Explainer: Understanding cryptocurrency trading in the region

As Abu Dhabi prepares to launch regulated crypto trading later this year, Leon Smith, CEO of crypto firm DEX, explains how the system works



Can you explain how crypto-trading works?
Trading crypto assets is similar to trading traditional financial products and asset classes in capital markets at present. Crypto assets (depending on the exchange) are traded in pairs either with fiat currency [which represents any currency that is issued by a government of any country] to the specified crypto asset i.e. BTC [bitcoin] / USD or crypto to crypto i.e. BTC/ ETH [ethereum].

There remains a lack of clarity about how the cryptocurrency market operates. Is that changing?
The FSRA in the Abu Dhabi Global Market (ADGM) has introduced a transparent, bespoke digital assets regulatory framework to regulate the trading of digital assets which includes virtual assets, fiat tokens, digital securities, and the use of derivatives within the framework.

The regulatory framework identifies each asset class with unique characteristics for transparency. It also provides a robust approach from a compliance, market surveillance and market infrastructure perspective. ADGM is the first jurisdiction in the world to take this unique approach and it’s exciting to be a part of the UAE’s digital asset sector. The regulation should help to shape the international digital asset ecosystem and encourage institutional participation in virtual assets as an alternative asset class around the world.

Is the regulatory framework in place regionally to support the sector?
The digital asset framework being implemented in the ADGM represents a clear and transparent approach with a robust regulatory framework as implemented by the FSRA. Jurisdictions such as Switzerland, Singapore and Japan have taken a progressive approach to developing regulatory frameworks to govern digital assets in equivalency.

The Covid-19 crisis has disrupted economies. How has this affected SMEs like DEX?
The current situation will undoubtedly impact sectors differently; for some it has been crippling, and capital markets have reflected the market sentiment. Fortunately, we’ve have been able to sustain and continue moving forward accordingly.

Looking ahead, what are your plans for DEX? Do you plan to expand operations?
DEX has received in-principle approval in 2019 and our current focus is to work towards receiving full approval to serve the digital asset markets as a regulated entity. This would allow us to provide a platform for both retail and institutional players to participate in a highly regulated financial ecosystem.

Lastly, what is your long-term outlook for the crypto-trading business in the region?
Abu Dhabi is becoming a global hub for digital assets with a robust regulatory framework. This should give market participants confidence in this asset class and it also broadens the global reach to provide a progressive ecosystem therein.