The recent launch of Dubai’s Metaverse Strategy by His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, and Chairman of The Executive Council of Dubai, positions the city as a global pioneer offering the world’s most advanced and connected ecosystem where the metaverse community can thrive in a dynamic and enabling environment.
The move consolidates Dubai’s status as a global capital of advanced technologies, primarily artificial intelligence (AI) and Web3. Dubai’s progressive regulatory environment and a world-class technological infrastructure that meets the evolving needs of international players have attracted several big names in the world of Web3, including cryptocurrency platforms, blockchain companies, and tokenisation firms.
Dubai is already home to over 1,000 companies in the metaverse and blockchain sector. As the city attracts new players, the sector’s current contribution of $500 million to the UAE’s economy is estimated to increase significantly. The Dubai Metaverse Strategy aims to support more than 40,000 virtual jobs by 2030 and add $4 billion to Dubai’s economy in five years.
The emirate is rapidly making headway with its metaverse strategy, announcing the formation of a Higher Committee for Future Technology and Digital Economy chaired by His Highness the Crown Prince of Dubai. The objective of the Committee is to consolidate Dubai’s status as a global digital economy hub.
The Committee will design policies, analyse trends and supervise the implementation of strategies related to the digital economy and future technologies, including the metaverse, AI, blockchain, Web3, virtual reality (VR), augmented reality (AR), the Internet of Things (IoT), data centres and cloud computing.
Dubai’s specialist Virtual Assets Regulatory Authority (VARA) formulated a Test-Adapt-Scale model that has proven to be a compelling proposition for global future economy companies. The model is a magnet for net-zero, high-value-add, technology-driven firms that are migrating to Dubai. The city seeks to become one of the top 10 metaverse economies and a global pioneer in adopting digital solutions, aiming to increase the number of blockchain companies by five times.
Among significant players moving to Dubai to join the VARA’s exclusive regime open to a limited number of licensees are some of the world’s largest and most credible virtual assets exchanges, such as Binance, FTX, crypto.com, Coinbase and Bybit. This is in addition to traditional finance icons offering DeFi solutions like Galaxy Digital, Komainu, and Brevan Howard, native crypto service providers, and home-grown virtual assets enterprises like BitOasis and CoinMENA.
Experts envision Web3 as the decentralised and democratised version of Web2, the current iteration of the Internet. Many believe it will include ‘crowd-owned’ social media platforms, search engines and marketplaces, replacing the current ‘corporate-owned’ format. Intertwined with the idea of cryptocurrencies or decentralised finance (DeFi), the concept of a decentralised Internet – independent of a handful of ‘Big Tech’ companies – has been around for a while, but Web3 gained traction in 2021.
Dubai’s metaverse leadership
Dubai is the world’s first and only jurisdiction with the foresight to set up a dedicated virtual assets regulator. In March this year, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, approved Dubai’s Virtual Assets Law (VAL) and established the VARA, firmly cementing Dubai’s leadership in the sector. The law ensures much-needed investor protection, economic security, and market transparency, backed by fully traceable and non-deletable transaction records that fulfil AML-CFT considerations for global interoperability in the rapidly growing domain.
His Excellency Helal Al Marri, Director General of the Dubai World Trade Centre Authority that houses VARA, said: “Virtual assets are transforming the financial world and are set to be the primary drivers of the future global economy. Establishing the world’s only independent regulator for virtual assets is symbolic of Dubai’s confidence in the potential of this sector. The VARA regime is structured to catalyse collaboration and prioritise public protection. Our mission is to provide a progressive regulatory framework that can securely enable borderless economic opportunity across the global virtual assets Industry. Dubai is a global leader in adopting and adapting to new technologies. With VARA, the emirate is well-positioned to lead the global adoption and regulation of digital assets.”
Dubai is a pioneer in several new-age business sectors like FinTech and eCommerce. The Economist’s Digital Cities Index 2022 ranks Dubai first in the Middle East and 18th globally. Within the Index, Dubai is among the Top 10 in digital finance, underscoring the emirate’s lead in blockchain, the engine that powers Web3 and the infrastructure that supports cryptocurrency and digital assets.
Policymakers are now consciously focusing on creating a virtuous ecosystem for emerging new technologies that will be integral to the future. In the absence of an established worldwide framework for the nascent virtual assets sector, global players are now following Dubai’s lead in the regulatory landscape. With a rapidly evolving ecosystem, Dubai has swiftly matured into a significant hub for new-age enterprises, including established multinationals, unicorns, and startups.
Since its formation, VARA has been busy forging an enabling ecosystem and identifying a highly selective list of global participants from among the hundreds of industry players it attracts. Its regime is underpinned by technologically strong and advanced data-tracing blockchain expertise to assure governance, security and responsible participation. It is enabled by partnerships with some of the world’s most recognised players like Chainalysis, Elliptic, AnChain and Coinfirm. In addition to the licensees mentioned earlier, financial services company Fintonia Group, crypto trading app OKX, and digital brokerage GCEX recently announced their Dubai launches after receiving provisional virtual assets licences from VARA.
Several such companies are setting up operations in Dubai, attracted by its fast-growing digital assets ecosystem fully backed with regulatory supervision. OKX, for one, has joined its global peer exchanges to move its regional headquarters to Dubai. At the same time, Fintonia expects to expand its team in Dubai and provide tailored Treasury and Balance Sheet management services to Token Foundations, protocols, Bitcoin miners and other large holders of digital assets, the company said.
