Abu Dhabi is gaining traction as a preferred destination for crypto companies seeking supportive regulators and keen investors. While major markets like the US grapple with regulatory uncertainties, companies such as Copper Technologies Ltd., Paxos Trust Co., and eToro Group Ltd. are turning their attention to the thriving crypto landscape in Abu Dhabi.
These companies have secured licences or established parts of their crypto operations within the emirate’s international economic zone, known as the Abu Dhabi Global Market (ADGM). Phoenix Group Plc, a cryptocurrency mining hardware company, witnessed a 47% surge in shares since its debut on public markets in Abu Dhabi on December 5.
Executives from these crypto firms cite multiple advantages for choosing Abu Dhabi, including a growing network of partners, favourable government policies, and the presence of deep-pocketed investors. While Dubai has been a popular choice for crypto companies due to its Virtual Assets Regulatory Authority (VARA), Abu Dhabi is actively competing for attention by emphasising its commitment to the industry’s future.
ADGM’s Financial Services Regulatory Authority, the financial regulator within the ADGM, has outlined support for innovation in digital assets in its 2024 business plan. This commitment has attracted companies like Copper Technologies, which recently established a new unit offering tokenized securities in Abu Dhabi. The city’s regulatory environment, operating under British common law, is seen as a positive factor, offering global respect and a commitment to consistency in regulations.
The longevity of ADGM’s financial regulator, celebrating its 10th anniversary, adds to its appeal for crypto firms. Walter Hessert, head of strategy at Paxos Trust Co., notes that ADGM’s financial regulator is more highly respected by traditional global financial clients compared to Dubai’s VARA. The track record of a regulator with crypto as an additional mandate is preferred over one solely focused on the asset class.
While some crypto firms sought Dubai for its VARA, expecting faster regulatory approval, challenges arose due to the regulator’s first year in action. Jez Mohideen, CEO of Laser Digital, a crypto subsidiary of Nomura Holdings Inc., noted that VARA’s rules kept changing during its initial year, resulting in a licencing process that took around 10 months. This unpredictability led some firms to reconsider Abu Dhabi’s more stable regulatory environment.
Binance, the world’s largest crypto exchange, had initially set its sights on Dubai but faced regulatory challenges. While Dubai’s VARA has more registered firms, Binance’s operational licence from VARA in July is still pending full approval from a regional regulator. Binance’s recent $4.3 billion penalty deal with US authorities adds to the regulatory pressures, prompting a reassessment of its global structure.
Despite the recent influx of crypto companies, the UAE’s crypto industry remains relatively small compared to traditional hot spots. As of the end of September, companies in the UAE raised $462.3 million from venture capital firms, paling in comparison to $704.5 million in the UK and $2.8 billion in the US.
Some companies are adopting a strategic approach by obtaining licences in both Dubai and Abu Dhabi. Dubai licences provide firms with permission to service local clients, while approval from ADGM is ideal for those aiming to cater to clients overseas. Laser Digital, for instance, has filed an application for a full licence from ADGM’s FSRA, complementing its existing VARA authorisation to offer tokenized versions of digital assets.
Abu Dhabi has emerged as a compelling destination for crypto companies as they seek stable regulatory environments and global expansion opportunities. With a supportive regulatory framework, a growing network of partners, and a commitment to innovation, Abu Dhabi’s position in the global crypto landscape is on the rise signalling a promising future for its flourishing ecosystem.
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