Shalini Nagarajan

Institutional investment in the crypto space is surging in the United Arab Emirates.



Blockchain data platform <a href="https://blockworks.co/tag/chainalysis">Chainalysis</a> found that institutional investments (each exceeding $1 million in value) constituted more than 67% of cryptocurrency transactions in the federation of seven emirates between July 2022 and June 2023.



Following these institutional transactions were transfers linked to professional investments, ranging from $10,000 to $1 million, and retail investments made up 4.63% of all transfers in the Emirates, according to a <a href="https://www.chainalysis.com/blog/middle-east-north-africa-mena-cryptocurrency-adoption/">report</a> published on Sept. 26.



The high incidence of institutional investments indicates that a more diverse group of professional investors is actively engaging in the market, bolstering its overall expansion.



“The fact that by far the larger portion of crypto investments in the UAE is for institutional and professional sized transactions, indicates an eagerness from organisations and high-net-worth individuals to add cryptocurrency to their investment portfolios,”&nbsp; Kim Grauer, Chainalyis’ director of research, said in a statement.



“This market confidence is validation of the efforts being made by the country’s leadership to offer commendable regulatory clarity, and establish the nation as a global crypto hub.”



Chainalysis also found that the total crypto value received by the <a href="https://blockworks.co/tag/uae">UAE</a> during this period amounted to almost $35 billion.&nbsp;



A 17% decrease from the prior year, the UAE&#8217;s crypto market also outperformed several other countries in the region, such as Qatar, Oman, Jordan and Lebanon, according to the report.



The UAE is seen as a business-friendly environment with minimal taxation, making it an attractive destination for companies wanting to maximize profits. It is also strategically located between Europe, Asia and Africa, which helps companies reach global markets easily in various time zones.



UAE regulators got into crypto early, especially <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">Dubai</a>, which has been a pioneer in embracing cryptocurrency since launching its blockchain strategy in 2016.&nbsp;



To further advance its regulatory efforts, the emirate established <a href="https://blockworks.co/tag/vara">VARA</a>, the Virtual Asset Regulatory Authority, in 2022.



In the Middle East and North Africa region, Chainalysis identified the UAE as one of the few countries where a larger portion of crypto activity occurs on <a href="https://blockworks.co/tag/dex">decentralized exchanges</a> (48%) compared to centralized <a href="https://blockworks.co/tag/exchanges">exchanges</a> (46%).



Decentralized exchanges are preferred over centralized exchanges due to enhanced security, user control of funds and privacy preservation, among other things.



Significant enthusiasm for NFTs was also observed in the area, with UAE <a href="https://blockworks.co/tag/nfts">NFT</a> websites receiving 4 million web traffic visits between July 2022 and June 2023.



“This retained interest in NFTs in the UAE offers businesses the opportunity to grow past the hype and start to introduce practical use cases based on this technology,” Grauer said.



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chainalysis

UAE sees major institutional influx: Chainalysis

Ben Strack

Komainu has received approval from Dubai&#8217;s Virtual Asset Regulatory Authority (VARA) to provide its custody services to clients in Dubai, the company told Blockworks Tuesday.



The crypto custodian is among the first to receive a full Virtual Asset Service Provider (VASP) in a region that various companies in the segment <a href="https://blockworks.co/news/crypto-bullish-on-uae">have sought to set up outposts</a>. Crypto firms’ interest in <a href="https://blockworks.co/tag/dubai">Dubai</a> accelerated after <a href="https://blockworks.co/news/dubai-is-the-latest-government-to-roll-out-crypto-law-set-up-regulator">the emirate established VARA</a> in March 2022.&nbsp;&nbsp;



“VARA has created a robust regulatory framework allowing firms like ourselves to innovate, whilst operating safely and exploring the future potential of digital assets, which includes tokenization and DeFi services,” Komainu’s strategy lead Sebastian Widmann told Blockworks in an email.&nbsp;



Read more: <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">Dubai free zone now home to more than 500 crypto startups</a>



VARA has a four-stage licensing process: a provisional permit, preparatory and operating minimal viable product (MVP) licenses and a so-called full market product (FMP) license.&nbsp;



Reaching this final step in VARA’s licensing process allows the company to provide institutional staking and collateral management in the region via its Komainu Connect platform, the company noted. It can also offer custody and custodial staking.



