Home Industry Technology PwC publishes UAE cryptocurrency report, identifies three-stage model for regulation The UAE is one of the fastest growing cryptocurrency markets in the world generating transactions worth $25bn by Gulf Business August 9, 2022 PwC Middle East published a new report titled, ‘The UAE Virtual Assets Market’ which provides insight 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 cryptocurrency market is around $25bn transactions, and it has increased 500 per cent between July 2020 and June 2021. Regionally, the UAE ranks third by volume, behind Turkey transaction volumes worth $132bn and close to Lebanon at $26bn. The UAE has been harbouring 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 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. Mahmoud Al Salah, financial crime compliance partner at PwC Middle East said, “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 financial crime that such new, technology frontiers may unwittingly bring. In our proposed ‘three-stage facilitative model for UAE regulators’, we believe that regulators can benefit immensely in establishing clear and comprehensive regulations, collaboration with industry experts, and international cooperation to promote transparency, compliance and innovation within the industry.” Clear regulations The UAE requires a comprehensive, all-encompassing framework that covers all anti-money laundering or combatting the financing of terrorism and financial crime aspects. Niche regulation on areas such as decentralised finance and non-fungible tokens is also essential given the luxury real estate and arts market in the UAE. Institutional investors, who seek clarity and protection through regulations, invest in regulated markets. Additionally, regulatory certainty makes it easier for small firms to seek financing and establish banking relationships and retail investors 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. By collaborating with industry experts, fintechs, crypto firms, academics, consumer interest bodies and subject matter experts, regulators can reduce their monitoring and enforcement costs and encourage greater cooperation and compliance to mutually agreed standards. Added benefits can include advanced training programmes and sharing of insights and research. 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 and cooperation As indicated by the International Monetary Fund, calling for greater international coordination, the Sunrise Issue and borderless nature of crypto can not only cause friction and misalignment but also make compliance difficult for firms, especially where extraterritorial treaties exist. Greater international harmonisation, communication and cooperation is required with other jurisdictions for the UAE to succeed in this last stage of PwC’s proposed model. Tags cryptocurrency Fintech NFT PwC Middle East 0 Comments You might also like Botim unveils region’s first ‘Send Now, Pay Later’ remittance service Paymob secures $22m extension to Series B funding, raises $72m in total Rorix Holdings’ Finstreet unveils regulated digital trading platform at ADGM Mozn: Pioneering AI solutions in fintech, fraud prevention, and compliance