Understanding Abu Dhabi’s Rise as a Cryptocurrency Hub

Understanding Abu Dhabi’s Rise as a Cryptocurrency Hub

Insights

What makes Abu Dhabi a preferred destination for cryptocurrency enterprises?

As mentioned by Anndy Lian in the article, he said that Abu Dhabi's appeal to cryptocurrency enterprises stems from its comprehensive and forward-looking regulatory approach to crypto assets, a business-friendly environment, strategic geographic positioning, and a high quality of life.

What role does the Abu Dhabi Global Market (ADGM) play in the rise of Abu Dhabi as a crypto hub?

ADGM, as an international financial center, provides a regulatory framework modeled after English and Welsh common law. The Financial Services Regulatory Authority (FSRA) within ADGM spearheaded cryptocurrency regulation, offering clarity on various crypto activities and aligning with international standards.

How has Abu Dhabi attracted prominent crypto entities like Kraken and Paxos?

Abu Dhabi's regulatory framework and business-friendly incentives, such as a tax-friendly regime, 100% foreign ownership, and strategic geographic positioning, have attracted leading crypto entities like Kraken and Paxos to establish operations in ADGM.

What challenges does Abu Dhabi face in becoming a cryptocurrency hub, and how does it address them?

Abu Dhabi faces challenges such as crypto market volatility and competition from other jurisdictions. To address these challenges, a vigilant and adaptable approach from both crypto companies and regulators is deemed vital for fostering a resilient and thriving crypto sector.

How does Abu Dhabi compare to other jurisdictions, particularly Dubai, in terms of crypto regulations?

Comparisons between Abu Dhabi and Dubai highlight differences in regulatory perspectives, with concerns about the Virtual Asset Regulatory Authority (VARA) in Dubai. Clear, consistent policies and resource optimization are seen as crucial for Abu Dhabi to maintain its position as a leading crypto hub amidst competitive pressures.

 

Abu Dhabi, the capital and the most expansive emirate of the United Arab Emirates, is swiftly becoming the preferred destination for cryptocurrency enterprises within the region and globally. This rise to prominence is the result of the emirates’ comprehensive and forward-looking regulatory approach to crypto assets, which has drawn industry heavyweights. Coupled with a business-friendly environment, a geographically strategic position, and a superior quality of life, Abu Dhabi presents a compelling case for investors and entrepreneurs in the cryptocurrency domain.

Central to Abu Dhabi’s distinctive appeal is the Abu Dhabi Global Market (ADGM), an international financial center and free zone established on Al Maryah Island. Inaugurated in 2013 and operational since 2015, ADGM offers an extensive suite of financial and ancillary services to both local and international firms. It boasts an autonomous legal framework modeled after English and Welsh common law and is regulated by its own Financial Services Regulatory

The FSRA has spearheaded cryptocurrency regulation in the Middle East, unveiling the region’s inaugural exhaustive regulatory framework for crypto assets in June 2018. This pioneering framework comprehensively governs the full spectrum of crypto asset activities, encompassing issuance, trading, custody, and brokerage services, while addressing the predominant risks such as money laundering, terrorism financing, consumer protection, market integrity, and technological governance. Furthermore, the FSRA provides regulatory clarity on initial coin offerings (ICOs) and stablecoins and aligns with international standards and best practices in the sector.

By understanding Abu Dhabi’s unique positioning and proactive stance, we can better comprehend its ascent as a crypto hub and its implications for the broader financial landscape.

Abu Dhabi’s crypto regulatory framework has garnered significant acclaim and attention from the crypto community. Its comprehensive rules provide clarity and confidence for crypto businesses operating within Abu Dhabi, fostering an environment ripe for innovation and growth in the sector. This flexibility is conducive to emerging technologies and business models, from decentralized exchanges to tokenization platforms and digital asset funds. Regulatory authorities have developed a symbiotic relationship with the industry, ensuring a continuous exchange of insights and support throughout the regulatory and supervisory process.

This visionary approach has led numerous prominent crypto entities to establish their operations in ADGM. Notable among them, Kraken, a preeminent crypto exchange, became the first international virtual assets exchange group in the UAE to obtain a comprehensive financial license from ADGM in 2022. Similarly, Paxos, a leading blockchain infrastructure platform, received in-principle approvals from FSRA, positioning it to innovate within ADGM’s dynamic framework.

Additionally, Copper, a distinguished crypto custody and brokerage firm, plans to inaugurate a digital securities brokerage using blockchain technology in 2024 after obtaining the necessary FSRA endorsements.