<a href="https://blockworks.co/tag/komainu">Komainu</a> — started in 2018 as a joint venture between Japan-based financial giant Nomura, blockchain company Ledger and crypto investment firm CoinShares — services institutional clients, such as asset managers, banks, liquidity providers and exchanges.



It had <a href="https://blockworks.co/news/crypto-custodian-komainu-follows-exchanges-to-dubai">gained preliminary approval to operate in Dubai</a> in July 2022. Komainu then received its MVP license from the Dubai regulator in November.



“We see tremendous growth potential in the [Gulf Cooperation Council countries] and expect to increase our headcount in the region to meet growing client demand,” Widmann said.&nbsp;



A spokesperson noted that Komainu currently has five employees in Dubai under Widmann’s leadership and plans to double that number by the end of the year.



The company’s license comes a few weeks after Laser Digital, the crypto unit of Nomura, <a href="https://blockworks.co/news/nomura-laser-digital-dubai-license">obtained a full license from VARA</a>. Crypto exchange <a href="https://blockworks.co/news/binance-dubai-operational-license">Binance received an operational MVP license last month</a> — bringing the company one step away from offering a broader range of authorized services in the region.



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Dubai

Komainu becomes latest crypto firm to gain full license in Dubai

Binance has obtained a crucial license from the Virtual Asset Regulatory Authority (VARA) of Dubai, the crypto exchange said on Monday.



By acquiring the operational minimum viable product (MVP) license, Binance has gained the ability to provide approved services in Dubai under VARA oversight. 



The services encompass exchange and broker-dealer facilities, initially tailored for institutional and qualified retail investors, with the potential to expand to include other retail investors after obtaining full approval.



Additionally, eligible users in Dubai have the option to convert virtual assets to fiat under VARA-designated standards.



“In due course investors that qualify (our institutional or qualified retail), through Binance FZE our locally regulated entity, will have access to local currency on and offramp channels, which were not previously available via Binance.com,” a spokesperson for the exchange told Blockworks.



The issuance of the license follows Binance&#8217;s acquisition of a provisional MVP license in March last year and a preparatory MVP license in September.



“With this operational MVP license, all users onboarded through this platform can expect access to a trusted and regulated service that prioritizes security alongside compliance with highly specialized, tier-one virtual asset regulations under VARA,” Alexander Chehade, Binance Dubai’s general manager, said in a <a href="https://www.binance.com/en/blog/ecosystem/binance-is-the-first-virtual-asset-exchange-to-receive-an-operational-mvp-license-in-dubai-7342057061995039467?ref=AZTKZ9XS&amp;utm_source=BinanceTwitter&amp;utm_medium=GlobalSocial&amp;utm_campaign=GlobalSocial" target="_blank" rel="noreferrer noopener">statement</a>.



In Dubai, the VARA has a four-stage licensing process for applicants. They go through these stages to ensure they operate within the regulatory framework before getting a full market product license (FMP).



As of now, Binance has not obtained an FMP license, which would permit them to offer a broader range of authorized services.



The transition from MVP to FMP will enable Binance to onboard retail clients under the 500,000 AED (about $136,000) liquid capital threshold set by VARA during the MVP stage, a spokesperson for Binance said.



Even if they have completed the initial stage of the licensing process, virtual asset service providers may still operate, but with certain restrictions in place.



Dubai is one of the fastest-growing crypto economies, <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">attracting over 500 crypto companies</a> to its digital asset ecosystem as of January.



Although Binance appears to be progressing well with its licensing journey in the Middle Eastern city, it has faced challenges elsewhere.



The exchange was recently <a href="https://blockworks.co/news/binance-exits-european-markets">forced to withdraw</a> from several European cities due to registration issues and is currently contending with a <a href="https://blockworks.co/news/sec-allegations-against-binance">lawsuit</a> from the US Securities and Exchange Commission.



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Binance

Binance one step away from full approval in Dubai with operational license

Dubai says it has now attracted more than 500 crypto companies to the wealthy Middle Eastern city’s budding digital asset ecosystem.



The Dubai Multi Commodities Centre (DMCC) <a href="https://cms.dmcc.ae/news/dmcc-attracts-3049-businesses-dubai-2022-reaching-22000-member-companies-through-another-record-year" target="_blank" rel="noreferrer noopener">said</a> Monday it registered around 3,000 new businesses last year, representing a 23% jump from 2021.



