Dubai – the Blockchain Oasis of the UAE: From Public to Private Sector
Dubai and the United Arab Emirates are making concerted efforts to be global leaders in blockchain adoption.
In some countries around the world, governments have had a stifling effect on the adoption of blockchain technology. Conversely, the government of the UAE and Dubai have been the driving force behind the promotion of blockchain use in the country.
2018 has seen some significant developments on this front but the foundations had been laid a couple of years ago.
Across the private and public sectors, there has been a push to incorporate this new tech to overhaul current systems. This includes as plans to launch a cryptocurrency that will be used by citizens and governmental departments.
The first proposal for an official Dubai cryptocurrency called emCash came about in October 2017. The cryptocurrency is touted to be used for payments for governmental and nongovernmental services – and is pegged to the UAE Dirham.
Consumers could well be using emCash in the next few months after the government signed a deal with a number of parties to setup point of sale payments for the cryptocurrency.
The partnership was announced on October 9, which includes emCredit, a subsidiary of the Dubai Department of Economic Development, blockchain payment provider Pundi X and its partner Ebooc Fintech & Loyalty Labs LLC.
Ebooc will be responsible for providing point of sale terminals in retail outlets, while Pundi X is expected to create 100,000 point of sale units over the next three years.
Regulations – ICOs lead to cautious approach
The Central Bank of the UAE began working on legislation at the beginning of 2017 to address the use of cryptocurrencies in the country.
This culminated in a report by Abu Dhabi's Financial Services Regulatory Authority in October 2017, which released its findings on initial coin offerings (ICOs) and cryptocurrencies – classing them as securities and commodities respectively.
A swathe of apathy towards ICOs, with bans in countries like China, happened around the same time last year. This had a slight ripple effect, as other institutions and regulatory bodies put out warnings to investors centred on the associated risks of investing in ICOs. This saw UAE Central Bank Governor Mubarak Rashid al-Mansouri caution citizens against the use of cryptocurrencies – amid fears of volatility and criminal uses.
This was primarily due to the corresponding drop in value of various cryptocurrencies following China’s ban, as Al-Mansouri said in a speech at the Islamic Financial Services Board Summit:
“The risks of trading in digital currencies have clearly appeared when the prices of digital currency fell sharply after some countries announced a ban on using initial coin offerings.”
The negative stigma around ICOs seemed to continue into the new year, amid an overall decline in the crypto markets following all time highs in December. In the US, the Securities and Exchange Commission (SEC) led the way with no-nonsense attitude towards ICOs in February 2018.
The UAE Securities and Commodities Authority (SCA) also cautioned local investors about the inherent risks associated with ICOs. Given that they are not regulated in the country, investors had no means of legal protection against fraud.
In an effort to address these concerns, it is understood that the UAE in nearing the completion of a draft of regulations for ICOs in the country. This was reported in September 2018, and is led by the UAE SCA.