Omar Bin Sultan Al Olama: The UAE’s role in bringing crypto assets into the mainstream

Digital currencies — and the technologies they utilise — are already revolutionising finance and transforming the world we live in. While many involved in the initial development of cryptocurrencies and associated technologies wanted to use them to circumvent mainstream financial institutions and monetary systems, this is not a practical nor a desirable goal for obvious reasons. Rather, the future of digital currencies lies firmly within the mainstream financial system, where they can make an enormous difference to several problems in areas such as payments, banking and investing.

To realise this potential, these technologies should be embraced by the existing financial system, uniting policy-makers, institutions and businesses at both a national and international level. This means allowing those at the forefront of pushing new technologies the requisite room to breathe, while ensuring the necessary regulations that protect consumers and the financial system, and prevent criminal enterprise, are in place.

This is very much the approach of the UAE, and we will continue to nurture the industry’s growth while keeping consumer and system protections front and centre. There are three principal elements to our approach: encouraging the use and uptake of digital finance by individuals and businesses; providing a favourable regulatory environment and economic environment within which it can prosper; and encouraging collaboration between industry and countries on a global level.

Environment for innovation

For the cryptocurrency market to reach its potential, it is vital that it can operate within a space where there is a high degree of consumer appetite. This provides operators with a competitive marketplace where they can test and develop new products and solutions among customers who are au fait with the technology. The UAE has been fostering an environment where our citizens feel equipped to explore a new economy of virtual assets, and this is reflected from their uptake. For example, nearly a quarter (23%) of our population own at least one non-fungible token (NFT), which is more than double the global average. Similarly, 35% of people in the UAE own cryptocurrency.

Consumer demand and familiarity with cryptocurrencies will help create a vibrant marketplace and build an ecosystem of firms that serve their needs. This network effect works to accelerate the rate of innovations in the industry, as individual firms and entrepreneurs benefit from access to talent, ideas and funding.

The UAE — and Dubai in particular — is a perfect example of this in action. There are more than 1000 crypto organisations operating within our country, including major players such as Binance, the world’s largest crypto trading platform, which is currently planning to build its regional headquarters in Dubai. The city has become home to several industry clusters, including Dubai International Centre for Finance. The centre is home to all types and sizes of crypto businesses, from companies developing blockchain-enabled trading platforms to firms offering, issuing, listing and trading crypto assets.

The blockchain and cryptocurrency scene in Abu Dhabi is also thriving. In partnership with local crypto firm, Attarius Network, the Emirate is at the forefront of integrating blockchain technology, crypto and NFTs into the gaming industry, in a wider strategic move to position itself as one of the world’s leading gaming destinations. This kind of innovation is driven by the panoply of world-class businesses operating in the UAE. Through our growing number of fintech conferences, such as Binance Week, Crypto Expo and Blockchain World, we’re creating frequent networking opportunities for key players in the industry, which is fostering an incredibly robust and well-connected environment of digital asset businesses.

A favourable regulatory framework

In addition to a thriving marketplace and innovative ecosystem, crypto assets and technologies also need a positive yet robust regulatory steer to prosper. If a system is too permissive, consumers and businesses are put at risk. If a system is too restrictive, innovation will be stifled, which thereby limits a technology’s transformative potential.

It is therefore vital that regulators adopt a middle-ground approach. Furthermore, it is important for regulators to be pragmatic and flexible too. Crypto technology evolves extremely quickly, which can transform use cases overnight and with it the risks it poses to consumers.

In the UAE, we are actively taking this approach. We recently launched the Dubai Virtual Assets Regulatory Authority (Vara), which is a significant step towards regulating the expansive global virtual assets industry in the Emirate of Dubai. Vara will be responsible for licensing and regulating the sector across Dubai’s mainland and the free-zone territories, and will streamline regulatory application and operating licensing approvals for virtual assets, including digital assets, products, operators and exchanges. This will enable the Dubai World Trade Centre (DWTC) to become a dedicated zone for digital assets businesses. We are the first country to adopt this approach to the regulation of digital assets and hope others will follow suit.

Taking full advantage of these specialised free zones, the DWTC Authority has cultivated progressive and attractive offerings for international businesses operating within the digital/virtual asset space. In December 2021, it made the DWTC a crypto zone and regulator for cryptocurrencies and other virtual assets. This ensures investor protection and creates a safe and secure environment for businesses to trade and operate within.

Bringing together stakeholders

The final pieces of the puzzle for ensuring digital finance reaches its full potential are alignment and clear communication between global stakeholders. While legislation and investment often take place at a national level, these expansive technologies are global by nature: there are no borders on the blockchain. The sheer growth of the technology over the past few years means that regulatory efforts are now being pushed towards the front of many leaders’ agendas, but it is not enough to have a piecemeal approach that could stifle the growth of this exciting asset class that has the potential to add significant value to the global economy.

The UAE is an open country that sees itself at the heart of global commerce, and we therefore welcome and encourage any opportunity to sit down with countries to discuss both the opportunities and challenges that the sector presents to the world economy. Our country hosts several important events in the global blockchain calendar during which we are proud to welcome entrepreneurs, regulators, investors and others key stakeholders in the global crypto space. These events include the Future Blockchain Summit, the Abu Dhabi Crypto Expo and Blockchain Economy 2022. Similarly, our exchanges and free zones also bring key stakeholders together from across the world to collaborate.

Cryptocurrencies and the technologies underpinning them have enormous potential to revolutionise the existing financial system if implemented in the correct way. This approach requires consumer appetite, sensible regulation and collaboration at a global level. The UAE has adopted this model and hopes to inspire other countries to embrace it too.

Omar Bin Sultan Al Olama is the UAE’s minister of state for artificial intelligence, digital economy and remote-work applications.