Piecing together the regulatory jigsaw
Issuing VAL and establishing VARA is part of Dubai’s strategy to become an international hub for the rapidly growing digital assets sector. VARA is the regulator of choice for many of the world’s most respected cryptocurrency players. With VARA and VAL, Dubai is now at the forefront of the virtual assets industry and continues to play a critical role in its growth, evolution, and regulatory future.
Part of the policy and regulatory jigsaw, the Dubai Metaverse Strategy and the Dubai Blockchain Strategy aim to position Dubai as a global centre for evolving technologies. The Dubai Blockchain Strategy is one of the many initiatives with 24 blockchain use cases currently implemented across eight key industry sectors, including finance, education, and real estate.
Owing to cryptocurrency’s volatile nature and a perceived lack of transparency, many global jurisdictions have been tentative in embracing the trends, with some destinations imposing punitive taxation, if not outright banning it. Cryptocurrencies led by Bitcoin have seen a massive correction in their prices this year, as have global equity and bond markets. Yet, investment interest in digital assets is far from a fad, say industry experts, with inflation pushing many investors to actively consider digital assets as a potential hedge.
Recognising the inevitability and acknowledging the popularity of DeFi, Dubai is putting in place systems to regulate the sunshine sector and make it more secure and accessible for everyone concerned. “Dubai is committed to enabling economic freedom in the metaverse and empowering its stakeholders, including individuals, innovators, market makers and virtual assets service providers. VARA wants to establish and enable the safe adoption of industry best practices, encourage knowledge-sharing and drive global interoperability while raising awareness,” said Al Marri.
The industry has witnessed a surge in institutional and individual capital. Within digital assets, the crypto market is growing particularly fast. Total transaction volume grew to $15.8 trillion in 2021, up 567% from 2020’s totals, according to Chainalysis. Research firm Technavio expects the global NFT market size to grow by $147.24 billion between 2021 and 2026 at a CAGR of 35.27%.
Ditching frosty regulatory environments elsewhere, Web3 players have found Dubai a warm and welcoming home with its robust infrastructure and forward-looking and flexible regulatory framework. With several of Web3’s leaders and promising startups moving to Dubai, the city is also attracting the brightest global talent in this field.
Dubai’s virtual assets ecosystem
The virtual assets industry is set to build on Dubai’s well-established position as a pro-business city and its continued drive as an ever-evolving business capital, serving the needs of the future economy. The emirate is home to three free zones dedicated to the Web3 and crypto ecosystem: Dubai World Trade Centre (DWTC), Dubai International Financial Centre (DIFC), and the Dubai Multi Commodities Centre’s DMCC Crypto Centre.
Ahmed bin Sulayem, Executive Chairman and CEO of DMCC, said: “Digital assets are playing an increasingly important role in DMCC’s mandate to drive trade through Dubai. Now home to over 400 of the UAE’s crypto firms – more than one-third – the DMCC Crypto Centre offers a comprehensive ecosystem to facilitate the development and adoption of cryptographic and blockchain technologies. As well as providing access to capital, talent, resources and opportunities, the Crypto Centre is also working closely with the Dubai government to ensure a robust operating environment that places the emirate on the global crypto stage.”
As a part of the Dubai government’s efforts to create new economic sectors, it has been announced that the DWTC will become a comprehensive zone and regulator for virtual assets and crypto, including digital assets, products, operators and exchanges.
As a relatively new free zone established in 2015, DWTCA’s regulatory and competitive operating environment is geared to facilitate the growth of the virtual assets ecosystem in Dubai. VARA, responsible for licensing and regulating the virtual assets sector across Dubai’s mainland and free zone territories (excluding DIFC), is linked to the DWTC Authority, which aims to become a dedicated zone for regulated virtual assets businesses.
The Dubai Financial Services Authority (DFSA), the regulatory body of the DIFC free zone, oversees the regulation of investment tokens but does not regulate any other types of crypto assets, including cryptocurrencies, virtual assets, or digital assets.
A hub for high-potential, future-focused firms
Dubai’s location as an innovation hub bridging the East and the West helps it offer unrivalled access to the world’s fastest-growing economies. A traditional global financial hub, Dubai is well equipped as a safe and highly well-regulated conduit for trillions of dollars worth of transactions between the East and the West. The futuristic city is also a global leader in technology, home to some of the world’s most robust and dependable infrastructure. It is only natural, then, that the pioneering city has now taken the lead in an industry that lies at the intersection of finance and technology.
Dubai is now also home to major industry events like ETHDubai and Binance Blockchain Week, which saw hundreds of international Web3 entrepreneurs, experts, and enthusiasts participate in fireside chats and panel discussions in March this year.
To be held at the Museum of the Future in September this year, the Dubai Metaverse Assembly will bring together regional and international experts in Dubai to shape the future of the metaverse and explore its promise and potential applications. More than 300 global experts, policymakers, thought leaders, and decision-makers from more than 40 organisations will explore how the revolutionary metaverse technology can be deployed across vital sectors to create a better future and quality of life for humanity.
With Dubai now home to a large community of innovative startups shaping the future of finance, it has embarked upon a new mission to conquer the new economy frontier. Its ongoing technological advancements and infrastructure investments are set to maintain its status as the world’s Web3 capital.
Source: Dubai Media Office