His crypto exchange collapsed on Oct. 26th, just a few days before. FTXSam Bankman Fried sat down for lunch at an exclusive restaurant. Dubai Restaurant, where a group of bankers, founders and financiers test the waters for funding.
It was a good thing. to be a final hurrah before the former billionaire’s troubles were exposed to The end of the world. The implosion FTXThe value of, which was $32 Billion less than the original valuation to In the following weeks, bankruptcy sent crypto markets into a tailspin and drove them to their current level. billions of dollars in outflows Some of the most important global exchanges.
The aftershocks have reverberated particularly hard in the United Arab Emirates — especially in DubaiThis has been working for many years. to lure the world’s largest firms with its crypto-friendly policies. While some financial centers tightened regulations, many UAE officials promoted virtual assets as a gold mine for economic growth and pivotal in the nation’s diversification strategy beyond fossil fuels.
This helped the Gulf state to position itself as a crypto-hub. attracting Industry heavyweights, while also encouraging bankers and lawyers to be tech executives to Change jobs According to property brokers, there was an increase in demand for their services. crypto funds into luxury real estate. Some are still disappointed by the end of bull market.
Local exchanges Rain Financial Inc. And BitOasis have trimmed headcount in Dubai. Hazem Shishi, an ex-Barclays Plc banker and crypto hedge fund founder in Abu Dhabi, is one of those who are reconsidering entering the sector. Although it was successful in its initial months, the challenges of raising institutional capital amid market turmoil led to him closing the fund. to step back from the main fund’s management, according to People familiar with the matter requested anonymity because the information is confidential.
Shish declined to comment.
FTX One of the first companies to be granted a license Dubai’s Virtual Assets Regulatory Authority as part of the push to The exchange was able to attract business and established its regional headquarters in the capital.
Helal Al Maarri, the director general of The Associated Press, was present at the time. Dubai World Trade Centre Authority that houses VARA, praised the move and said it followed a rigorous evaluation — months before the firm went bust.
With FTX Bankman-Fried is now under investigation by the US to Officials from the Bahamas have They distanced themselves from this decision and even removed its license details from the regulator’s website.
Some links were more difficult to Remove from view
Banners advertising FTXAbu Dhabi Grand Prix sponsored party: Line one Dubai’s most exclusive beachfront drives. Formula One hats were worn by spectators at the race track. FTX logo.
Twin blows
The firm’s collapse was the second significant blow to Dubai’s efforts within a matter of months. After obtaining a provisional licence in the city, Three Arrows Capital, a hedge fund, collapsed in June in one of the worst-ever crypto trading busts.
Drama has gotten more dramatic to Other asset managers
Multiple crypto hedge funds set up in Dubai recently had all their client money. FTXThis is what caused a mad scramble to You can exit the platform prior to withdrawals being halted in an order to They can avert their own fall according to to People familiar with this matter.
Some 4% FTX’s global customers are based in the UAE, according to court filings in the firm’s bankruptcy case, making it one of the top 10 jurisdictions impacted by the fallout.
FTX and Three Arrows Capital didn’t have Full-scale licenses limit the local fallout to The extent. The Dubai virtual assets regulator’s structure is aimed at opening the doors for the biggest firms to However, initial licenses are limited to a specific range of services.
Nevertheless, these incidents are still occurring have This sparked a debate about whether authorities were too agile in their push to lure crypto firms, lending legitimacy to Companies that have Since then, it has gone bankrupt.
“As a regulator, there’s always the risk that if things go wrong it looks really bad,” said Dapo Ako, a former compliance specialist at UBS Group AG, whose firm J. Awan & Partners is helping crypto firms set up in the UAE. “But it’s also a chance to rethink the framework. If Lehman didn’t fail, we wouldn’t have new banking regulations.”
VARA spokesmen said FTX hadn’t cleared the approval process to You can take on clients and/or start your own business. They stated in a July statement that the license would permit them to onboard clients and start operations. FTX to Trade services and products using crypto derivatives to Qualified institutional investors
Three Arrows Capital: The representative of VARA stated that a provisional permit was available. “approval of concept” factoring in the credibility of other licensing jurisdictions but that steps for a more complete license didn’t progress.
In response to questions, a UAE official said there’s a commitment to Enable mass economic empowerment by focusing on consumer protection, cross border financial security, and economic stability.
At FTX declined to comment.
‘A walking time bomb’
Much of the UAE’s bet on crypto has centered around Binance Holdings Ltd. and its Chief Executive Officer Changpeng “CZ” Zhao.
