With nearly 3 million users— around a third of its population — the United Arab Emirates has the world’s highest cryptocurrency adoption rate, by some estimates.
But the Gulf nation doesn’t just want to buy digital currencies — it wants to become a crypto capital.
In addition to rolling out one of the world’s most comprehensive crypto regulatory frameworks and the launch of a dirham-backed stablecoin this year, the UAE last week authorized the first global license for Binance, the world’s largest cryptocurrency exchange, within Abu Dhabi Global Market (ADGM), a special economic zone in the Gulf nation’s capital.
“Our global users now have the assurance that we’re subject to the regulatory oversight of ADGM,” Binance CEO Richard Teng told CNN.
The city’s push on cryptocurrency in recent years has made it “compelling” for companies like Binance, said Teng, who is a former CEO of ADGM’s Financial Services Regulatory Authority. “It has a very pro-business environment,” he added. “The regulators here started to regulate crypto about seven years ago … (it has) the fastest-growing capital markets and fastest-growing financial center in the world. So, it’s a very enabling environment for us to help ourselves here.”
The UAE’s sovereign wealth funds, estimated to control assets worth $2 trillion, are investing heavily in decentralized digital finance models in a bid to diversify their economies away from fossil fuels, reduce their reliance on the US dollar, and streamline banking and cross-border transactions.
“We have a very thriving crypto and blockchain ecosystem growing up in Dubai and Abu Dhabi,” said Ronit Ghose, head of future of finance at research group Citi Global Insights.
While the UAE is leading the charge, other countries in the Gulf Cooperation Council (GCC) are also exploring digital finance, with Saudi Arabia focusing on blockchain and Bahrain one of the “frontier states” in its adoption of crypto rules, Ghose told CNN at Binance Blockchain Week, a global conference of crypto leaders and investors hosted in Dubai in early December.
“You’ve got the leadership of particularly the UAE and also Saudi, who are forward-looking, they’re relatively young in mind and spirit, and they want to adopt and embrace these new technologies,” he added.
But not all countries in the GCC are embracing crypto: Oman, Qatar and Kuwait have taken a more cautious approach, with the latter two placing bans on cryptocurrency and stablecoins.
The crypto market is notoriously volatile: Bitcoin hit an all-time high on October 6 of $126,000 per coin, before crashing below $81,000 seven weeks later. Long-time crypto critic Peter Schiff, chief global strategist of asset manager Euro Pacific Capital, told CNN that cryptocurrency’s value relies on speculation and is concerned that government support for cryptocurrencies risks legitimizing what he views as a pyramid scheme.
He believes that the best use for blockchain is to tokenize gold, a real resource with intrinsic uses, rather than cryptocurrency or stablecoins, the latter of which relies on the value of a real-world currency.
“Tokenized gold would be real currency. They talk about Bitcoin as ‘digital gold,’ but it’s not — it’s got nothing in common with gold,” said Schiff, who debated tokenized gold and stablecoins at Binance Blockchain Week with Changpeng Zhao, Binance’s co-founder and former CEO. Zhao was pardoned by Trump earlier this year for money laundering violations.
Ghose also acknowledges the extreme volatility of crypto but sees government intervention as essential for mainstream adoption.
“We always have to do things that are regulated: it’s not a nice-to-have, it’s a must-have,” he said.