Many people consider FinTech or financial technology to be an economic revolution. It’s one of the rapidly growing sectors in finance all over the world. Stats back that. In 2020, the Global FinTech market was valued at $7301.78 billion. The future of FinTech is also bright as the global FinTech market is expected to grow at a CAGR of 26.87%.
UAE is cashing in on this opportunity by taking significant steps. Read on to know more about how the UAE is on the way to becoming a global crypto hub and how it is supporting the growth of the FinTech sector.
How UAE is Making a Perfect Environment for FinTech Companies to Thrive
- The Role of Dubai World Trade Centre
The UAE has been focused on increasing the use of blockchain in the last few years. To achieve that goal, it is attempting to make Dubai a global crypto hub that resembles the likes of Singapore, Switzerland, and other similar regions.
Recently, the government stated that Dubai World Trade Centre would soon transform into a comprehensive zone and regulator for virtual assets and cryptocurrencies.
Ahmad Belhoul Al Falasi, minister of state for entrepreneurship and SMEs stated, “Cryptocurrency is here to stay, we’ve seen an increase in uptake. As long as you are following the right regulation, there is no harm in adopting such technology or putting the regulation in place.”
- Adoption of a Financial Technology Accelerator
Located in the heart of DIFC (Dubai International Financial Centre) is FinTech Hive. It is the first and one of the largest technology accelerators in the MEASA (Middle East, Africa, and South Asia) region. It is a part of the DIFC Innovation Hub, home to more than 350 innovation companies.
The leading financial institutions of the region, ENBD, ADIB, Visa, Zurich, and Standard Chartered Bank, are helping in running FinTech Hive’s flagship FinTech accelerator program. Each year, they work with some carefully selected start-ups to develop their solutions to collaborate in the integration process and provide new products and services.
The Accelerator has played a key role in driving the growth of countless FinTech start-ups aiming to explore the MEASA market and capitalise on unlimited opportunities present in the region by connecting them with top-tier organizations present in each vertical. In addition to FinTech, the accelerator is also helping RegTech, InsurTech, and Islamic FinTech start-ups.
FinTech Hive has accelerated more than 120 start-ups through the program and has helped FinTech firms based in DIFC to raise over Dh1.1 billion ($298.8 million).
- The Rise of Crypto
Cryptocurrency is a virtual currency that uses cryptographic techniques to transmit digital information and ensure valid and legitimate transactions.
The UAE has been very welcoming to establish cryptocurrency trading agencies and other cryptocurrency verticals. It is the right move, given that the cryptocurrency market size was $1.49 billion in 2020 and is expected to grow to $4.94 billion by 2030. The number of cryptocurrency users is rising at a pace of 113% each year.
Cryptocurrency adoption is at an all-time high in the Middle East as a regulatory framework that supports FinTech, and cryptocurrencies adoption is also being expanded. The UAE, in particular, has established many cryptocurrency trading agencies and several other cryptocurrency verticals.
According to a recent poll, wealth managers and institutional investors in UAE want to enhance exposure to digital assets in the next few years.
- Launch of Dubai Digital Authority
The UAE government is constantly trying to foster smart and digital transformation. One example is the launch of Dubai Digital Authority (DDA) which was launched by Vice President and Prime Minister of the UAE and Ruler of Dubai- His Highness Sheikh Mohammed bin Rashid Al Maktoum to leverage emerging technologies like cryptocurrencies and give a boost to the growing FinTech sector.
- Dubai Virtual Asset Regulation Law Issued
The Dubai Virtual Asset Regulatory Authority (VARA) will regulate, supervise, and control virtual asset services. The authority set the rules and controls that govern the conduct of virtual assets activities, including management, clearing, and settlement services, as well as classifying specifying types of virtual assets. “The future belongs to whoever designs it,” tweeted Sheikh Mohammed bin Rashid Al Maktoum, announcing the development.
- International Recognition
Even international institutions like Cambridge Centre for Alternative Finance (CCAF) recognise the work put in by the UAE government. The co-founder and director of CCAF, Robert Wardrop, stated, “In the Middle East and North Africa region, regulators have taken positive steps to create an enabling environment for FinTech through a combination of regulatory frameworks and regulatory innovation initiatives.”
- Issuing Federal Licenses
UAE will also issue federal licenses for virtual asset services providers by the end of the first quarter of 2022. The aim is to attract more business owners. At the time of publishing, the process was in the final stages, and official authorities had unveiled that some of the nation’s potential free zones had already started to issue permits. For instance, Dubai Multi Commodities Centre has already licensed 22 permits, and the Abu Dhabi Global Market has licensed 6.
- Focus on Crypto
Officials at the UAE government have also confirmed that the government aims to build a regulated ecosystem for crypto mining.
According to data from July 2020 and June 2021, the UAE is the third-largest crypto market in the Middle East, with a $26 billion transaction volume. When the UAE government succeeds in creating a fully regulated environment for crypto trading, it will surely become a global crypto hub that will attract people worldwide.
Meanwhile neighbouring Bahrain has also taken baby steps into the world of digital assets by announcing the launch of NFTs in the educational space. The Bahrain Institute of Banking and Finance (BIBF), an institution for training and development, has launched Educational NFT (Non Fungible Tokens), a first of its kind globally.
The BIBF has launched eight unique NFTs on the Binance blockchain, with each unique NFT modeled after the institute’s iconic digital cube and priced at $1000, The Educational NFT entitles the first owner to do the ADIF distance learning qualification and all subsequent owners receive 50% discount on all the Islamic finance qualifications and courses provided at the institute.
In essence, it can be said that UAE is on the way to becoming a global crypto hub, and the efforts put in by the UAE government are the key reasons. Foreign investors and companies can make the most of this growth by seizing the opportunity right now.
TASC acknowledges and appreciates the UAE government’s efforts and hopes that they will bring in the desired results.