For digital money new businesses looking for the stamp of authenticity that accompanies guideline, the capital of the United Arab Emirates (UAE) has become a draw.
Being on the fringes of a desert, where temperatures effectively outperform 40 degrees Celsius in the mid year, life in Abu Dhabi is a battle. With minimal regular drinking water, the city needs to desalinate seawater just to give enough drinking water to its 1.5 million occupants.
The advanced high rises and the rich open nurseries are a piece of an alternate reality: Abu Dhabi introduces itself as a desert garden. As the UAE keeps on differentiating from oil, the city’s rich rulers need to tempt new organizations, incorporating those in the digital currency industry.
A few industry individuals revealed to CoinDesk that Abu Dhabi – explicitly the Abu Dhabi Global Market (ADGM), the city’s worldwide money related focus – has become an appealing locale for crypto organizations, enormous and little, since it presented advanced resource guideline in June 2018.
Richard Teng, CEO of the ADGM’s main markets guard dog, the Financial Services Regulatory Authority (FSRA) revealed to Coindesk that it had “got solid enthusiasm” from industry players in working as an authorized crypto business in the ward.
There are upwards of seven or eight digital money organizations, and a comparable number of auxiliary administrations, keen on moving to Abu Dhabi.
These incorporate some commonly recognized names. Kraken has just started the permitting procedure and is working with the FSRA to make its contribution consistent with neighborhood laws. COO Dave Ripley told CoinDesk Abu Dhabi was appealing on the grounds that it is a “solid, developing and free-showcase [that is] turning out to be increasingly worldwide.”
The Huobi trade is likewise during the time spent setting up an office in Abu Dhabi. Ciara Sun, Huobi’s head of worldwide business, said the firm expectations its new premises would fill in as their territorial base for the Middle East: “It’s an incredible market, blockchain appropriation is developing quick in the district.” Sun declined to state how far Huobi was along the permitting procedure.
Blockchain installments startup Ripple is in discourse with the FSRA, an individual acquainted with the circumstance said. A representative for the firm didn’t react to a solicitation for input.
In a nutshell, the ADGM’s crypto framework provides a full list of standards and expectations on key financial market components, like anti-money-laundering, market integrity, customer protection, safe custody of assets and governance models, for any business looking to operate as an exchange, brokerage or custodian in the jurisdiction.
Although no business has been given a full license yet, Christopher Flinos, the co-founder of crypto OTC and custody platform HAYVN, has held in-principle approval – a nod, effectively – from the FSRA for the past 10 months. He told CoinDesk that HAYVN had looked at other jurisdictions, but settled on Abu Dhabi because its regulation “was much better than anything else.”
As his company deals with institutional clients, many of which have strict due-diligence requirements, Abu Dhabi’s stronger regulatory regime was better for business, Flinos said.
“All I care about is that the regulatory framework in which HAYVN operates is good enough so that when I’m sitting with a U.K. pension fund, and I’m trying to allocate a small percentage of their overall portfolio into cryptocurrency, they appreciate HAYVN is regulated as if we are a financial institution,” he said.
There are other, more strategic reasons for moving to Abu Dhabi. “The whole [regulatory] regime in Abu Dhabi is pretty much lifted from the U.K,” explained Tim Aron, director of decentralized exchange DeversiFI and a London-based barrister.
Before becoming FSRA CEO in 2015, Teng was director for corporate finance at the Monetary Authority of Singapore (MAS). As the FSRA hires many of its officials from the financial regulatory bodies of other countries – such as the U.K’s Financial Conduct Authority (FCA) – Aron suggested Abu Dhabi’s regulation might be a precursor for future crypto regimes in other countries.
“The language and the legislation are almost exactly the same, so anyone who is familiar with U.K. regulation would find their way around Abu Dhabi regulation pretty simply,” Aron said. “The reason we, and possibly others, are thinking about this is that we’ve got an eye on the possibility, and the likelihood, in the near future there will be a move towards regulating spot crypto.”
There are, of course, other jurisdictions offering some sort of cryptocurrency licensing framework: Malta and Liechtenstein have their own cryptocurrency regimes, with Singapore having gradually incorporated digital assets into its existing payments regulation.
But part of the appeal of Abu Dhabi, according to the companies moving there, is it is devilishly difficult to get regulated there. Only 5 percent of initial applicant-companies are invited to apply for an ADGM license, according to Teng, a process that can take upwards of 14 months.
Some of the businesses pushing for an Abu Dhabi license, like Kraken or Huobi, are already global players. But many, like DeversiFI and HAYVN, are smaller and see having passed such rigorous scrutiny as a ticket that will enable them to offer their services in other jurisdictions.
HAYVN is setting up offices in London, Singapore and Zurich, as branches of the Abu Dhabi office. Although there is no equivalence regime with the U.K., Aron said approval from FSRA, with the same standards and right protections as the FCA, would likely make U.K. authorities more amenable when the time came to get regulated there.
“We could all be sitting in the Seychelles and providing these services,” Aron continued. But having a regulator “looking over your shoulder and essentially giving a stamp of approval” generally gives customers a little bit more comfort, he added.
And not just customers. In an industry like crypto, where the outlook for regulation is so uncertain, something like the ADGM license may give businesses the much-needed reassurance they are in the clear.