Across the globe, cryptocurrency players have welcomed the announcement made by the government of Abu Dhabi in the United Arab Emirates (UAE) to regulate cryptocurrency exchanges. This isn’t the first time the Abu Dhabi has taken steps toward cryptocurrency regulation.
Last year, the country released regulations aimed at guiding the launch of initial coin offerings (ICOs). Cryptocurrency community members seem to agree that regulation could help reduce risks for cryptocurrency investors.
Roman Guelfi-Gibbs, CEO of Pinnacle Brilliance says, “With businesses growing so quickly in the Middle East, it makes sense that the UAE would be a good first test case. Other possibilities for the region would be Israel or Turkey.”
According to Alessandro Cadoni, co-founder of Friendz, regulation is necessary to seal loopholes that allow illegal activities, such as identity theft and scamming.
“We encourage the introduction of regulation in the cryptocurrency market. At the moment there are too many risks for investors, especially related to ICO participants. It should be possible to be protected against illegitimate acts, such as stealing the identity of company’s team to contact people in private. People get scammed by people that provide fake information and the wrong wallet addresses just to gain on their ingenuity and this is not correct,” notes Cadoni.
At the same time, regulation will allow governments to identify fake projects from those that are truly legit in order to protect investors.
Jay Singh, CEO of ClearCoin, says, “Some government regulation can help separate the wheat from the chaff in the booming cryptocurrency and token market. As a matter of principle, I think government should respect the citizen’s interest in the booming crypto economy.”
If the UAE succeeds in developing and implementing a solid regulatory framework, only companies with viable projects that offer value in the region will be able to raise funds from cryptocurrency investors.
“Too many fake projects have been raising money from people that believed in their vision and eventually got nothing. This trend must come to an end. By eliminating lemons from the market, both investors and good, solid projects will benefit. UAE has always been a leader country in technology and financial matter, we expect that it will take the suitable measures soon, and will be followed by other Eastern as well as European countries,” Cadoni adds.
But contrary to popular belief that other countries in the Middle East could borrow a leaf from Abu Dhabi and regulate virtual exchanges, Susanne Tarkowski Tempelhof, founder and CEO of Bitnation, thinks this might not happen.
“One of the most wonderful aspects of UAE, is that just like Switzerland, it has a regionally decentralized governance model which caters for great local autonomy. Meaning, if Abu Dhabi implements certain regulations, it doesn’t mean Dubai or other Emirates will follow,” Tempelhof says.
But this doesn’t mean that other Emirates would avoid cryptocurrencies completely. “The Smart Dubai Blockchain initiative shows great support for cryptocurrencies and blockchain applications in Dubai. Competitive jurisdictions like the different Emirates in UAE, is something we think highly of and promote at Bitnation because it allows us to test different models and see which one works most efficiently” she adds.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.