Of those, 343 were digital asset startups joining DMCC&#8217;s “Crypto Center,&#8221; the group told Blockworks, which would mean around 150 crypto-related startups were added in 2021.



The DMCC is the city’s flagship free zone which gives tax breaks and other benefits to startups. It launched a crypto hub in 2021, located in a 68-storey skyscraper in the Jumeirah Lake Towers area of Dubai. 



The center is meant to serve as a coworking and networking space for entrepreneurs in the crypto and blockchain sectors.



While crypto technically falls under the Virtual Assets Regulatory Authority (VARA) purview, the Securities and Commodities Authority (SCA) — a UAE federal agency — is also responsible for some oversight of the digital asset industry.



“Backed by a strong regional macroeconomic landscape, DMCC has been efficiently accelerating its growth strategy throughout 2022, focusing on supporting its member companies in high-impact sectors such as Web3 and blockchain technologies, commodities and global trade,” said DMCC CEO Ahmed Bin Sulayem.



A number of crypto firms <a href="https://blockworks.co/news/crypto-seeks-freedom-in-the-uae-is-it-a-regulatory-rug-pull" target="_blank" rel="noreferrer noopener">began setting up in the UAE last year</a> to take advantage of the region’s ambitions to thrive as a crypto hub. 



Major crypto companies with provisional licenses, such as <a href="https://blockworks.co/news/binance-granted-license-to-operate-in-dubai" target="_blank" rel="noreferrer noopener">Binance</a> and <a href="https://blockworks.co/news/crypto-com-secures-provisional-approval-to-open-crypto-exchange-in-dubai" target="_blank" rel="noreferrer noopener">Crypto.com</a>, haven’t opted to join the DMCC per its member <a href="https://www.dmcc.ae/business-search?directory=1&amp;submissionGuid=0b2cf711-289f-4492-8e87-fbbc3a5a2e04">directory</a>. But the DMCC highlighted a number of metaverse-centric startups on its member list.



Despite the promotion and supposed ease of setting up there, some have found their entrepreneurial journeys complicated as the due diligence process can be taxing.



The center <a href="https://gulfbusiness.com/dmcc-crypto-centre-vc-firm-brinc-to-provide-members-access-to-150m-accelerator-fund/" target="_blank" rel="noreferrer noopener">reportedly</a> partnered with Hong Kong-headquarterd venture capital firm Brinc last October. Brinc said it would offer potential funding opportunities to DMCC crypto startups through its $150 million accelerator vehicle.



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Dubai Free Zone Now Home to More Than 500 Crypto Startups

Sebastian Sinclair

<div id="highlights-block_62b124acabb52" class="highlights">
 <ul>
 <li>Dubai&#8217;s government is hoping to attract foreign investment following the passage of its Virtual Asset Law in February</li>
 <li>Hex Trust is the latest crypto firm to be approved, in part, for licensure within the emirate</li>
 </ul>
 
</div>



Hong Kong-based crypto custodian Hex Trust has become the latest crypto firm to receive provisional approval from the Government of Dubai to conduct business in the region.



Hex Trust said it is in the process of obtaining a Virtual Asset MVP License via the emirate&#8217;s Virtual Assets Regulatory Authority (VARA) to provide a range of services to institutional clients and investors, according to a statement Monday.



VARA, set up in March of this year, oversees virtual asset regulation via a licensing regime. The regulator is also responsible for developing strategic plans and policies relating to digital assets in the region, as well as establishing and overseeing know-your-customer checks and anti-money laundering rules.



It also became the world&#8217;s first regulator in May to establish a presence in the <a href="https://mediaoffice.ae/en/news/2022/May/03-05/Dubai-Virtual-Assets-Regulatory-Authority-becomes-world-first" target="_blank" rel="noreferrer noopener">metaverse</a> as a means of increasing accessibility to stakeholders.



With provisional approval now in hand, the custodian said it would open an office in Dubai for use as a regional headquarters in the Middle East. 



The move follows the custodian&#8217;s recent and first significant raise, an <a href="https://cms.blockworks.co/hex-trust-raises-88m-in-series-b-to-expand-into-europe-middle-east/" target="_blank" rel="noreferrer noopener">$88 million</a> Series B funding round in March, where funds were put toward scaling its operations in the Middle East and Europe.



