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Cryptocurrency, Digital Currency, Featured

Dubai and MENA Partners Introduce Crypto Regulations to Boost Fintech

The global COVID-19 pandemic accelerated worldwide development of the fintech industry, particularly among the associated regulatory and governing bodies in the Middle East and North Africa(MENA) region including Dubai and the UAE. Recent times have witnessed the establishment of a number of fintech legislations for regulating and utilizing business opportunities brought forward by tech-aided financial services. This includes virtual assets like cryptocurrencies. 

MENA Fintech Regulation Report

A report from the Cambridge Centre for Alternative Finance(CCAF) entitled “Fintech Regulation in the Middle East and North Africa” highlights steps taken by MENA jurisdictions to capitalize the opportunities and mitigating risks presented by the rapidly growing fintech industry including study findings of the associated regulatory challenges. 

The study comprises of previous years’ data from nations such as Morocco, Egypt, Tunisia, Saudi Arabia and the UAE, in addition to free zones like the Abu Dhabi Global Market(ADGM) and Dubai International Financial Centre(DIFC). 

As per the report, an overwhelming majority of surveyed financial regulators recognize the growing role of fintech in boosting market development(85%), facilitating financial inclusion(77%), boosting competition(69%) and triggering widescale adoption of digital finance products/services(62%). In response, a number of regulations have been introduced post pandemic with a focus towards remote onboarding. 

Of the respondents, 46% of the MENA regulators acknowledged bringing in new measures such as KYC, AML and digital identity. The percentage was varying in regard to initiatives for economic support and relief(46%), business continuity(38%) and cybersecurity(23%) according to the research. 

Also Read: HashCash Contributions to Digital Asset Innovation in the MENA Region

Regulatory Frameworks Across Sectors

Almost all of the MENA fintech regulators have built regulatory frameworks for payments(92%), cross-border remittances(80%), and e-money(92%). The protection of consumer finance also remain in high priority, with 92% of the MENA jurisdiction having established laws for cybersecurity and financial consumer protection. 

Cybersecurity Concerns

The world witnessed a massive increase in cyberattacks in 2021 with a 105% increase in ransomware As per SonicWall’s 2022 Cyber Threat Report, cyber attacks increased 1885% on government websites, and 755% on healthcare industries. 3 out 4 participants in the CCAF survey admitted the growing cybersecurity risks, with 67% reporting elevated operational risks. 

P2P, Data Protection, Equity Crowdfunding Frameworks

In addition to the aforementioned findings, the CCAF report also mentioned how the majority of MENA regulators already have operational frameworks for P2P lending(67%), protection of data(69%), as well as equity crowdfunding(69%). Most of the respondent not having established frameworks reported to be working on these. 

The prioritization of data protection has brought forward a focus on open banking systems prevalent across Europe. Bahrain has been a pioneer utilizing open APIs and bank-data sharing for enhanced customer service experience as early as 2018. Its open-banking regulations mandate retail banks to share customer data to licensed 3rd party financial service providers once consent is granted. Known as the Tarabut Gateway, the open-banking platform has 15 participating Bahrainian banks. 

Formal or compulsory open banking platforms are operational in 23% of the MENA participants in the CCAF survey including Bahrain. An additional 54% of the respondents are in the planning and designing stage, making MENA the global leader in planned financial frameworks racing ahead of Asia Pacific regions. 

Also Read: How Blockchain is Transforming the P2P Crypto Lending Procedure

Latest Crypto Developments in Dubai

The Emirates of Dubai recently passed the Dubai Virtual Asset Regulation Law in view of propelling the nation to the forefront of global crypto development. His Highness Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, authorized the legislation aiming the creation of a cutting-edge legal framework for the protection of investor assets. In addition, the proposed regulation will lay down a world-class infrastructure for virtual asset industry governance facilitating responsible business growth. 

Dubai’s Crypto Legislation

The law brings forth provisions to be enforced all over the Emirate including free zones and special development zones, but excluding the Dubai International Finance Centre. The provision also leads to the foundation of the Dubai Virtual Asset Regulatory Authority(VARA), a governance body with legal and financial autonomy. VARA will be linked with the Dubai World Trade Centre Authority(DWTCA).

In a response regarding Dubai’s interests in becoming a key player in the global crypto community, the noted Dubai Vice President and Prime Minister confirmed, “Today, we are participating in designing the future of virtual assets globally.” 

He noted that Dubai has all the tools and resources for qualifying as a global hotspot in cryptocurrencies, particularly in advanced legislative development. “Approving the virtual asset law and establishing the Dubai Virtual Asset Regulatory Authority is a vital step that establishes the UAE’s position in this sector a step that aims to help the sector to grow and protect investors,” he explained.

The Dubai VARA

The proposed Virtual Asset Regulatory Authority will be tasked with licensing and regulating the crypto ecosystem across all regions of Dubai excluding the DIFC. This includes enterprises within the Dubai Mainland as well as Free Zone territories. Its establishment is based upon the strategies implemented by the Dubai Securities and Exchange Higher Committee. 

The Director-General of DWTCA, Helal Saeed Al Marri, mentioned how the proposed legislation along with the establishment of VARA will elevate Dubai and UAE’s status in the global crypto community attracting the industry’s leaders and pioneers. He also told that the Dubai VARA will be providing a comprehensive range of digital asset services in collaboration with UAE’s Central Bank as well as the Securities and Commdities Authority. The governing body will also function as the central custodial authority for this rapidly developing industry. 

Wrapping Up

The recent legislation and regulatory frameworks across Dubai and the MENA region propels the area as a hotbed for crypto and fintech development. The laws are being seen as the much-needed change in current fintech and virtual assets development by the industry leaders.

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