The United Arab Emirates (UAE) is preparing to issue federal licenses to virtual asset service providers (VASPs), according to a government official.
The Securities and Commodities Authority is finalizing legislation that would enable VASPs to begin operation by the end of the first quarter, according to the official, an anonymous Bloomberg source. A national licensing regime for crypto services providers could help the UAE compete with rival financial centers such as Singapore and Hong Kong, which are already positioning themselves as global crypto hubs through the crafting of practical regulatory frameworks. The UAE official also said that the government hopes to develop an ecosystem for crypto mining, which he said would be regulated.
Incidentally, some permits for VASPs have already been issued within financial free zones across the UAE, including 22 for the Dubai Multi Commodities Center, six for Abu Dhabi Global Market, and at least 1 for Dubai Silicon Oasis Authority, while Dubai International Financial Center, a Middle East hub for most Wall Street banks, currently lacks any.
Prudently, the UAE performed a risk assessment on VASPs last year, which included 14 public-sector agencies and 16 private-sector actors. Despite a “high risk” that VASPs could be used for illicit finance, the government concluded that proper regulation, rather than outright prohibition, would better mitigate those threats, the report said.
According to the report, Dubai-based crypto exchange BitOasis is currently the largest UAE VASP, but the competition is picking up.
Binance Holdings Ltd., the world’s largest cryptocurrency exchange by trading volume, is among those looking to increase its presence in the country. Having already helped the Dubai World Trade Center Authority develop regulations as a fledgling cryptocurrency center, Binance has now built up a local team. As Chief Executive Officer, Changpeng “CZ” Zhao has quickly become a fixture in the city, there have also been talks of establishing a potential HQ.
Other regional players include CoinMENA BSC and Rain Financial Inc., while San Francisco-based exchange Kraken is currently headhunting a Middle East North Africa CEO based in Abu Dhabi.
Growing 1,500% over the past year, the UAE has now become the Middle East’s third-largest crypto market, following Turkey and Lebanon, with a transaction volume of about $26 billion, according to Chainalysis data.
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