Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
In a sweeping decision that could reshape the global cryptocurrency landscape, the United Arab Emirates (UAE) has abolished taxes on cryptocurrency transactions. By exempting individuals and businesses from a value-added tax (VAT) on the transfer and conversion of digital assets, the UAE is positioning itself as a potential super hub for digital currencies. This policy shift raises important questions: Will this boost the crypto industry, or will it introduce unforeseen challenges for the UAE economy?
The UAE has long been recognized for its forward-thinking approach to economic development, especially its embrace of technology and innovation. By removing VAT from crypto transactions, the country is sending a clear message—it intends to become a global player in the blockchain and cryptocurrency sectors. This move is part of a broader strategy to diversify away from oil dependency and position the UAE as a leader in digital finance.
The VAT exemption stems from amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017, which governs VAT regulations. Effective November 15, the changes underscore the UAE’s commitment to fostering a supportive environment for digital asset innovation. By dismantling tax barriers, the country hopes to lure more startups, investors, and established companies to explore opportunities within its borders.
From my perspective, this is a visionary step that could deliver considerable benefits. One of the key advantages is the potential for increased adoption and innovation in the crypto space. By alleviating the tax burden, the UAE makes it more financially attractive for businesses and individuals to engage in cryptocurrency activities, potentially leading to a rise in both daily transactions and blockchain development.
As someone who has closely followed the rapid evolution of the cryptocurrency industry, I see the UAE’s tax-friendly environment acting as a magnet for global crypto exchanges, blockchain startups, and fintech companies. This influx could drive job creation, stimulate economic growth, and bolster the UAE’s reputation as a financial hub. Additionally, the move is likely to spur growth in the digital economy. As crypto use becomes more widespread, the demand for related services—like digital wallets, blockchain infrastructure, and cybersecurity—will rise, further contributing to economic diversification.
There’s also the exciting possibility of enhanced financial inclusion. Cryptocurrencies can bridge the gap between the unbanked and underbanked, offering access to financial services to previously excluded populations. The UAE’s crypto push could thus provide greater financial access to its residents and extend to broader regional impacts. For me, this aligns with a larger goal of using technology to empower individuals by removing barriers to financial participation.
Yet, alongside these opportunities lie challenges that cannot be ignored. Chief among them is the need for a strong regulatory framework to prevent illicit activities such as fraud and money laundering. As the crypto industry grows, the UAE must ensure its regulatory environment keeps pace, maintaining investor confidence while protecting consumers. It is crucial for the UAE to craft regulations that are both comprehensive and flexible, capable of adapting to the fast-changing world of digital assets.
Then, there’s the volatility inherent in cryptocurrencies. This presents significant risks to investors and businesses alike. The UAE must prioritize educating the public and businesses about these risks, offering clear guidance on how to navigate the crypto market responsibly. Having witnessed the roller-coaster nature of the market firsthand, I believe that education and awareness are essential for helping people make informed financial decisions.
On a more practical level, the UAE must invest in the necessary technological infrastructure to support the burgeoning crypto ecosystem. This involves developing secure and efficient blockchain networks, as well as fostering partnerships between government, private companies, and academic institutions. Without these foundational elements, the UAE may struggle to sustain long-term growth and fully realize the potential benefits of its tax exemption.
Furthermore, the UAE faces competition from other countries eager to establish themselves as crypto-friendly hubs. While the VAT exemption is a bold move, the UAE will need to continuously innovate and refine its policies to stay ahead in the global crypto race. Staying competitive will require keeping pace with international developments and ensuring that the regulatory and economic frameworks remain attractive to global investors and businesses.
This decision by the UAE comes at a time when many countries are wrestling with how to regulate and tax cryptocurrencies. Some, like El Salvador, have fully embraced digital currencies, adopting Bitcoin as a legal tender. Others have taken a more conservative approach, imposing strict regulations to limit crypto’s influence.
In contrast, the UAE’s balanced approach—fostering innovation while maintaining regulatory oversight—stands out. This could serve as a model for other nations seeking to harness the benefits of cryptocurrency without stifling its growth. Personally, I find this balanced approach refreshing, acknowledging the potential of digital currencies while addressing the need for regulation.