These instances underscore Abu Dhabi’s emerging prominence as the regional hub of choice for the crypto industry, with expectations for increased migration of similar firms shortly.

Moreover, Abu Dhabi’s appeal as a crypto haven extends beyond its regulatory landscape. As one of the globe’s most affluent and stable nations, boasting a GDP of $508 billion and a per capita income of $87,729, the emirate has a multifaceted economy with strengths across various sectors, including energy, aerospace, tourism, and healthcare. Home to some of the world’s largest sovereign wealth and private investment firms, Abu Dhabi is a powerhouse of capital.

Businesses in ADGM benefit from an array of incentives: a tax-friendly regime with no corporate, personal, or withholding taxes, and exemption from VAT for financial services; 100% foreign ownership with unfettered capital and profit repatriation; world-class infrastructure; strategic geographic positioning for market access across Asia, Africa, and Europe; and an advantageous time zone.

Coupled with a high quality of life, cosmopolitan culture, and a spectrum of lifestyle amenities, Abu Dhabi is an increasingly compelling choice for crypto companies seeking to broaden their international presence and leverage the burgeoning opportunities across the region and beyond.

Abu Dhabi’s emergence as a pivotal cryptocurrency hub in both the UAE and the wider MENA region is a testament to its holistic regulatory landscape and conducive business environment. The emirate’s strategic location augments its appeal, drawing leading crypto companies worldwide and nurturing a dynamic, multifaceted crypto ecosystem. Abu Dhabi’s commitment to innovation and its aspiration to be at the forefront of the crypto sector is evident in the progressive policies it has implemented.

However, Abu Dhabi’s ambitions are not without challenges. The crypto market is notorious for its volatility, presenting a spectrum of risks that could impact the emirate’s crypto businesses and investors. Such challenges are not unique to the country; they reflect broader uncertainties inherent in the global crypto landscape.

Competing jurisdictions vie for the attention of crypto enterprises with varying regulatory climates, potentially offering more appealing conditions. Within the region, the comparison between Abu Dhabi and Dubai often surfaces, particularly regarding the application and enforcement of crypto regulations. There are concerns that the Virtual Asset Regulatory Authority (VARA) in Dubai may not have the necessary resources or clarity in its guidelines, underscoring the need for unequivocal and stable regulations.

These hurdles necessitate vigilant oversight and an adaptable stance from both crypto companies and regulators in Abu Dhabi. A pragmatic and balanced approach is vital to fostering a resilient and thriving crypto sector within the emirate.
Abu Dhabi’s regulatory framework, spearheaded by the Abu Dhabi Global Market (ADGM) and the Financial Services Regulatory Authority (FSRA), is commendable for its inclusive approach to crypto asset regulation. This approach has placed Abu Dhabi on the map as an inviting destination for global crypto enterprises, and its economic landscape is equally alluring. The emirate’s diverse economy is supported by substantial investments from some of the world’s largest sovereign wealth funds. The business environment, characterized by tax incentives, full foreign ownership, and exemplary infrastructure, is strategically poised to attract crypto companies looking to scale their operations.

Yet, to maintain its trajectory as a crypto hub, Abu Dhabi must navigate the market’s inherent unpredictability and the competitive pressures from other jurisdictions. The contrasts in regulatory perspectives between Abu Dhabi and Dubai highlight the necessity for clear, consistent policies and the optimization of resources.

For Abu Dhabi to continue its rise in the crypto domain, a strategy that embraces vigilant regulation and the flexibility to adapt to the market’s evolving dynamics is essential. Such a strategy will secure Abu Dhabi’s position as a crypto haven and cement its stature as a global leader in the digital economy.

 

 

 

Source: https://intpolicydigest.org/understanding-abu-dhabi-s-rise-as-a-cryptocurrency-hub/

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”.

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Is Asia on the Way to Becoming the Next Crypto Hub?

Is Asia on the Way to Becoming the Next Crypto Hub?

Asia seems to be standing at the forefront of the global cryptocurrency landscape and is headed to become the next crypto hub, with data revealing that central and southern Asia are leading regions in digital asset adoption.

With a number of key seminars taking place in South Korea, Singapore, and Hong Kong, the region is moving fast in establishing itself as a key player in the decentralized finance (DeFi) industry.

How is the region trying to achieve that?

Trade Volume in Asia Surges

ChainAnalysis’ 2023 crypto adaptation index showed central and southern Asia to be leading the way in crypto adaptation, with six of the top 10 countries being located in the region.

