The Middle East has proven to be an attractive spot for the development of Web3 technologies. For example, in Dubai alone, OKX, a crypto exchange, was granted an MVP preparatory license in June; Bybit, another crypto exchange, launched its new headquarters in April 2023; and its police force started a blockchain service to help people retrieve their passports when such an incident occurs.
In a comprehensive breakdown of how the industry has thrived in both the Middle East and North Africa, Emurgo noted some key factors that have changed over time and what the region is focused on.
First, it was revealed that “in both the Middle East and North Africa (MENA)) region was the fastest-growing crypto market between 2021 and 2022.” Then in Egypt, Emurgo said that the blockchain regulatory landscape is undergoing development and evolution.
Although the trading of cryptocurrencies is explicitly banned and enforcement is carried out through religious decrees and laws prohibiting crypto-related activities, violators may face imprisonment and fines.
While this ban exists, the use of cryptocurrencies in Egypt is increasing, indicating growing demand. In 2020, the Egyptian Parliament passed a law that introduced digital tools for the digital transformation of the banking sector, including cryptocurrency, digital finance, and digital check settlement. The law also provided definitions and licensing instructions for digital banks.
Expansion of Web3 in UAE
Focusing on the United Arab Emirates (UAE), which is a country with seven states, Emurgo said that it has a favorable regulatory environment for blockchain technology. The UAE government has implemented several initiatives to support the growth of the Web3 industry.
In 2018, the Emirates Blockchain Strategy 2021 was launched, aiming to adopt blockchain in 50% of government transactions, which is projected to help save AED 11 billion (approximately $3 billion).
The Blockchain Committee was established in the same year to develop and implement a comprehensive national strategy for blockchain. The UAE has also established the Global Blockchain Council, which comprises 46 members and aims to promote blockchain technology across various industries, enhancing efficiency and reliability.
Regarding crypto regulatory trends in the UAE, the country has regulations aligned with the Financial Action Task Force (FATF) and the Middle East and North Africa FATF for anti-money laundering (AML). The Virtual Asset Regulatory Authority (VARA) has published guidelines on marketing, advertising, and promoting virtual assets.
Authorities are evaluating their approach to other areas of digital assets, including stablecoins and decentralized finance (DeFi). Furthermore, the Central Bank of the UAE (CBUAE) is exploring and testing the possibility of issuing a wholesale Central Bank Digital Currency (CBDC) through international projects.
Abu Dhabi and Dubai
Emurgo added that Abu Dhabi, which is a state in the UAE, has also adopted blockchain technology. In 2022, the Abu Dhabi government organized the Middle East Blockchain Awards (MEBA) to recognize contributors to blockchain technology’s development.
The Financial Services Regulatory Authority (FSRA) introduced a comprehensive framework in 2018 for businesses to trade virtual assets within the Abu Dhabi Global Market (ADGM), covering multilateral trading facilities, custodians, and brokerage firms.
Several companies and organizations in Abu Dhabi that utilize blockchain technology include Bonds Without Borders, Abu Dhabi Commercial Bank (ADCB), Abu Dhabi Islamic Bank, Smarthub, and Abu Dhabi Global Market Courts.
Then, in Dubai, Sheikh Hamdan, the Crown Prince of Dubai, launched the Dubai Blockchain Strategy in 2016 as a collaborative effort between the Smart Dubai Office and the Dubai Future Foundation. The strategy aims to transform Dubai by integrating blockchain technology into various aspects of daily life.
The city expects to achieve annual savings of 5.5 billion dirhams (approximately USD 1.5 billion) in document processing alone, which is equivalent to the value of one Burj Khalifa, the iconic skyscraper, every year.
One of the key objectives of the Dubai Blockchain Strategy is to utilize blockchain technology to fully power the city of Dubai, showcasing the extensive potential and applications of blockchain in various sectors.