Crypto firms continue to flock to the major Arab emirate following Dubai&#8217;s head, Sheikh Mohammed bin Rashid Al Maktoum, passing the &#8220;Regulation of Virtual Assets in the Emirate of Dubai&#8221; in February.



Better known as the Virtual Asset Law, the regulation sets about providing clear guidelines and definitions regarding digital assets, including NFTs (non-fungible tokens).



Several major crypto firms including <a href="https://cms.blockworks.co/ftx-granted-crypto-license-with-dubai-hq-in-sights/" target="_blank" rel="noreferrer noopener">FTX</a>, <a href="https://cms.blockworks.co/binance-granted-license-to-operate-in-dubai/" target="_blank" rel="noreferrer noopener">Binance</a>, <a href="https://cms.blockworks.co/crypto-com-secures-provisional-approval-to-open-crypto-exchange-in-dubai/" target="_blank" rel="noreferrer noopener">Crypto.com</a>, Bybit and <a href="https://cms.blockworks.co/kraken-receives-abu-dhabis-first-virtual-asset-exchange-license/" target="_blank" rel="noreferrer noopener">Kraken</a> have recently established regional headquarters or received licenses to operate in the United Arab Emirates.



&#8220;Hex Trust is excited and fully committed to expanding into the Middle East and sees enormous potential for digital asset growth given the progressive regulations, welcoming governments and thriving crypto ecosystem in the region,&#8221; Filippo Buzzi, Hex Trust&#8217;s regional director for the Middle East and North Africa, said in the statement.



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Hex Trust Greenlit for Virtual Asset License in Dubai

David Canellis

<div id="highlights-block_629926fb89b89" class="highlights">
 <ul>
 <li>Singaporean exchange Crypto.com has furthered its commitment to servicing Dubai’s burgeoning digital asset ecosystem</li>
 <li>Unlike Binance and Bybit, the firm won’t be moving its headquarters to the emirate</li>
 </ul>
 
</div>



Crypto.com has secured critical government approval to expand into Dubai, joining a string of top crypto exchanges given the greenlight to launch localized platforms in the region.



The Singapore-headquartered exchange first received provisional approval of its Virtual Asset MVP License from the Dubai Virtual Assets Regulatory Authority (VARA).&nbsp;



The government <a href="https://cms.blockworks.co/dubai-is-the-latest-government-to-roll-out-crypto-law-set-up-regulator/" target="_blank" rel="noreferrer noopener">launched</a> VARA — which oversees crypto trades and new product issuances — in March.



Crypto.com shared plans to set up a regional outpost in Dubai just three weeks after VARA’s inception. The firm plans to eventually provide a full suite of crypto exchange products and services, including offerings geared toward institutional investors, the firm told Blockworks.&nbsp;



In February, Dubai issued its first law specifically regulating digital assets. It prohibits anyone in Dubai from engaging in digital asset dealings without VARA’s prior authorization – including running crypto exchanges and overseeing custodial solutions.&nbsp;



The law also requires crypto companies looking to do business in the region to incorporate in Dubai, which explains Crypto.com’s <a href="https://www.reuters.com/business/finance/uae-crypto-push-sees-bybit-cryptocom-announce-dubai-offices-2022-03-28/" target="_blank" rel="noreferrer noopener">recent move</a> to open a regional office.&nbsp;



All approved crypto operators must operate within Dubai’s strict market model of testing, adapting then scaling. Initially, only limited exchange products and services can be rendered to pre-qualified investors and professional finance service providers. VARA then monitors the markets before deciding whether to open them to retail investors.&nbsp;



So far, no regulated crypto exchange offers crypto-to-dirham trading pairs in the UAE, with Kraken <a href="https://www.cnbc.com/2022/04/25/crypto-exchange-kraken-to-launch-in-uae-after-full-regulatory-approval.html" target="_blank" rel="noreferrer noopener">pegged</a> to be the first to do so sometime in the near future. Crypto.com declined to comment on its initial crypto offerings.&nbsp;



Indeed, Crypto.com&#8217;s operating license is conditional — until it meets certain mandated requirements. VARA gave the company a conditional go-ahead based on documents outlining Crypto.com’s assurance of compliance checks, pending further due diligence.



“We are excited to provide more of our products and services in a market of great importance to our business, and one that is equally committed to regulation and compliance,” Crypto.com co-founder and CEO Kris Marszalek said in a statement.&nbsp;



Helal Saeed Almarri, director general of the Dubai World Trade Centre Authority (DWTCA), which oversees VARA, called Crypto.com “one of the anchors partnering with VARA in the development of a global, future-focused regulatory framework.”



