubai. Last year, for example, crypto companies were given the go-ahead to establish operations in the Dubai Multi-Commodities Center (DMCC) free zone.
The UAE KYC (Know-Your-Customer) blockchain platform also aided Dubai’s economy, making instant bank account functionality, secure digital customer introduction, and the sharing of verified data between financial institutions and licensing authorities possible by 2020.
The Middle East is also interested in the cryptocurrency market, as the region’s first Bitcoin fund was listed on the Nasdaq Dubai in June 2021. While cryptocurrency has gradually spread throughout the Middle East, the high level of volatility in the cryptocurrency market has piqued the interest of investors and relevant authorities.
Abu Dhabi’s neighbor and fellow emirate, Dubai, is also keen to attract digital-assets firms and last month revealed that it enlisted Binance to help it develop an “international virtual asset ecosystem.” Binance announced on Dec. 27, 2021, that it has also received approval for a license-in-principle in Bahrain.
Two regulated digital asset exchanges — Matrix Exchange and Midchains — are already operating in Abu Dhabi and a third, DEX, is due to commence full operations soon, according to H.E. Mohamed Ali Al Shorafa Al Hammadi
“The whole ecosystem in Abu Dhabi is working together to make it easy for all the actors of that space, to not only attract them but bring them here, to develop the legal framework, to find what are the pain points worldwide so we can remove them, and have a very strong robust regulatory framework for those people,” Al Hammadi said.
Abu Dhabi’s determination to become a crypto hyperhub is part of the city-effort state’s efforts to restructure its economy in order to reduce its reliance on oil and gas. As part of this effort, the emirate is focusing on financial technology innovation, offering the private sector a fintech sandbox where they can test their products in a live environment to ensure they meet the UAE’s stringent anti-money-laundering (AML) and other regulatory standards.
Al Hammadi said a challenge for regulators is ensuring they don’t stifle innovation as they try to protect investors. “It’s really important for business operators that the regulators think about how to allow for innovation and the adaptation necessary as things change,” “The UAE and Abu Dhabi is striking the right balance between putting regulation around crypto but not so much that we’re constraining the growth and the exploration that will continue to happen for many years going forward.”
Read more about the cryptocurrency market in our article The Bitcoin Revolution Has Just Begun – Again
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