With 1,400 crypto companies such as Binance and Huobi settling in, what is the attraction of Dubai?

Recently, Saudi Arabia announced that it will invest $6.4 billion in metaverse and blockchain technology.

In fact, the United Arab Emirates, also a major oil country, has always been one of the countries in the world that most supports and embraces blockchain, and Dubai in the UAE has become one of the gathering places for blockchain companies.

According to local news reports in the UAE, the digital economy contributed a total of about 100 billion dirhams ($27.25 billion) in 2021, accounting for 4.3% of the UAE's GDP. The country has more than 1,400 blockchain and crypto startups with a total valuation of 90 billion dirhams ($24.5 billion). According to government data, more than 90 investment funds and 12 business incubators are also supporting the country's digital industry.

Industry insiders analyzed to the Blockchain Daily reporter that blockchain, as a new technology, is treated differently around the world; and Dubai, through its open policies, attracts blockchain companies and talents from around the world, and has an advantage in the future development of the blockchain industry.

1. 1,400 crypto companies settled in

The United Arab Emirates, referred to as the UAE, is a federal country consisting of seven emirates: Abu Dhabi, Dubai, Sharjah, Fujairah, Umm al-Qaiwain, Ajman and Ras al-Khaimah. The UAE is known as the flower in the desert because of its abundant oil.

But oil-producing countries also have a sense of crisis, that is, oil resources are not inexhaustible, and flowers in the desert will wither. They must find new wealth opportunities.

Blockchain and encryption industries represented by Bitcoin have given new vitality to some small countries including the United Arab Emirates, Saudi Arabia, and El Salvador.

Dubai in the United Arab Emirates is on the road to becoming a Bitcoin trading center. Binance, ALPEX, Metahero and hundreds of other companies (including more than 90 investment funds and 12 business incubators) have chosen Dubai as their operating center.

In 2021, China launched a round of virtual currency mining and trading rectification, and many Chinese blockchain and crypto asset companies also moved to Dubai to seek compliance operations there. Among them are Huobi Exchange, Hufu Exchange, Coinw Exchange, etc., which have completed the withdrawal of users in mainland China at the end of 2021.

A reporter from Blockchain Daily learned from relevant sources from Huobi that Huobi currently has an office in Dubai, which has both domestic and local employees.

"Dubai's policies towards blockchain companies have always been quite positive." The above-mentioned Huobi person told reporters.

In addition, on December 20, 2021, the cryptocurrency exchange Binance signed a cooperation agreement with the Dubai World Trade Center Authority (DWTCA) to jointly promote the establishment of a new international crypto asset ecosystem in Dubai.

An insider of the exchange who wished to remain anonymous told the Blockchain Daily reporter that given Dubai’s current open policy towards exchanges, they are also actively seeking a virtual asset trading license in Dubai, and will move operations there when the time is right.

Due to the UAE's open policy towards cryptocurrencies, many companies have settled in. According to local news reports in the UAE, the digital economy contributed a total of about 100 billion dirhams (27.25 billion U.S. dollars) in 2021, accounting for 4.3% of the UAE's GDP. The country has more than 1,400 blockchain or crypto startups with a total valuation of 90 billion dirhams (24.5 billion U.S. dollars).

2. Dubai’s open policy

The Blockchain Daily reporter learned that the regulation of cryptocurrency in Dubai is completed by FRSA (Financial Services Regulatory Authority), SCA (UAE Securities and Commodities Authority) and DFSA (Dubai Financial Services Authority).

In order to provide crypto services in the UAE or Dubai, a license is required from the SCA or FRSA (depending on where you operate). Trading in cryptocurrencies is regulated by the SCA and FRSA, and licenses are granted depending on the cryptocurrency nature of the transaction.

At the end of 2020, the Securities and Commodities Authority (SCA) of the United Arab Emirates issued "Decision No. (21/RM) of 2020 of the Chairman of the Authority on the Regulation of Crypto Assets".

The regulation aims to establish a clear licensing regime for any provider wishing to offer crypto-asset services within the UAE. This includes initial token offerings, exchanges, marketplaces, crowdfunding platforms, custodial services and related financial services based on or utilizing crypto-assets.

The Crypto Regulatory Decision states that providers wishing to provide crypto asset services (or any related services) must be incorporated in the UAE or in one of the UAE’s financial free zones (i.e. Dubai International Financial Centre or Abu Dhabi Global Market) and must be licensed by the SCA. As part of the process, applicants must demonstrate that they will strictly comply with the UAE’s anti-money laundering and counter-terrorist financing laws, cybersecurity compliance standards and data protection regulations.

3. Dubai’s blockchain layout

Marwan Alzarouni, CEO of Dubai Blockchain Center, told the media that the UAE, especially Dubai, has always been forward-looking and fast-moving in any future technology, and crypto assets and blockchain are no exception.

As early as 2013, the UAE launched the Smart Dubai initiative. The core part of the plan is to improve government efficiency through the use of blockchain technology. It includes its own actions to promote the development of blockchain from 1.0 (payment tools) to 2.0 (financial industry applications) and then to 3.0 (other industries and government management applications), and is committed to making Dubai a global leader in this field.

In 2016, Dubai established the Global Blockchain Committee, which currently has more than 30 members, including government entities, international companies, and blockchain startups. Technology giants such as Microsoft, SAP, and Cisco are all members of this committee.

The Global Blockchain Committee held its 2016 industry theme meeting and announced seven new blockchain concept verifications, including: medical records, jewelry transactions, ownership transfer, business registration, digital wills, tourism management, and improved freight. It can be said that Dubai is currently the blockchain R&D center in the Middle East.

In 2017, the Dubai government announced that Emcredit, a subsidiary of Dubai Economy, would work with US-based startup Object Tech Grp Ltd to create a cryptocurrency called emCash.

In 2018, Dubai Prime Minister Sheikh Mohammed announced that the Dubai government will use blockchain technology for half of its government operations by 2021.

In 2020, Smart Dubai fulfilled its promise to build a thriving blockchain ecosystem in Dubai, launching numerous use cases, a joint blockchain platform and the Dubai Blockchain Policy, in line with the vision of the Dubai Blockchain Strategy 2020. Government and private sector institutions are committed to realizing 24 blockchain use cases. These use cases cover eight sectors, namely finance, education, real estate, tourism, commerce, health, transportation and security.

The UAE has reportedly completed a digital KYC project called “UAE Passport,” which will enable users to interact with various aspects of the legal process from remote locations, and has already adopted blockchain technology in its judicial notarization and certification services.

The UAE has also proposed a plan to transform Dubai into the world's first city fully driven by blockchain technology - the "Dubai Blockchain Strategy", making Dubai the happiest city on earth.

Hu Jie, a professor at the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, told the Blockchain Daily reporter that as major oil-producing countries, the UAE and Dubai actually have relatively single and fragile resources, and the Dubai government has been thinking about how to find opportunities in the new economic system.

Hu Jie said that as a new technology, blockchain is still in the stage of exploration and sedimentation in the world. Dubai, through its open policies, attracts blockchain companies and talents from all over the world, and has an advantage in the future development of the blockchain industry.