Last December, DWTCA established a crypto hub in the Dubai World Trade Centre – a government-run exhibition and events facility – which exchange Binance quickly joined. The idea is to give crypto companies a controlled environment in which to set up.



Multiple major crypto players have now secured approval to provide services in the United Arab Emirates (UAE). FTX Europe and Binance <a href="https://cms.blockworks.co/binance-granted-license-to-operate-in-dubai/" target="_blank" rel="noreferrer noopener">both</a> <a href="https://cms.blockworks.co/ftx-granted-crypto-license-with-dubai-hq-in-sights/" target="_blank" rel="noreferrer noopener">acquired</a> VARA’s Dubai-focused license in March – the latter pledged to move its headquarters to the region shortly after.&nbsp;



Singaporean crypto derivatives platform Bybit – which is joining Binance in relocating its headquarters to Dubai – also gained VARA approval in April. Crypto hedge fund firm Three Arrows Capital is likewise <a href="https://cms.blockworks.co/singapore-central-bank-ready-to-try-defi-after-crypto-giants-leave-for-dubai/" target="_blank" rel="noreferrer noopener">making the switch</a> from Singapore to Dubai.



San Francisco-based exchange Kraken, on the other hand, <a href="https://cms.blockworks.co/kraken-receives-abu-dhabis-first-virtual-asset-exchange-license/" target="_blank" rel="noreferrer noopener">opted for</a> neighboring Abu Dhabi, where it received the emirate’s first virtual asset exchange license.&nbsp;



In any case, Crypto.com formally joining the mix (albeit without relocating its headquarters) proves the UAE is well on its way to becoming a global hub for digital assets – although one that’s very closely regulated.



Crypto.com, founded in 2016, has more than 50 million users worldwide.



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Crypto.com Secures Provisional Approval To Open Crypto Exchange in Dubai

Casey Wagner

<div id="highlights-block_62717216df8e7" class="highlights">
 <ul>
 <li>VARA did not provide details about when MetaHQ will be accessible to users or information about the cost of the digital land</li>
 <li>The US is also expanding its crypto regulatory presence by adding 20 positions to its SEC watchog unit</li>
 </ul>
 
</div>



Dubai’s cryptocurrency regulator has become the first such national watchdog to acquire land in the metaverse with plans to establish a virtual headquarters.



Dubai’s Virtual Assets Regulatory Authority (VARA) will create its “MetaHQ” using The Sandbox metaverse platform, according to a Tuesday <a href="https://www.wam.ae/en/details/1395303044162" target="_blank" rel="noreferrer noopener">statement</a> from VARA to the WAM news agency.&nbsp;



MetaHQ plans to provide digital users access to regulatory resources within the virtual environment, something that will become increasingly important as digital presence increases, the statement said.&nbsp;



&#8220;By expanding VARA’s resources to a borderless audience through the Metaverse, Dubai is creating a prototype Decentralised Regulator Model, inviting international thought leaders &#8211; global authorities, governance custodians, and industry shapers &#8211; to participate, exchange knowledge, and problem-solve collectively so that we enable the dynamic virtual assets sector to build economic resilience, accelerate social inclusion, and address environmental sustainability,” Crown Prince Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum said in the statement.&nbsp;



The development comes as the United States likewise moves to increase regulatory oversight of digital assets — albeit in the physical world.



The SEC <a href="https://www.sec.gov/news/press-release/2022-78" target="_blank" rel="noreferrer noopener">announced Tuesday</a> that it will be adding 20 members to the unit responsible for protecting investors in crypto markets and from cyber-related threats.&nbsp;



The newly renamed Crypto Assets and Cyber Unit, formerly known as the Cyber Unit, will now have 50 team members, including the new hires, the SEC said.&nbsp;



&#8220;The U.S. has the greatest capital markets because investors have faith in them, and as more investors access the crypto markets, it is increasingly important to dedicate more resources to protecting them,&#8221; SEC Chair Gary Gensler said in a statement.&nbsp;



The new SEC positions will focus on regulating cryptocurrency exchanges, lending and staking, non-fungible tokens (NFTs) and more.



VARA did not provide details about when MetaHQ will be accessible to users or information about the cost of the digital land.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>