In addition, crypto trading volumes are also on the rise in the region, fuelled by market uncertainty in the West powered by the United States Securities and Exchange Commission (SEC) suing three major cryptocurrency exchanges earlier this year, it seems like most major players in the crypto space are moving East.

Anndy Lian, author of NFT: From Zero to Hero, explained:

“As US regulators sued three major crypto exchanges this year, billions of dollars of trading volumes have migrated to Asia. Investors and marketplaces are flocking to Singapore, Japan, South Korea, and more recently to Hong Kong, which introduced a new regulatory regime for crypto.”

Lian added that resilience in Asian crypto volumes is underpinned by institutional investors who view the regulatory environment in the region as less risky and more welcoming for DeFi firms.

Even though market activity has been stagnant, with global crypto adaption taking a hit, influenced by the collapse of FTX and the de-pegging of the TerraUST stablecoin, a number of lower-middle-income (LMI) category countries have been seeing a recovery in grassroots crypto adoption.

“Many of the top countries on our Global Crypto Adoption Index, from Central & Southern Asia to Africa, are in the LMI category, and taken together, LMI countries have seen the greatest recovery in grassroots crypto adoption over the last year. In fact, LMI is the only category of countries whose total grassroots adoption remains above where it was in Q3 2020, just before the most recent bull market,” research by ChainAnalysis revealed.

Asian Countries Are Embracing Cryptocurrencies

“In recent years, Asia has emerged as a hotbed for cryptocurrency innovation and adoption, sparking a growing debate over whether the continent is poised to become the next global crypto hub. With a dynamic blend of technological prowess, regulatory shifts, and a burgeoning interest in digital assets, Asia’s crypto journey is a captivating one to watch,” Rishi Vaidya, the co-founder and head of partnerships and marketing at Carbo-X Token and a recent speaker at the EDGE Global AI and Web3 Investment Summit in Hong Kong told Technopedia in an exclusive interview.

Overall, Asia has been populated with crypto events, including the Korea Blockchain Week at the start of September, Token2049 in Singapore in mid-September, and the Edge Summit in Hong Kong last week.

Token2049 has even made headlines as being the largest cryptocurrency event, sporting 300 exhibitors and 400 side events, and leading faces in the DeFi industry are drawn to the region thanks to its more lenient regulatory regime.

Singapore was the first country to agree on stablecoin regulation meanwhile, Hong Kong had decided to let retail investors trade digital assets while trading crypto in mainland China continues to stay illegal.

Karl Blomsterwall, the CEO of Planet IX and another speaker at the EDGE Summit, told Technopedia:

“Over the last couple of months, we have seen a push from Hong Kong to position itself in a favorable position to capture a larger share of the future crypto and blockchain market. It’s not surprising as the lack of regulatory clarity and commitment in other regions, such as the US, opens up for new entrants.”

Lian added that with so much uncertainty surrounding crypto regulation in the West, a number of major cryptocurrency exchanges have decided to shift their focus to the region, helping it “grow better and in a more stable manner”.

Asia to Become the Next Crypto Hub

Carbo-X Token’s Vaida, Asia’s fascination with cryptocurrencies, can be tracked to the early days of bitcoin (BTC). While the digital asset started as a speculative playground, it has managed to evolve into a more serious investment landscape, with a number of countries in the region embracing cryptocurrencies and establishing a strong foundation for several crypto businesses to flourish.

“China’s foray into the digital yuan and blockchain technology has added further weight to Asia’s crypto dominance. Asian nations have invested heavily in blockchain technology and cryptocurrency infrastructure. South Korea, for instance, has become a hotbed for blockchain startups, while Singapore is a global leader in fintech innovation. These advancements in technology are not just creating opportunities for local entrepreneurs but are also attracting international crypto giants.”

Vaida further noted that regulation will play a bigger role in determining whether Asia will manage to evolve into a crypto hub.

“Asian governments have been exploring various regulatory frameworks to balance innovation and security. Japan, known for its progressive approach, has introduced clear regulations for cryptocurrencies, instilling investor confidence.”

Lian added that Singapore’s proactive approach to regulating stablecoins has given the country a competitive edge in the crypto space, as it offered the region a clear and consistent legal framework for issuers and users of such digital assets.