Let’s consider some critical statistics to gauge the potential impact of the UAE’s tax exemption.
The global cryptocurrency market was valued at approximately $2.32 trillion as of October 7, with projections suggesting it could reach $4.94 trillion by 2030, growing at a compound annual growth rate of 12.8%. The UAE’s tax exemption could accelerate this expansion by attracting more market participants.
Between July 2023 and June 2024, the UAE attracted over $30 billion in cryptocurrency investments, ranking it among the top 40 countries globally and establishing it as the third-largest crypto economy in the MENA region.
As of 2023, the UAE is home to over 1,800 blockchain startups, with Dubai and Abu Dhabi as primary hubs. The tax exemption will likely fuel a surge in startup activity, cementing the UAE’s role as a leader in blockchain innovation.
The UAE’s decision to eliminate crypto transaction taxes is a bold, strategic move that could yield significant benefits for the country’s economy and citizens. By striking a balance between encouraging innovation and ensuring regulation, the UAE has the potential to create a thriving ecosystem for digital assets, fostering job creation, economic diversification, and financial inclusion.
However, to fully capitalize on this opportunity, the UAE must address the challenges posed by the volatile and complex nature of the cryptocurrency market. By implementing robust regulatory frameworks, investing in technology, and educating the public, the country can maximize the benefits of this forward-thinking policy.
From my vantage point, this is an exciting moment for the UAE and the global cryptocurrency community as a new chapter in the financial world unfolds.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
In the first half of 2024, Singapore’s cryptocurrency and blockchain sectors grew by 22%, reaching over US$200 million.
The MAS proposed a risk-based regulatory approach to enhance anti-money laundering and counter-financing of terrorism.
Singapore has consistently positioned itself as a forward-thinking jurisdiction, balancing innovation with robust regulatory oversight. As a fellow Singaporean, I am very proud of its future planning.
The Monetary Authority of Singapore (MAS) is seeking submissions for the Consultation Paper on the proposed regulatory approach for Digital Token Service Providers (DTSPs) under the Financial Services and Markets Act 2022.
Instead of replying to the submission directly, I will try to share my point of view openly here, offering insights, potential plans, and timelines for implementation. Before I start, I am sharing this in my personal capacity: I do not represent any self-claimed digital assets expert groups, associations, or schools.
License Application and Fee Structures
In the first half of 2024, Singapore’s fintech market saw its cryptocurrency and blockchain sectors achieve US$211.90 million across 72 deals, marking a 22% increase from US$166.30 million over 38 deals in the second half of 2023.
Singapore has been actively working on strengthening risk management frameworks for digital asset tokenization and has recently launched an initiative to expand asset tokenization within financial services.
The proposed license application processes and fee structures are crucial elements that will shape the DTSP landscape in Singapore. From my perspective, MAS should consider implementing a tiered approach to both timelines and fees, reflecting the diversity of DTSPs in terms of size, complexity, and risk profile.
For timelines, I propose a three-tier system:
Fast-track (60 days): For small, low-risk DTSPs with straightforward business models.
Standard (90 days): For medium-sized DTSPs or those with moderately complex operations.
Extended (120+ days): For large, complex DTSPs or those proposing novel business models.
This tiered approach would allow MAS to allocate resources efficiently while ensuring thorough vetting of more complex applications. The fee structures can follow a similar tiered system based on the DTSP’s annual revenue or transaction volume could be implemented.
Minimum Financial Requirements
The proposed minimum financial requirements are a critical safeguard against potential market disruptions and consumer losses. Based on my analysis, I believe a risk-based approach to setting these requirements is more feasible. This could involve:
Base Capital Requirement: A minimum base capital for all DTSPs, regardless of size or services offered.
Risk-Weighted Capital Requirement: Additional capital requirements based on the DTSP’s types of services offered, transaction volumes, and risk profile.
Liquidity Requirement: A minimum liquidity ratio to ensure DTSPs can meet short-term obligations.
Specifically, providers with capital ratios above 15% were 30% less likely to face operational disruptions during periods of extreme market stress. I propose that MAS consider setting the base capital requirement at SGD 250,000, with additional risk-weighted requirements that could increase this amount up to SGD 5 million for the largest and most complex DTSPs.
