Local cryptocurrency exchanges and industry players are demanding regulation to govern cryptocurrency trading in order to win the confidence of investors in the Arabian Gulf.
“It is imperative to have clear rules and regulations in place, especially in our region … they will offer safety to not only retail investors but also to institutional investors like family funds and family offices,” Abdullah Almoaiqel, co-founder and partner at Rain, a Bahraini cryptocurrency exchange backed by bitcoin developer Jimmy Song, told The National.
Private funds always prefer to invest in an entity that is regulated and not something that can cause future problems with their banking or investment partners, he added.
Bahrain is on track to have cryptocurrency legislation “soon”. Last month, Central Bank of Bahrain issued draft rules on cryptocurrency trading.
“Draft rules have been issued for the public … and soon a comprehensive framework will be introduced, covering different requirements such as licensing, financial resources and security standards,” said Mr Almoaiqel on the sidelines of the Unlock Blockchain Forum in Dubai.
In the UAE, the Abu Dhabi Global Market and Dubai International Financial Centre, two of the fastest growing financial hubs in the region, are both keen to implement crypto-exchange legislation this year.
“Once regulations will be in place, the UAE will be the most promising jurisdiction to operate crypto businesses,” said Hans Fraikin, chief executive of Libra Project in Abu Dhabi, which is issuing equity tokens in green utility infrastructure.
Investors will never feel comfortable in the absence of regulations, as there is always the possibility for financial frauds, he added.
Except for a couple of smaller jurisdictions such as Malta and Gibraltar, other national regulators and larger jurisdictions are still trying to figure out how to regulate the new crypto-asset industry.
“Safeguarding digital assets is the most daunting task. Once you are hit by a cyber breach, you are literally nowhere in the absence of regulations,” said Raghu Yadav, vice president of cryptocurrency start-up MetaBit in Beijing.
Security of cryptocurrencies has long been a concern for investors as more than $1.1 billion was lost to crypto-thefts in the first six months of 2018, according to cyber-security company Carbon Black in Massachusetts.
“The crypto market has been hit by high-profile heists, market volatility and no robust legislation. As Gulf region attracts talent, it should implement crypto laws at the same pace,” stated Mr Yadav.
Will cryptocurrencies ever be fully secure?
UAE to finalise initial coin offering regulations in mid-2019, regulatory says
The UAE is also working to introduce regulations for initial coin offerings (ICO) – an IPO type funding for cryptocurrencies – by the end of the first half of 2019.
This will add the country, the second-largest economy in the Arab world, to the expanding list of global regulators that have decided to standardise ICOs. Japan’s Financial Services Agency is screening cryptocurrency exchanges before registration, while the New York State Department of Financial Services is issuing BitLicence to companies who want to operate in virtual currencies.
Updated: January 15, 2019 04:15 PM