He highlighted:

“By setting standards for anti-money laundering, consumer protection, and financial stability, Singapore has attracted many global players in the crypto industry, such as Binance, Coinbase, and Gemini, to set up their regional headquarters in the city-state. Singapore’s stablecoin regulation has also influenced other Asian countries, such as Japan, Thailand, and Malaysia, to adopt similar measures or to collaborate with Singapore on cross-border supervision and innovation. As a result, Asia has emerged as a leading region in the crypto markets, with high levels of adoption, liquidity, and innovation.”

Increased Adoption Plays a Major Role

“One of the driving forces behind Asia’s crypto boom is the increasing adoption of digital assets. In countries like India, where a massive population lacks access to traditional banking, cryptocurrencies offer a new financial frontier. Moreover, the younger generation in Asia is more receptive to digital currencies, which bodes well for long-term adoption,” Vaida said.

Planet IX’s Blomsterwall added that the blockchain industry tends to wield much of the world’s talent and is expected to grow massively over the next couple of years. Data found Singapore has the second highest number of crypto-related jobs relative to the country’s population, with 90.86 vacancies per million people, further pushing the region as a great pool for further crypto adoption.

Vaidya added:

“Asia’s crypto ecosystem is not limited to its own borders. International investors and crypto companies are actively seeking opportunities in the region. Silicon Valley giants are eyeing partnerships and investments in Asian startups, recognizing the potential of this market.”

Challenges Remain

Even though the region pushes itself as an emerging space for the DeFi industry, challenges remain.

Vaidya mentioned regulatory uncertainties, security concerns, and the need for cross-border collaboration as some of the most critical factors many nations in the region must still consider.

Blomsterwall added:

“With the recent fraud in JPEX, however, it will be interesting to follow which stance policymakers take towards crypto – keep their current strategy or revert back to a more conservative view.”

However, led by its rapid technological innovation, growing crypto adoption, and dynamic business landscape, Asia “is undeniably on the path to shaping the future of cryptocurrencies”.

The Bottom Line

Asia’s crypto boom signifies a seismic shift in the global financial landscape, pushing the region to become a massive crypto hub in the coming years. Fuelled by regulatory clarity, technological innovation, and growing adoption, the area has emerged as the epicenter of cryptocurrency investment and innovation.

Despite challenges, Asia’s proactive approach, coupled with increasing acceptance among its populace, positions it as the driving force shaping the future of digital currencies.

 

Source: https://www.techopedia.com/is-asia-on-the-way-to-becoming-the-next-crypto-hub

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”.

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Hong Kong Emerges As An Attractive Hub For The Virtual Asset Industry Amidst Regulatory Scrutiny

Hong Kong Emerges As An Attractive Hub For The Virtual Asset Industry Amidst Regulatory Scrutiny

The virtual asset industry is facing increasing scrutiny and regulatory clampdowns worldwide, leading to the emergence of new hubs for the industry. Hong Kong is one such hub that has proposed rules allowing retail investors to trade certain “large-cap tokens” on licensed exchanges, contrasting with mainland China’s ban on crypto-related transactions. Although the Securities and Futures Commission of Hong Kong has not specified which tokens would be allowed, industry insiders believe Bitcoin and Ether are likely to be among them.

China’s crackdown on crypto trading aimed to protect individual investors from speculative activity. However, the crypto industry’s increasing bankruptcies and layoffs may justify their actions. Despite this, the industry continues to attract investment and talent, making it hard to imagine Beijing sitting idly by while the rest of the world develops new building blocks that could potentially spark a new wave of innovation as big as the current internet itself.

As a result, many of China’s web3 startups have set up new bases in more crypto-friendly locations such as Singapore and Dubai. However, with Hong Kong’s more relaxed regulatory environment for cryptocurrencies, some Chinese-founded web3 companies in exile may consider returning home. Hong Kong’s proposal stipulates that all centralized virtual currency exchanges operating in the city or marketing services to the territory’s investors must obtain licenses from the securities and futures authority.

The proposed requirements cover key areas such as safe custody of assets, know-your-client, conflicts of interest, cybersecurity, accounting and auditing, risk management, anti-money laundering/counter-financing of terrorism, and prevention of market misconduct. Centralized crypto exchanges must ban Hong Kong IP addresses until they obtain the relevant permits to operate in the city. The regulatory requirements are open for consultation until March 31, and the new licensing regime will take effect on June 1. This move by Hong Kong is strategic, as it can attract crypto companies and investments to the city. Implementing clear regulatory frameworks would help the industry gain mainstream adoption and bring in more institutional investors.