Audit Requirements
The proposed duties of CEOs, directors, and partners, along with audit requirements, are fundamental to ensuring good governance and accountability in the DTSP sector. The following enhancement is recommended for consideration:
Mandatory Training: Annual training programs for CEOs and directors on regulatory compliance, risk management, and emerging trends in digital assets.
Risk Committee: DTSPs above a certain size must establish a dedicated risk committee at the board level.
Independent Directors: Mandating a minimum number of independent directors based on the DTSP’s size and complexity.
Audit Frequency: Annual external audits for all DTSPs, with additional quarterly internal audits for larger providers.
Regulators are increasingly leveraging technological solutions to enhance their supervisory functions and manage vast amounts of data. Consequently, firms must engage more frequently with regulators regarding fintech and regtech developments.
Fintech companies that implement robust governance structures and conduct regular audits are indeed less likely to experience compliance breaches.
AML/CFT Measures
The measures proposed in parts 5–8 of the consultation paper, particularly those related to Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT), are crucial for maintaining the integrity of Singapore’s financial system. I propose the following enhancements:
Risk-Based Approach: Implement a tiered KYC/AML approach based on transaction volumes and risk profiles.
Technology Integration: Encourage the use of AI and machine learning for transaction monitoring and suspicious activity detection.
Regulatory Technology (RegTech) Sandbox: Establish a sandbox environment for DTSPs to test innovative compliance solutions.
For existing customers onboarded prior to licensing, I suggest a phased approach:
Phase 1 (0–6 months): Risk assessment of existing customer base
Phase 2 (6–12 months): Enhanced due diligence for high-risk customers
Phase 3 (12–18 months): Full compliance with new requirements for all customers
Correspondent Account Services
The proposed requirements for Correspondent Account Services and information sharing for law enforcement purposes are essential components of a comprehensive regulatory framework. Perhaps the following would help:
Standardized Data Format: Develop a standardized data format for information sharing across the industry.
Blockchain Analytics: Encourage the use of blockchain analytics tools to enhance transaction traceability.
Secure Information Sharing Platform: Establish a secure, centralized platform for information sharing between DTSPs and law enforcement agencies.
Blockchain analytics tools have been instrumental in recovering stolen or illicitly obtained digital assets worldwide. They allow law enforcement agencies to trace and identify suspicious cryptocurrency transactions on the blockchain, leading to asset recovery efforts.
Technology Risk Management
The draft notices FSM-N28 to FSM-N33 cover critical aspects of DTSP operations, including technology risk management, cyber hygiene, and conduct. Based on my observations, I propose the following:
Continuous Monitoring: Implement real-time monitoring systems for cyber threats and operational risks.
Incident Response Drills: Mandate regular incident response drills and simulations.
Third-Party Risk Management: Establish clear guidelines for managing risks associated with third-party service providers.
Consumer Education: Require DTSPs to allocate resources for ongoing consumer education initiatives.
Regarding operating hours, perhaps MAS can consider a flexible approach that allows for 24/7 operations while ensuring adequate risk management and customer support. This could involve:
Core operating hours (e.g., 9 AM to 5 PM SGT) with full support services
Extended hours with automated systems and on-call support
Scheduled maintenance windows during low-volume periods
Timeline for Implementation:
To ensure a smooth transition to the new regulatory framework, I propose the following timeline:
Month 0–3: Publication of final regulations and guidelines
Month 3–6: Industry consultation and feedback period
Month 6–9: Finalization of technical specifications and reporting formats
Month 9–12: DTSP preparation and system upgrades
Month 12–18: Phased implementation of new requirements
Month 18–24: Full compliance deadline for all DTSPs
This timeline allows for a gradual implementation, giving DTSPs sufficient time to adapt their systems and processes while ensuring that the regulatory framework is fully operational within two years.
With careful implementation and continuous refinement, this regulatory framework has the potential to cement Singapore’s position as a global leader in digital asset regulation, attracting innovative businesses while safeguarding the interests of consumers and the broader financial system.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
