Cryptocurrency in the Middle East — State of the Art of a growing ecosystem
Crypto is a global technology which brings new challenges and opportunities for individuals, organizations and governments around the world. We recently went to the United Arab Emirates to learn more about how Dubai and Abu Dhabi are building a robust crypto startup ecosystem.
The UAE has become a leader for technology in the Middle East, with private and government partnerships and key initiatives to increase its lead. This region is quite different than the United States, Europe, and Asia where innovation is usually driven from the top down, such as “Smart Dubai” initiative. This means that government initiatives are followed closely by entrepreneurs who drive advancements. These businesses then look to other subsidiaries for global expansion instead of creating new local standalone enterprises.
The UAE is a highly capitalized investment market. Despite of the wealth that exists in the ecosystem, it gravitates towards traditional businesses. Financing usually trends with endeavours like real estate and late-stage investment rounds. The typical individual investor in the UAE mirrors this. They are usually well-heeled, but conservative and risk-averse. This all means that there is a large financial pool for crypto projects to access provided they can show themselves to be a sound investment opportunity.
And that’s traditional consumer behaviour as well, with shoppers still choosing to go in-stores, despite its high level of internet penetration (96%). Cash remains a preferred method of payment (even cash on delivery is the 2nd most preferred method of paying online). Credit card fraud and security are cited as a big concern among consumers, with e-wallets having a higher than average share at point-of-sale spending, in an expanding payments market — point-of-sale and online sales forecasted to grow to 29 billion and 13 billion respectively in turnover in 2020. Dubai has already developed a pilot digital currency program to introduce consumers to virtual assets. EmCash was developed by the city of Dubai to allow customers to pay for governmental and nongovernmental services. On top of this, the UAE is now introducing key initiatives to regulate the crypto space.
The Securities and Commodities Authority of the UAE has been planning on advancing their broad public regulations but it is likely that this will be postponed until the end of the year. This includes clarifying rules surrounding initial coin offerings. Currently, the focus is on helping new assets being brought to exchanges rather than regulating legacy currencies like Bitcoin and Ethereum. However, one major development is approval to launch the Arabian Bourse crypto exchange. This means that one of the largest regional exchanges can operate a regulated virtual asset trading platform.
We have learned a great deal about the development of the crypto ecosystem in the UAE, and it appears that the space is quickly becoming a regional leader. Given that UTRUST is aiming to be a global payment system, keeping up with emerging trends and market opportunities is of vital importance. We will continue to engage and take part in future payment-focused events — such as the previously attended Seamless — to build relationships with local partners and develop future expansion opportunities.
