Last year, the UAE celebrated its 50th anniversary. In this short time, the nation has exhibited the kind of exponential growth associated with the digital industries that it is now supporting. Dubai remains a tremendous catalyst for this growth. It is a city with unparalleled ambition as well as a can-do ethos. The world has seen a number of macro-economic challenges in the last few years, however, Dubai has been optimistic and continued accelerating towards a digital future. Welcome to Dubai 3.0.
Describing Dubai 3.0 requires clarifying what we mean by 1.0 and 2.0. Here’s a simplified version of that narrative: Once the leadership had laid the groundwork and trade infrastructure, Dubai 1.0 was marked by the establishment of DIFC as a regional financial hub and a commitment to developing a financial economy, including projects that helped attract foreign capital and services. Dubai 2.0 saw a real deepening of the services market as well as increasing sophistication of market dynamics and regulations. Dubai 3.0 is about a digital revolution currently underway. Much like we did in Dubai 1.0 and 2.0, DIFC is a proud participant and contributor to this movement.
Not surprisingly, Crypto is a key pillar of Dubai 3.0 because it continues to disrupt global financial services much like Dubai disrupts itself. Crypto is also the third generation of financial innovation in Dubai. More than four years ago, DIFC launched the first wave of FinTech innovation by issuing the region’s first crowdfunding regulations, which helped jump start the FinTech revolution. Shortly after, we launched the DIFC FinTech Hive, which was the region’s first accelerator. The launch of these regs and this accelerator enabled DIFC to first start to attract attention, talent and capital to this nascent sector. The second wave of FinTech Innovation began with DIFC’s launch of the region’s most comprehensive payments and money services regulations. This ushered in an era of innovation that attracted scores of start-ups as well as scale-ups/unicorns, such as Ebury and Rapyd, that will disrupt the market at scale. Crypto and the promise of Web 3.0 is the third and next wave of innovation driving Dubai 3.0.
Crypto is an important component of DIFC’s Future of Finance Strategy not only as a viable asset class for investors but also as a technology that revolutionises corporate governance, contracts and asset ownership. If done right, we see Crypto technology bringing greater efficiency and access to financial markets. DIFC’s approach to Crypto has two components. In November 2021, we launched our Security Token Regulations, which covered all non-digitally native assets that could be digitised, such as equity securities, debt securities and real estate among other. These regulations relied on our existing financial services regulation, permitting the buying, selling, trading, intermediating and market-making of such assets. The DFSA issued a consultation on Crypto Asset Regulations in the first half of 2022 and we await the introduction of the regulations. These regulations will naturally include digitally native Crypto assets and will also rely on our existing financial services regulations albeit with the appropriate controls that are specific to Crypto risks. Regulations would be aligned with Dubai’s ambition to be among the top three global centres for Crypto. We are already seeing the inflow of such firms, including a large representation of the top 20 Global Crypto firms and exchanges.
DIFC and Dubai would help scale the Crypto market by introducing initiatives that help a.) increase our understanding of the technology b.) attract top Crypto talent to Dubai and c.) drive creation of new ventures in this space. DIFC has launched the world’s first venture studio platform, which will enable studios to create and scale firms from DIFC. Similarly, we seek partnership with firms, such as Crypto Oasis, who have demonstrated the ability to create and grow ecosystems in markets like Zurich, Zug as well as in Dubai. Our recent partnership in Zug in September revealed the strength and richness of the ecosystem that Crypto Oasis has developed. In addition to DIFC’s regulations and existing innovation ecosystem, which is now the largest and deepest in MENA, the growth of firms, such as Crypto Oasis will have an important contribution to the development of the Crypto market in Dubai.
Dubai’s location at the heart of young, growing emerging markets, coupled with its bold digital ambition, makes it an ideal global hub for disrupting finance and technology. DIFC’s track record as an innovative but stable and deep market positions it perfectly for Crypto. Issuing flexible and sensible regulations and partnering with firms that can build ecosystems are important to grow this market and to bring to life the ambition of Dubai 3.0