AML Crypto Regulations In Hong Kong

The Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (AML/CTF Amendment Bill 2022) on December 7, 2022. This bill introduced a licensing regime for virtual asset service providers (VASPs) and imposed anti-money laundering (AML), counter-terrorism financing (CTF), and investor protection obligations upon these actors.

VASPs that are licensed in Hong Kong are subject to a number of AML, CTF, and investor protection obligations. These include:

  • Customer Due Diligence (CDD): VASPs must conduct CDD on their customers, which includes identifying and verifying the identity of the customer, the beneficial owner, and any other person who exercises control over the customer. VASPs must also assess and understand the nature and purpose of the business relationship with the customer.
  • Ongoing Monitoring: VASPs must monitor their customers’ transactions on an ongoing basis to ensure that they are consistent with their knowledge of the customer, the customer’s business, and the risks associated with the customer.
  • Record-Keeping: VASPs must maintain adequate records of their customers, their transactions, and their risk assessments. These records must be kept for a period of at least five years.
  • Reporting: VASPs are required to report suspicious transactions to the Joint Financial Intelligence Unit (JFIU) of Hong Kong. Suspicious transactions include those that are inconsistent with the customer’s profile, those that have no apparent economic or lawful purpose, or those that involve the proceeds of crime.
  • Investor Protection: VASPs must also put in place measures to protect their customers’ assets. This includes measures such as segregation of customer assets from the VASP’s own assets and insurance against losses.
  • Penalties for Non-Compliance: VASPs that fail to comply with the new regulations are subject to a range of penalties, including fines, suspension or revocation of their license, and criminal liability. Individuals who are found guilty of money laundering or terrorist financing may face imprisonment of up to 14 years and fines of up to HKD 5 million.

The new regulations also provide for the imposition of sanctions by the United Nations Security Council or by Hong Kong in respect of breaches of international sanctions.

Licensing And Registration Requirements For VASPs In Hong Kong

Anyone who engages in a virtual asset exchange business in Hong Kong must apply for a license with the SFC. The AML/CTF Amendment Bill 2022 also introduced regulations for VASPs to comply with the Crypto Travel Rule.

The HKMA will only grant licenses to VASPs that meet certain criteria, including:

  • The company must be incorporated in Hong Kong.
  • The company must have a permanent place of business in Hong Kong.
  • The company must have adequate financial resources.
  • The company must have appropriate AML/CTF systems and controls in place.
  • The company must have a compliance officer responsible for ensuring the company’s compliance with the new regulations.

VASPs that fail to obtain a license will be prohibited from providing virtual asset services in Hong Kong.

Complying With The Crypto Travel Rule In Hong Kong

The Crypto Travel Rule will be effective in Hong Kong as of June 1, 2023. The new regulatory regime will provide industries with a grace period to prepare for compliance until that date. In Hong Kong, Travel Rule requirements apply regardless of the transaction amount.

The scope of data to be exchanged varies depending on the threshold of the transaction. For virtual assets that amount to HKD 8,000 or more, the following information needs to be shared: name, account number, and address of the originator, as well as the beneficiary’s name and account number. For virtual assets that amount to less than HKD 8,000, only the name and account number of the originator and beneficiary are required.

There are no differences in customer personally identifiable information (PII) requirements for cross-border transfers and transfers within Hong Kong. However, for wire transfers, the information recorded must include the number of the originator’s account or a unique reference number assigned to the wire transfer by the financial institution.

Non-custodial or self-hosted wallet transactions do not have any specific requirements in Hong Kong. The AML/CTF Amendment Bill 2022 defines virtual asset transfers subject to Crypto Travel Rule requirements as transactions for transferring virtual assets carried out by an institution on behalf of an originator, with a view to making the virtual assets available to the originator or another person at an institution, which may be the ordering institution or another institution.

To sum up, Hong Kong’s plan to permit retail investors to trade large-cap tokens on licensed exchanges is a significant advancement for the worldwide crypto industry. While China’s crackdown on crypto trading was meant to safeguard individual investors from speculative behavior, Hong Kong’s proposed regulatory framework is more lenient and has the potential to lure more crypto companies and investments to the city. The establishment of clear regulatory frameworks would aid in the industry’s adoption by the general public and attract more institutional investors. I hope to witness a harmonious balance between the two approaches.

 

Source: https://www.benzinga.com/23/03/31340390/hong-kong-emerges-as-an-attractive-hub-for-the-virtual-asset-industry-amidst-regulatory-scrutiny

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”.

j j j