Cryptocurrency firms are flocking to Dubai as crypto trading regulations have tightened. A new law has been the most significant factor in generating interest in the United Arab Emirates. Dubai is the financial hub of the Emirates, which has also encouraged cryptocurrency players to move to Dubai. The UAE has added a grey list to help clean up its reputation, which is helping to increase cryptocurrency trading volumes across the region.
Why Dubai?
The cryptocurrency market has been plagued with several issues, including lacking a regulatory framework to make the system work for many investors. While many individual investors can make trading decisions without specific regulatory networks, some institutional investors have regulatory mandates that require specific laws to allow them to trade a particular asset.
Dubai is the most populated region within the United Arab Emirates. As of 2022, the UAE had more than 10 million people slightly, up from three million in 2000. Dubai has a population of nearly three million people, and the growth has accelerated sharply over the past decade.
Dubai is the capital city of the Emirates and is located on the peninsula's eastern coast. Dubai is also considered the financial hub of the country. Most of the inhabitants are expatriates, and only 15% are native residents. The official language is Arabic, but English is commonly used throughout Dubai.
What has made Dubai attractive within the crypto trading sector is the higher level of scrutiny the city has faced. Dubai is included on the Financial Action Task Force (FATF) grey money laundering watchlist. Dubai recently passed the Virtual Assets Law (VAL) in March 2022. The law defines virtual assets as a representation of value that may be digitally traded or used as a payment device for investment purposes. The law, which was established by the Dubai Virtual Asset Regulatory Authority (VARA), also explains what can be considered a virtual key, defined as "A digital representation of a set of rights that can be digitally offered and traded through a Virtual Assets Platform."
VARA is in charge of regulating and supervising the virtual assets industry. The law established VARA as the supervising authority over digital assets. VARA is an independent authority tasked with regulating the different digital exchanges and tokens traded in Dubai. Ultimately, the introduction of VARA has helped build a sense of confidence around the cryptocurrency industry.
The Grey List
The Financial Actions Task Force placed Dubai on a "grey list" in March 2022. The grey list is a list of countries that have had issues monitoring anti-money laundering regulations. The addition to the grey list can be a double-edged sword for cryptocurrency volume. Adding Dubai to the list means that money launderers should tend to stay away from Dubai. Simultaneously, investors could be attracted since there will be more scrutiny. Several exchanges that flocked to Dubai help to show that these exchanges are more interested in a regulated environment that can attract investors than using virtual tokens for unlawful practices like cryptocurrency money laundering.
How Does Cryptocurrency Money Laundering Work?
Unfortunately, there is a dark side to cryptocurrency trading. Several methods are used to obscure the origins of the cryptocurrency sent from address to address. A cryptocurrency address is a unique identifier from the sender or receiver of a cryptocurrency. A crypto trading address is derived from a private key, a set of numbers or letters. There is no name or identification number that lets anyone know who the owner of the address happens to be.
When you sign up for an exchange, you will receive a cryptocurrency wallet that has a unique cryptocurrency address. This address allows you to send and receive cryptocurrency. Each time you make a cryptocurrency trade, you send your cryptocurrency to another individual address. This type of crypto trading differs from contract for differences (CFD) crypto trading. CFD crypto trading tracks the price movements of underlying assets such as Bitcoin or Ether, and allows an investor to purchase or sell a CFD without having to own any actual crypto. In this instance, you will not need a wallet or address to trade in the cryptocurrency market.
The Bottom Line
The cryptocurrency markets are focusing on Dubai and continue to look for areas that are improving their regulatory framework. Recently, a new law has generated interest in the United Arab Emirates. Dubai has been a key city in financial innovation and is considered the financial hub of the Emirates. Recently, the UAE has added a grey list that points to specific regions where the regulatory framework needs to improve its reputation.
Cryptocurrency has faced issues related to criminal activity, which has allowed investors to focus on the lack of a regulatory framework to make the system work for many investors. While many individual investors can make trading decisions without specific regulatory networks, some institutional investors need secure regulatory mandates that require specific laws to allow them to trade a particular asset.
The upshot is the positives of the new law outweigh the negative aspects of reducing volumes because there is less of an ability for criminals to use cryptocurrency to commit money laundering. The new VARA laws implemented in Dubai will likely continue to add scrutiny to the crypto trading market, which could result in more confidence. Eventually, it may be possible for more institutional trading to come into the arena, especially if Dubai continues down its regulatory path.
