The UAE Is All Set To Become The World's New Capital Of Crypto The UAE's rapidly growing adoption of digital assets will have a significant knock-on effect to other sectors and other parts of the world.
By Mo Ali Yusuf
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The UAE is rapidly becoming the epicenter for some of the most exciting innovations, regulations, and transactions in the crypto realm. The latest figures on the UAE market revealed that US$35 billion of crypto transactions had been received in to the Emirates over a 12-month period (Chainalysis). A large chunk of that (67%) came from institutional investments, valued at more than $1 million.
It's easy to see why the crypto landscape is gearing towards supporting these professional investors and businesses. Across the UAE, there are now close to 2,000 organizations of varying sizes, vying for crypto relevancy. 70% of them are "crypto-native" businesses offering digital assets products, with others offering complementary services that support the industry's success.
That figure is growing all the time, with the UAE being one of the fastest growing digital assets markets in the world. Research suggests that year-on-year, the number of daily crypto traders has risen by 166%, reflective of an overall climb in regional adoption. It's estimated between 27% and 31% of UAE residents have invested into digital assets. Among this active pool of crypto investors, nearly three-quarters (72%) are thought to have invested in Bitcoin. But it's not just UAE citizens and long-standing residents who are driving the state of the crypto economy- it includes new expatriates who have flocked to the UAE for its safety and protection in the midst of political and economic upheaval in other parts of the world.
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In recent times, we have seen hedge fund legend Ray Dalio as well as Egypt's richest man, Nassef Sawiris, move their family offices to Abu Dhabi. Alan Howard, the founder of one of the world's largest hedge funds, Brevan Howard, moved operations to the Abu Dhabi Global Market (ADGM) as he said it "offers a transparent and business-friendly environment to the banking, fintech, and investment management industries." American firms are also shifting operations and launching digital asset funds in ADGM and Dubai's Virtual Assets Regulatory Authority (VARA), moving away from a lack of support in the US market.
The UAE is home to a high proportion of high-net-worth individuals (HNWIs), with Henley & Partners estimating 4,500 new millionaires migrated to the UAE last year, and Knight Frank reporting that there will be 228,000 HNWIs living in the Emirates by 2026. Amongst crypto millionaires, the UAE is an attractive option- China has banned cryptocurrencies, the US is taking a strong look at organizations innovating in the crypto space, and India has levied high taxes on crypto profits and digital assets transactions. While not all HNWIs have exposure to cryptocurrency, a global Capgemini survey highlighted that 71% have invested in digital assets.
As the UAE continues to welcome family offices and HNWIs, the infrastructure to accommodate their investments has surged. ADGM has announced that during the first quarter of the year, assets under management skyrocketed by 211% compared to the same period in 2023. This is reflective of what we have seen in our operations at Fuze as well. There is a growing necessity for appropriate infrastructure to facilitate institutional and professional investment. It is one of the reasons that Fuze's regulated over-the-counter (OTC) desk is handling millions of dirhams in crypto trading volumes on a daily basis.
To support this rapid growth, there is a real demand for blockchain and crypto talent– just browsing across the most popular job portals, there are currently hundreds of advertised roles from development to sales. This investment in infrastructure and talent to support wealthy institutions and investors, underpinned by robust regulation, stands to benefit everybody. The strength of the institutional crypto landscape and the capital that accompanies it, attracts more crypto firms to drive innovation.
If traditional financial institutions are interacting with the top percentages of crypto wealth, the opportunity presents itself to serve a wider segment. What may have previously been a leap for traditional financial players to introduce consumer-facing crypto products now becomes part of the natural evolution. That ripple effect from institutions through to consumer will initially spread across the simplest forms of crypto trading, but then digital assets will continue to revolutionize other areas of life.
The UAE's rapidly growing adoption of digital assets will have a significant knock-on effect to other sectors and other parts of the world. For example, UAE expats remit around $50 billion a year to other countries. The vast majority of this is still via traditional physical outlets (estimates suggest just 11% of remittance is by digital means), which can be slow, and the processing by intermediaries costly. With the innovation of stablecoins, remittance can be completely transformed to be smoother, faster, and more affordable. This is just one example of the transformational impact of digital assets. Every sector from real estate to art, from payments to reward programs, and everything in between, will be shaped by digital assets. While today, professional investors are benefitting the most from forward thinking regulation and a welcoming environment for crypto, soon, it will pervade across every walk of life.
New York rose to prominence as a global financial centre because of several factors. A combination of smart regulatory frameworks, an environment that encouraged financial innovation and investment in first-class infrastructure, supported its acceleration. Wealth and talent followed quickly. Much like the early days of New York's financial hub, the UAE has set itself up for success in the crypto industry. It has developed clear policies in its financial centres, welcomed entrepreneurs, and invested in the right digital infrastructure. And as the statistics show, the wealth and talent is coming too.
While some might say it's a little too early to crown the UAE as the capital of crypto, the facts suggest its coronation can't be too far away.
Related: Dubai's World-Leading Entrepreneur Ecosystem Is Making It A Global Public Relations Hotspot Too
