In the shadow of Dubai’s sail-shaped Burj Al Arab hotel, crypto executives rubbed shoulders with Emirati royals, Wall Street bankers and Instagram influencers.
The festivities in late March were organised by Binance Holdings Ltd. in its de facto home of the United Arab Emirates, which is fast becoming a global hub for digital currencies. Co-founder and Chief Executive Officer Changpeng ‘CZ’ Zhao skipped the event as he recovered from Covid, but he was top of mind for partygoers who said they aspired to replicate his rapid ascent from software developer to one of the world’s wealthiest people.
Following Zhao’s lead, many are flocking to the UAE, which he has called the “Wall Street of crypto.” The euphoria even has local bankers, lawyers and big tech executives pondering career pivots of their own to cash in.
“We see a lot of interest from employees in traditional financial institutions who want to work for us,” Richard Teng, the head of Middle East and North Africa at Binance, which is the world’s largest crypto exchange by trading volume, said in an interview at Bloomberg’s Dubai office. “We’re actually recruiting a number of them.”
In February, Binance tapped Vishal Sacheendran, a former Bank of New York Mellon Corp. banker, as its UAE-based director of MENA. Robbie Nakarmi, the firm’s senior counsel in Dubai, joined late last year after almost a decade as a mergers and acquisitions lawyer.
They’re far from alone.
Ahmed Ismail, a former banker at Bank of America and Jefferies in Dubai, pivoted in 2017. He launched HAYVN, an Abu Dhabi-based digital currency investment bank, with Chris Flinos, a fellow BofA alum. He said several banker friends recently quit their jobs to launch crypto investment funds.
“It all starts from the top,” Ismail said in e-mailed comments. “We have witnessed the UAE making a huge push in developing world-class infrastructure and a regulatory environment for crypto firms to thrive and call home.”
Amir Tabch, former head of global markets at Emirates Investment Bank, is one of the more recent folks to decamp. He became CEO of DeFi brokerage Securrency Capital in Abu Dhabi last June after 16 years in the traditional banking sector. In his new role, he said he’s looking to hire more bankers to help “bridge the gap” between traditional and digital finance.
Surging inflation is compelling more investors to consider investments in digital assets as a potential hedge, yet many who’ve piled in recently have been stung by steep losses. Bitcoin, the world’s largest cryptocurrency, has almost halved in value since its peak last November.
The UAE’s crypto-friendly policies — in contrast to tightening regulations in other jurisdictions — have lured the largest firms. In an interview in late March, Binance’s Zhao said Dubai is the firm’s HQ by any common interpretation. “Wherever we go, the industry players do tend to follow.”
Crypto hedge fund Three Arrows Capital said last month it’s planning to move its headquarters to Dubai from Singapore, which has been more conservative with its regulatory approach toward virtual currencies.
UAE authorities, meanwhile, are trying to strike a delicate balance as they promote the business-friendly environment that’s made Dubai an attractive home for many of the biggest financial firms while also seeking to navigate concerns about volatility and financial crime dogging the crypto industry.
Ola Doudin, the CEO of Dubai-based BitOasis, said the UAE government has demonstrated its strong commitment to address illicit finance concerns in the industry and that centralised exchanges like hers offer local investors a safer way to invest in virtual assets compared with peer-to-peer platforms.
“It won’t be easy to dethrone the UAE as the global crypto hub,” said Gabriel Abed, Ambassador of Barbados to the Gulf nation. Abed created the Caribbean’s first blockchain firm in 2010 and hosted Binance’s Zhao at his house as the Chinese-Canadian billionaire got settled in the UAE.
“This country literally has every piece of the puzzle – the leadership, regulations, the free zones, the talent and the capital,” Abed said in a phone interview.
Wealth funds are also joining in. Abu Dhabi’s Mubadala is investing in the cryptocurrency ecosystem, its spokesman Brian Lott said.
Investment firm Royal Group and ADQ, both controlled by National Security Adviser Sheikh Tahnoon Bin Zayed Al Nahyan, are pursuing deals in the crypto space, people familiar with the matter said. Representatives for Royal Group and ADQ did not respond to requests for comment.
The Dubai Multi Commodities Centre said it registered a record 665 new companies in the first quarter of 2022, buoyed by an influx of crypto and blockchain businesses. The sector accounted for 16% of all firm registrations in the quarter, according to the DMCC. Marwan Alzarouni, the CEO of Dubai Blockchain Center, said he expects more companies to move to the country.
Crypto is also becoming more commonplace for property purchases and even settling restaurant bills, demonstrating the broader appetite for it, according to Yehia Badawy, the co-founder of crypto platform Rain, which received in-principal approval from Abu Dhabi Global Market in January.
The UAE is the Middle East’s third-largest crypto market, trailing Turkey and Lebanon, with a transaction volume of about US$26 billion, according to data compiled by Chainalysis from July 2020 to June 2021. While the region’s crypto footprint is relatively small in global terms, it grew by about 1,500% from the prior year, the data showed.
“We don’t think we are seeing a blip or a bout of euphoria in the UAE,” BitOasis CEO Doudin said. “Over the next few years, those cities and markets that embrace this emerging sector will become what centers such as New York, London and Hong Kong have been to traditional finance.”
By Ben Bartenstein