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How the UAE is laying the framework to support virtual asset adoption

How the UAE is laying the framework to support virtual asset adoption

During an uncertain economic climate, motives for the adoption of virtual assets have risen, driven by the demand for diversified financial portfolios and wealth protection. With that being said, for a digital economy to truly thrive, an ideal environment that encourages technological innovation and the mass adoption of fintech solutions must be adopted. However, to

During an uncertain economic climate, motives for the adoption of virtual assets have risen, driven by the demand for diversified financial portfolios and wealth protection.

With that being said, for a digital economy to truly thrive, an ideal environment that encourages technological innovation and the mass adoption of fintech solutions must be adopted.

However, to fully reap the benefits, this domain must also be supported by robust governance practices, in addition to progressive regulatory frameworks that ensure fairness, equal opportunity, and transparency.

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In 2019, the financial crimes watchdog, the Financial Action Task Force (FATF), announced that cryptocurrency firms would be subjected to rules to prevent the abuse of digital coins, such as bitcoin for money laundering, a first regulatory attempt globally to constrain the rapidly growing sector.

The GCC has been experiencing a fast-growing demand for virtual asset investment and adoption, and the UAE has been a trailblazer when it comes to instituting regulations that are favourable to innovation and investment.

With the UAE government’s focus on introducing innovative technologies across the country, there is potential for a broader economic impact arising from the regulation of digital assets, opening up new possibilities enabled by the tokenisation of currencies, securities, fund units, and real estate investment trusts in the region.

According to the Global Findex, the region experienced a 400 percent growth in alternative finance investments between 2013 and 2016.

In 2018, the UAE launched the Emirates Blockchain Strategy, aiming to transform 50 percent of government transactions into the blockchain platform by the end of 2021.

Over the past month, regulatory developments in the virtual assets space persisted, with the launch of the first virtual assets trading platform, Matrix, that is fully compliant with the Abu Dhabi Global Market (ADGM) virtual asset policy framework.

Matrix, that is fully compliant with the Abu Dhabi Global Market (ADGM) virtual asset policy framework.

In addition, the UAE’s anti-money laundering watchdog (NAMLCFTC) recently adopted a regulatory framework for virtual assets, a first step to providing comprehensive regulation of virtual assets, and safeguarding the financial system and investors from money laundering.

According to FATF, virtual assets includes assets linked to blockchain, bitcoin, crypto assets, virtual currencies, which use technology to swiftly transfer value around the world.

Speaking on the virtual assets sector in the UAE, Vasja Zupan, president of Matrix, said: “We are noticing a lot of activity in the region, but I think it’s still a little bit behind Europe, US and some Asian markets, so there’s still potential for growth.

“For that evolution to happen, I think the market needs more than just endorsement; it requires support by the central authorities and central bank to ensure that the virtual assets market is under the umbrella of regulation.”

“We are still in early days, but I do believe for virtual assets, there’s a huge amount of potential, not just globally, but also regionally.”

Vasja Zupan, president of Matrix.

Matrix

Matrix is a virtual assets trading platform serving investors around the world, becoming the first regulated virtual asset Multilateral Trading Facility (MTF).

“We were the first to launch under the ADGM regulatory framework, and remain to be the only ones. We are, for the time, being quite a simple and plain support exchange platform, which is a good starting point,” Zupain said.

Licensed by the Financial Services Regulatory Authority (FSRA), Matrix is positioned to materialise the UAE’s strategic priority to drive fintech and blockchain innovation.

Designed to service both retail and institutional customers with its secure platform, Matrix enables investors across the globe to buy, sell, and hold virtual assets, and offers institutional grade hot and cold storage.

“We currently offer the most important virtual assets to our customers, but we are working to expand our product line, and are already in discussion with the regulator to allow us to do so,” said Zupain.

Matrix is positioned to materialise the UAE’s strategic priority to drive fintech and blockchain innovation.

Talking about ADGM’s regulation process, Zupan stated: “It was quite an exercise, and not easy by far. The regulatory framework here is really strong, much stronger than what I’ve seen in the US before.”

A team of more than 40 technical, operational, regulatory, and legal experts were behind the launch of Matrix.

“While the process was quite exhausting, it was rewarding as well because now we know that we have a safe environment for our customers to trade – probably the safest globally. From my last seven years in the industry, I would say there is no other market that could be as safe and as regulated as ours is currently.”

Looking ahead, Zupan shared: “We obviously want Matrix to grow here, and we hope to gain some local footprint first, but we also aspire to grow globally.”

“I think the UAE, being a vital hub connecting the east and west, is a great starting point for us to start building some global presence in the long term.”

“There’s also sufficient space for multiple players to join. I don’t think this is a ‘winner takes all’ situation, but rather a growth opportunity for niche players.”

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