Although digital assets in the United Arab Emirates (UAE) are thriving, PwC thinks the asset class can flourish even more and has identified a three-stage facilitative model for regulators.
PwC believes the virtual assets industry in the UAE could be the pacesetter globally, according to its latest report. Entitled The “UAE Virtual Assets Market,” the report sheds a light on the inner workings of the industry, highlighting areas of improvement and showing the growth trajectory.
The financial services firm suggested three models for the country’s regulators to consider for the industry’s long-term growth. Top of the list was the clarity of regulations.
The report noted that the country needs a “comprehensive, all-encompassing framework” for anti-money laundering (AML) and other niche sectors like decentralized finance (DeFi) and non-fungible tokens (NFTs).
Regulations are not a one-sided affair and PwC recommends that the UAE’s regulators should collaborate with industry experts, academics, and digital asset firms to make regulations for the entire industry.
“Self-regulation is proposed as a counterpart to legislation, and not as a replacement and requires the involvement and support of legislators for success,” read the report.
International cooperation is the way forward
PwC’s report underscored international coordination as the third ambit for the growth of the digital assets sector in the UAE. The firm notes that the borderless nature of the asset class and multiplicity of laws in different jurisdictions could clog the development of the industry.
“Greater international harmonization, communication, and cooperation are required with other jurisdictions for the UAE to succeed in this last stage of our proposed model,” said PwC.
Mahmoud Al Salah, Financial Crime Compliance Partner at PwC Middle East, hailed the report and expressed optimism that the regulators will implement the regulations.
The rise and rise of UAE’s virtual currency sector
Within 24 months, UAE’s digital assets grew by an impressive 500% rising to be the third country in the Middle Eastern region in terms of transaction volumes. Only Turkey and Lebanon rank higher than the UAE.
At the forefront of the UAE’s push into digital assets is the city of Dubai. Dubai passed the Virtual Assets Law and created a new regulatory entity called the Dubai Virtual Assets Regulatory Authority (VARA) in a bid to revamp the sector.
The effect was swift. Within months, top players in the industry like Binance and FTX have set up a base in the region, drawn by the allure of favorable legislation. An ex-PwC top-ranking executive setting his own digital asset fund chose Dubai as the new home of his fund over other Asian countries.
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