In December, the world's largest cryptocurrency exchange, Binance, announced that it would establish an advisory body in Dubai. CEO Changpeng Zhao, who was recently ranked as one of the world's richest people, shared a photo of himself wearing an Emirati robe.
Despite the city's efforts, the region's nascent crypto industry is not yet in the United Arab Emirates. Despite this, the company recently received approval to become a fully regulated exchange in Bahrain.
Unlike the UAE, the Gulf State of Bahrain has banking regulations for crypto. This makes it an ideal place for companies to set up operations, according to Talal Tabbaa, the CEO of Bahrain-based exchange CoinMENA. The Central Bank of Bahrain (CBB) allows banks to accept cryptocurrencies as a payment method. Although most countries do not recognize digital assets as legal tender, most of them do so through securities regulators.
The approach that CBB took greatly contrasts with the UAE Central Bank. Currently, the bank does not recognize cryptocurrency as a means of legal payment. In a statement to CNN, the CBUAE noted that most of the digital assets are not accepted as a payment method in advanced economies. It also noted that it is monitoring the developments in the industry.
The lack of banking regulations in the UAE is the biggest obstacle to the country's potential as a crypto hub, according to Tabbaa. CoinMENA is not the only cryptocurrency exchange that operates in Bahrain. Rain, another prominent platform in the region, is also licensed by the CBB. Governor Rasheed M. Al-Maraj of the CBB noted that the bank became one of the earliest authorities in the Middle East to embrace the crypto industry.
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Other countries, such as the UK and China, are also skeptical of the potential of cryptocurrencies. In September, China said that all activities related to digital assets are illegal in the country. The US Securities and Exchange Commission also warned that the industry is prone to fraud and abuse.
Despite the country's growing popularity, India's government still has not yet decided on how to regulate the industry. Bahrain's financial sector, which makes up 17% of the country's non-oil GDP, is a vital part of the country's economy. In 2019, the CBB established a framework for the licensing of cryptocurrency exchanges.
The Dubai Multi Commodities Centre, which is a free zone focused on commodities, is planning on attracting more crypto-related projects. Its CEO Ahmed Bin Sulayem noted that the central bank's slow pace is holding back the industry's development. He noted that the lack of regulations in the UAE is holding back the country's potential as a crypto hub. He said that instead of rushing into the industry, the government should wait for the crypto ecosystem to mature.
Sulayem also stated that the country's open and progressive approach toward regulating the cryptocurrency industry makes it an ideal place for start-ups and established firms. Aside from being an ideal location for start-ups, the city of Dubai also offers various perks such as a low capital gains tax rate and a free lifestyle. Tabbaa, for instance, lives in the city and owns a home there.