The world’s largest crypto exchange has found a more receptive audience in the country, so much so that the 45-year-old executive made Dubai his home base and soon made inroads with the nation’s power brokers. The UAE granted Binance multiple licenses, and more than 500 of the firm’s employees settled in the Gulf state.
After FTX’s demise, Binance’s share of global crypto trading volumes increased to According to estimates, almost half of the population is in this category to Data from CryptoCompare However, the speed of FTX’s unraveling has sparked a debate about the health of centralized crypto exchanges, and traders have These funds were used to pull funds.
At a summit in Abu Dhabi on Nov. 16, the economist Nouriel Roubini, a crypto critic who’s been referred to As “Dr. Doom,” Binance is also known as “walking time bomb,” Officials were enraged that the firm was granted licenses by regulators. to Zhao must be removed from the UAE
The Binance CEO was appointed the next day responded on stage at the Milken Institute’s conference in Abu Dhabi: “What’s a word for unimportant people?” He said. “We don’t care.” As the exchange became more volatile, there was a dust-up. approvals Abu Dhabi Global Market
Tighter regulation?
Since Zhao’s arrival last year, influential players from Kraken to OKX, Bybit, and Crypto.com have built up their UAE presence, aligning with the nation’s ambitions for a digital economy that creates more non-oil sector jobs. However, UAE officials kept their identities secret. have expressed concerns over the pace of regulatory approvals — that they may have It was too fast and the result was failure to Find out the blowups of Three Arrows Capital FTXPeople familiar with the subject said that they were not surprised.
Dubai Multi Commodities Centre, which has come under particular scrutiny from the US Treasury Department for its looser regulations, is attracting the lion’s share of crypto companies — more than 500According to to Spokesman for the DMCC.
“I’d expect that overall regulators will be more careful and conservative as a result of the latest developments,” Gabriele Dunker, a founding partner at Financial Transparency Advisors GmbH in Vienna, said this. She has also advised the UAE government.
Crypto players in the UAE are currently on alert for any updates from regulators.
Dubai’s VARA plans to Announce its CEO in the next weeks and intends to People familiar with the matter said that further consultations would be held with key stakeholders before the year’s end.
Meantime, Abu Dhabi’s efforts to finalize federal legislation for crypto have delay as authorities deal with lobbying efforts from industry insiders. scrutiny international organizations regarding money laundering concerns and consumer protection concerns.
Binance CEO has started a proof-of-reserves system to Support “full transparency.” His firm, however, has declined to Describe the corporate structure.
“We have the largest offices in Dubai and Paris so you can view those two as global hubs,” Zhao told Bloomberg TV Thursday
Binance spokesperson stated that the exchange is expanding its UAE team and is currently in the midst a corporate restructuring designed to provide regulators with more information about the company.
Close calls
Like some financial centers, the UAE is stuck for now to Its determination to become a crypto hub. Hong Kong has reiterated their desire to become a crypto hub. to Japan proposes easing rules for token-listing and lure virtual-asset companies. Singapore, on one hand, has expressed its preference for use case-based blockchain technology, while cautioning against retail crypto trading.
Abu Dhabi funds, including Mubadala Investment Co., had established committees to Study investments in the cryptocurrency ecosystem. They’ve felt vindicated for proceeding cautiously and plan to People who are familiar with this matter advised caution during the next months.
A Mubadala spokesperson declined to comment.
Other entities are controlled by Sheikh Tahnoon bin Zayed, UAE National Security Adviser have Zhao maintained a more aggressive approach to the space, pursuing investment plans. Zhao and his team met potential backers, including entities associated with Sheikh Tahnoon who oversees large financial operations in Abu Dhabi. Bloomberg reported Tuesday
Bankman-Fried had tried it earlier in the month. to close a rescue deal with Binance, Zhao’s colleague Dominic Longman was in Abu Dhabi, launching the Middle East, Africa & Asia Crypto & Blockchain Association alongside UAE officials, who were pushing ahead with their embrace of the industry.
“Abu Dhabi, and the UAE, is a leader in the development of innovative and compliant crypto and blockchain businesses,” Ahmed Jasim Al Zaabi is the chairman of ADGM. “We are pleased to be able to support MEAACBA, which will contribute towards developing this dynamic sector.”
—With assistance from Nicolas Parasie, Leen Al-Rashdan, Suvashree Ghosh and Philip Lagerkranser
