The collapse of the crypto market alarms Dubai
The collapse of the crypto market alarms Dubai
2022.11.27 09:04
The collapse of the crypto market alarms Dubai
Budrigannews.com – Sam Bankman-Fried subtly tested the waters for funding at a table of founders, bankers, and financiers, including Anthony Scaramucci, on Oct. 26, days before the collapse of his crypto exchange FTX.
It turned out to be a last chance before the world learned about the problems the former billionaire was having. The collapse of FTX, which went from having a valuation of $32 billion to declaring bankruptcy in the weeks that followed, sent crypto markets into a tailspin, resulting in outflows totaling billions of dollars from some of the largest global exchanges.
The repercussions have been particularly severe in the United Arab Emirates, particularly in Dubai, which has been attempting to attract the largest businesses in the world through crypto-friendly policies. Virtual assets were promoted by a lot of officials in the United Arab Emirates as a gold mine for economic growth and a crucial part of the country’s strategy for diversification beyond fossil fuels while some financial centers tightened regulations.
That helped the Gulf state establish itself as a crypto hub, bringing in industry titans and causing bankers, lawyers, and technology executives to switch careers. According to property brokers, crypto funds had entered the luxury real estate market.However, some people have expressed regret at the turn of events since the bull market ended.
In Dubai, Rain Financial Inc. and BitOasis, local exchanges, have reduced staff. Hazem Shish, a former Barclays Plc banker who recently established an Abu Dhabi-based crypto hedge fund, is one of those reconsidering their entry into the industry. According to people familiar with the situation, who requested anonymity because the information is private, despite the fact that it performed well in its early months, he decided to step back from managing the main fund due to difficulties raising institutional capital amid market turmoil.
In an effort to attract business, Dubai’s Virtual Assets Regulatory Authority granted FTX a license as one of the first companies, and the exchange established its regional headquarters in the city.
Helal Al Marri, the director general of the Dubai World Trade Centre Authority, which is home to VARA, praised the move at the time and stated that it was the result of a thorough evaluation months before the company went bankrupt.
Officials have distanced themselves from that decision, even removing the license information from the regulator’s website, as FTX and Bankman-Fried are currently the subject of investigations from the United States to the Bahamas.
It was harder to remove some links from view.
One of Dubai’s most exclusive beachfront drives was lined with banners advertising a party sponsored by FTX during the Abu Dhabi Grand Prix. FTX-emblazoned Formula One hats were worn by onlookers at the racetrack.
The company’s demise was the second significant setback for Dubai’s efforts in a short period of time. After receiving a provisional license in the city, the hedge fund Three Arrows Capital collapsed in one of the biggest crypto trading busts ever in June.
Other asset managers have also been involved in the drama.
According to people familiar with the situation, multiple crypto hedge funds that had just established themselves in the UAE had placed all of their client funds on FTX, necessitating a mad dash to leave the platform before withdrawals were halted to prevent their own collapse.
According to court documents filed in the company’s bankruptcy case, the United Arab Emirates has one of the top ten affected jurisdictions, accounting for approximately 4% of the company’s global customers.
The lack of full-scale licenses for FTX and Three Arrows Capital limited the local impact. The structure of the Dubai virtual assets regulator aims to allow the biggest companies to operate, but initial licenses only allow a limited number of services.
Despite this, the incidents have sparked a debate regarding whether or not the authorities were overly nimble in their efforts to entice crypto firms, giving legitimacy to businesses that have since failed.
Dapo Ako, a former compliance specialist at UBS Group AG whose company J. Awan & Partners assists crypto firms in setting up in the UAE, stated, “As a regulator, there’s always the risk that if things go wrong it looks really bad.”But it’s also an opportunity to reevaluate the framework. We would not have new banking regulations if Lehman failed.
According to a VARA official, FTX had not passed the approval process necessary to take on clients or begin operations. They stated in a statement in July that the license would enable FTX to offer qualified institutional investors trading services and crypto derivatives products.
Regarding Three Arrows Capital, the representative for VARA stated that while a provisional permit is an “approval of concept” that takes into account the credibility of other licensing jurisdictions, no progress was made toward obtaining a more comprehensive license.
A representative of the United Arab Emirates stated in response to questions that there is a commitment to facilitate mass economic empowerment with an emphasis on consumer safety, cross-border financial security, and economic stability.
FTX did not respond to a request for comment.
To be continued
