PwC Middle East launched a new report titled, The UAE Virtual Assets Market which provides insights on cryptocurrencies and virtual assets in the UAE. The report also identifies a three-stage facilitative model for UAE regulators, to ensure transparency and compliance to promote long-term growth in the sector.
Currently, the UAE’s share in the global market is around $25 billion in transactions, and it has increased 500 percent between July 2020 and June 2021. Regionally, the UAE ranks third by volume, behind Turkey which had $132 billion in transaction volumes, and close to Lebanon at $26 billion. The UAE has been harboring an encouraging environment for the growth of its crypto industry with Dubai’s enactment of the Virtual Assets Law and establishment of the Dubai Virtual Assets Regulatory Authority (VARA), and while the industry was largely unregulated a few years ago, recent legislative measures have shown the government’s commitment to reduce the potential financial crime risk in the nascent industry.
Clear regulations
This crucial building block is clear and unambiguous legislation, backed by law enforcement. Additionally, regulatory certainty makes it easier for small firms to seek financing and establish banking relationships, and retail investors are more confident when there is government endorsement.
Industry self-regulation
In addition to clear legislation, self-regulating approaches can also be extremely beneficial, especially in high-tech and rapidly advancing industries such as crypto where industry players have much greater expertise than external regulators. Self-regulation is proposed as a counterpart to legislation, and not as a replacement, and requires the involvement and support of legislators for success.
International coordination, cooperation
Greater international harmonization, communication, and cooperation are required with other jurisdictions for the UAE to succeed in this last stage of our proposed model, according to PwC.
Commenting on the report, Mahmoud Al Salah, Financial Crime Compliance Partner at PwC Middle East, said: “The UAE is one of the fastest growing cryptocurrencies markets in the world. Government support and increased consumer demands for virtual assets have led to growth in the industry. However, the crucial policy and strategic question for the UAE is how to maintain the fine balance between inviting innovation, technology, and wealth generation and owning the future of crypto and blockchain versus having robust regulations in place to control the potential risks related to the financial crime that such new, technology frontiers may unwittingly bring. “
