Why Cross-Border Transactions Could Inform Crypto Regulation in the Abu Dhabi
Five months after introducing guidelines for initial coin offerings (ICOs), the government in Abu Dhabi is now looking for ways to regulate cryptocurrency intermediaries and exchanges. For players in the cryptocurrency industry, this has not come as a surprise.
"It wouldn't surprise me to see some type of cryptocurrency regulation within the Middle East. It is bound to happen at some point, why not start now and hold companies to account. I believe surrounding countries will follow as well," says Andrew Stanford, Partner at AssetToken.
Other cryptocurrency community members feel that regulating the activities of cryptocurrency intermediaries, including exchanges, is a move in the right direction because it helps safeguard the interests of cryptocurrency traders.
Jameel Shariff, CEO of P2PS Token says, “The advent of cryptocurrencies has seen UAE leaders keep a close eye on its progress and proliferation in order to formulate regulatory norms that would develop a strong, risk appropriate structure, eventually helping not only the exchanges and intermediaries but also the end user participants."
A major reason for UAE's focus on the development of strong frameworks for cryptocurrency exchange regulation is the fact that banking institutions are looking for ways to address cross-border usage of cryptocurrencies.
"Over the last couple of decades, the UAE has taken initiative to lead, and has pioneered implementation of modern and updated technologies. Moreover, banking institutions in Saudi Arabia and UAE have started working with each other to address cross-border digital currency matters. Therefore, I anticipate UAE becoming the first country in the Middle East to usher in a strong, cryptocurrency regulatory framework that would eventually be adapted and probably customized by other countries in the region," Shariff adds.
In 2017, the government in Abu Dhabi introduced guidelines for ICOs through its regulator, the Financial Services Regulatory Authority (FSRA). The process of preparing these guidelines helped the regulator recognize the diversity of ICOs in terms of risk and quality. As such, companies seeking to launch ICOs in the UAE have to submit an application to FSRA to establish whether the tokens on issue are securities or not in order to determine their regulation.
Key Financial Center
The UAE is seen as an important financial hub in the Middle East. For many people, this strong economic foundation means that the country could be the one to set the pace for cryptomarket regulation in the region.
"The UAE has been a major financial center of the Middle East, and I fully expect them to lead the region in terms of cryptocurrency exchanges and intermediaries," notes Steve Kuh, Founder and CTO, Group Project.
Acknowledging the UAE's ability to innovate the Middle East, Kent Yan, founder and CEO of TraDove, has a different view when it comes to other countries following in its footsteps with regards to cryptocurrency regulation. In his view, there is a possibility that countries in the Middle East region could choose to wait and see how countries in the west go about regulating cryptocurrency trading before developing their own regulation frameworks.
"UAE is the most innovative in the Middle East. But I think most of the countries will wait and see what the US government will do," says Yan.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.