UAE’s cryptocurrency ambitions to continue despite FTX crash 

Al-Monitor Pro Members

Samuel Wendel

Senior Market Research Analyst, Al-Monitor

Nov. 30, 2022

The UAE has picked a bad time to embrace cryptocurrencies. The chaotic collapse of crypto exchange FTX has potentially imperiled the very future of an already volatile industry. This comes as MENA was the world’s fastest-growing crypto market in 2022 and the UAE has moved aggressively to attract crypto companies to the country. That saw Dubai’s newly created virtual asset regulator award a key license to FTX in July 2022, only months before it imploded. Binance, the world’s largest crypto exchange by trading volume and another controversial firm, has also secured licenses in the UAE. FTX’s downfall is now calling those moves into question. Despite this crypto calamity, the UAE doesn’t appear to be backing off from broader ambitions to become an industry hub.

Scenario 1: The UAE rethinks crypto ambitions, scaring off key industry players. The FTX debacle and worsening market conditions push UAE regulators to adopt a more conservative approach. As that warm welcome cools, Binance shifts focus to other jurisdictions—as it has done previously when regulations threatened its interests.

Yet after adopting unusually proactive approaches to attract industry growth, both Dubai and Abu Dhabi seem unlikely to radically reverse course in the short term. Crypto firms will be closely watching for updates from regulators, but the relationship should endure in the near term.

Scenario 2: Unwilling to reverse course, the UAE becomes a cautionary tale as the crypto market collapses. FTX’s downfall kicks off a tailspin that sees other key crypto companies fail. After catering to some of these same players, the UAE faces significant criticism for regulatory missteps that empowered risky firms, damaging its reputation as a financial hub.

Still, the crypto industry has survived past debacles and could again. FTX’s crash may also see other jurisdictions become even more conservative, driving more crypto companies to view the UAE as a destination of choice.

Scenario 3: FTX’s implosion blows over, leaving the UAE to capitalize. The failure of FTX adds another chapter to crypto’s checkered history but doesn’t sink it. As the crypto winter thaws, the UAE emerges uniquely positioned to fuel the industry’s next growth wave after making moves most regulators avoided.

Yet it’s still too early to tell how far FTX’s wave of destruction will travel. Plus, its downfall already represents a regulatory failure and calls into question how closely it was evaluated before it won its approval.

Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.