3 Reasons Why Dubai Is the Place for Cryptotech Startups

Dubai is at the forefront of digital transformation. It developed its own blockchain strategy in 2016, with the aim of becoming the world's first blockchain-powered city. And with the establishment of the Virtual Asset Regulatory Authority (VARA) in 2022, Dubai offers a mature regulatory framework for the digital asset industry. With its favourable ecosystem, Dubai has become the destination of choice for many crypto startups. Let’s explore why.

City of innovations

Dubai is known for it's appetite for innovation. The city's government has been committed to digital transformation since the announcement of its first ICT strategy in 1999, which led to the creation of several entities such as Dubai Internet City, Dubai E-government and Dubai Smart Government.

In October 2016, Dubai launched a citywide blockchain strategy to become the first blockchain-powered city. The aim was to continuously update traditional processes to ensure efficiency and speed in government-to-consumer and government-to-government services.

Dubai saw the potential of blockchain as a solution that uses open, distributed databases for transactions involving value, whether monetary or any type of digital asset.

Dubai also recognises blockchain technology as the ultimate trust mechanism. Blockchain eliminates the need for trusted third parties in transactions of any asset, an attribute that could significantly help simplify the Dubai government's evolving processes.

Its blockchain strategy is based on three pillars:

• Government Efficiency - implementing blockchain technology in government services

• Industry Creation - supporting industry, creating opportunities and enabling the entire ecosystem

• Local and International Thought Leadership - Dubai hopes to attract blockchain talent by providing more efficient, seamless, secure and impactful experiences for its residents and visitors. This is also in line with the city's vision to embrace technological innovation.

Dubai Blockchain Strategy. Source: https://www.digitaldubai.ae/initiatives/blockchain

It is also worth mentioning that there are crypto/blockchain events happening in Dubai almost all the time.

Regulations and guidelines

Dubai's Virtual Asset Regulatory Authority (VARA) was launched in Q1 2022 as the world's only independent and dedicated regulator for virtual assets, including cryptocurrencies or tradable digital tokens (NFTs). It aims to address the global money laundering and terrorist financing risks posed by the potential misuse of new technologies.

As the authority responsible for the supervision of virtual assets in Dubai, VARA aims to facilitate the economic stability, investor protection and legal resilience associated with virtual assets.

VARA recently issued new guidelines for virtual asset trading in the city, providing a comprehensive framework for virtual assets based on principles of economic sustainability and cross-border financial security.

• The new regulations cover seven licensed virtual asset activities: 

• Advisory services

• Broker-dealer services

• Custodian services

• Exchange services

• Lending and borrowing services

• Payment and remittance services 

• Virtual wealth management and investment services

Issuance is also a regulated activity under the VARA, allowing consumers to make informed decisions about new tokens being launched in Dubai and the associated obligations of the issuer.

Existing and new virtual asset providers are offered a pathway to full licensing. New services will be required to register with VARA and become fully compliant. Any breach of this condition will be subject to regulatory action.

VARA's regulations have been welcomed by the crypto industry, with some calling it a mature regulatory framework for the digital asset industry. It is also a major counterweight to the US SEC, which has taken an opposing view on crypto and has not issued any guidance to date.

Favourable taxes

Last but not least Dubai has very favourable tax policies. There is 0% personal income tax and no capital control restrictions. This means that cryptocurrency profits are not taxed in Dubai. This eliminates the need for extensive record keeping and filing.

The regulatory friendliness, activity of the crypto community, number of startups and future importance of the hub all point to Dubai. According to a report by Blockworks, the city boasts over 500 crypto companies operating within its borders and we can clearly see why.

Dubai's favourable ecosystem is starting to beat other crypto hubs such as London, Singapore and San Francisco. If Dubai can fight fraud with its regulations and attract the talent it needs, it has a good chance of emerging on top. 

Would you reallocate to Dubai to start your business?