Opinion: Dubai’s Mirage: A City That May Seem Heavenly, Yet Not So for Crypto Entrepreneurs
The opinions expressed in this article are solely those of the author and do not reflect the views and opinions of the editorial team at crypto.news.
Dubai’s cryptocurrency industry has been receiving a lot of attention lately, both from the media and entrepreneurs. The Emirates recently announced that it would start accepting Bitcoin as a form of payment, and the UAE government has set a goal to transition all of its operations to blockchain technology by 2030. Additionally, Binance’s CEO, CZ, has moved to Dubai and stated that the Paris and Dubai offices are the global hubs for the company.
Dubai has become synonymous with everything related to cryptocurrency due to the Bitcoin boom, startup funding frenzy, and its reputation as a tax haven. PwC has reported that the UAE’s cryptocurrency transaction volume has grown fivefold between 2020 and 2021, reaching a turnover of $25 billion in 2022.
The region now hosts numerous industry conferences, free trade zones, and a large number of influential figures on social media platforms like Instagram and X (formerly Twitter). However, as we approach the end of 2023, it is becoming clear that this may just be a facade as Dubai faces challenges in securing funding, launching new crypto projects, and dealing with regulatory uncertainties.
Dubai was quick to embrace the cryptocurrency hype, starting with the announcement of the Dubai Blockchain Strategy in 2016 and culminating in the launch of the Dubai Multi-Commodities Crypto Center (DMCC) in 2021. The timing was perfect, allowing Dubai to benefit from the bull runs and the growing adoption of cryptocurrencies, while avoiding the challenges of the crypto winter and increasing competition from other Gulf states.
The COVID-19 pandemic brought favorable tax regulations, relaxed pandemic restrictions, and a surge in seed and late-stage investments, making Dubai an attractive destination for tech entrepreneurs. Data from Pitchbook and Crunchbase shows that more than 100 crypto funding rounds closed in 2021 and 2022, with total funding increasing from $42 million to $97 million. The equity markets have also thrived, with the UAE’s share of global IPOs increasing from 2% to 23% in 2022, primarily due to the contribution of fintech companies.
The UAE government seized this opportunity and implemented blockchain technology in various sectors, from Emirates Airline to public transport, healthcare, and web3 conferences. By September 2023, Dubai had established itself as a leader in global blockchain adoption, or so it seemed.
However, despite the excitement, the government’s strategy lacks transparency. Out of 20 high-profile blockchain projects announced, only five have shown any substantial results. Dubai’s blockchain adoption seems to be driven more by the quantity of projects rather than their efficiency.
Enthusiasm among developers is diminishing, as evidenced by the same participants attending crypto conferences year after year. Existing builders struggle to secure funding, and the median valuation has declined. New developers are choosing more stable and less saturated environments over Dubai.
Another challenge is the brain drain caused by the post-pandemic situation. It is easy to attract people who invest in cryptocurrencies by offering a 0% capital gains tax, but it is difficult to retain professionals who are building products from scratch.
Regulation is another issue. Businesses can thrive in high-interest rate environments or conservative settings, but they need predictability. Dubai is actively working on creating a favorable legal space, but there is still uncertainty, which can be stressful for market players.
While Dubai’s Gulf neighbors are catching up in the crypto game, another player is emerging in the Balkans. Despite lacking Dubai’s tax benefits and attention-grabbing moves, the Balkans provide transparency and consistency. Issuing crypto assets in the Balkans is much easier, requiring tax compliance, a license from monetary authorities, and proof of anti-financial fraud monitoring.
So, where does Dubai stand in the grand scheme of things? The city remains a hotspot for crypto traders and those looking to spend their cryptocurrency wealth due to its favorable tax policies. However, when it comes to establishing long-term business foundations, Dubai presents a mixed bag. The city’s allure is undeniable, but the reality of setting up and sustaining a crypto business there requires caution. It is a combination of opportunities and challenges, ideal for some but not for others who may prefer more straightforward regions like the Balkans. Only time will tell if Dubai can strike the right balance between its flashy appeal and the substance that entrepreneurs need.
About the author:
Mary Pedler is an experienced communication expert and the founder of INPUT Communications Agency. With over seven years of experience in GR and PR, she has contributed to the success of over 50 tech projects, helping them enhance their organic media presence and raise over $500 million. Mary specializes in global media relations, tailored communication strategies, and has a deep understanding of web3, blockchain, and the MENA market. She is a regular speaker and moderator at industry events and her agency in Dubai focuses on creating effective communication strategies for tech projects around the world.
