How blockchain’s disruptive potential is paying off for the UAE

It is becoming increasingly apparent that the UAE’s early promotion of blockchain’s disruptive potential is paying off.

Over the past year, the world has become increasingly open-minded with respect to digital assets and cryptocurrencies. This has been demonstrated by growing acceptance and wider mainstream adoption of cryptocurrencies, not just at the retail level but at the institutional level as well.

As always with progress, there remains many sceptics. However, even the most stubborn of these would have had to question their position following US President Joe Biden’s March 9 executive order on Ensuring Responsible Development of Digital Assets. This executive order addresses the need for a supportive framework to encourage the development of cryptocurrencies in the US.

With the White House noting that there are about 40 million Americans involved in trading and investing in cryptocurrencies, it is increasingly apparent that the US does not wish to be left further behind by international competition, such as the UAE, that already has a significant head start.

As part of the initiatives to diversify the UAE economy, the government recognised early on the disruptive potential of blockchain and actively sought to create a supportive ecosystem. While others hesitated, the country’s leadership and regulators took a number of positive steps to develop a hub to support growth and innovation in the blockchain industry.

Through a combination of specific and precise regulations, government adoption of blockchain initiatives and sovereign wealth fund investments, the foundation for a solid ecosystem was created and growth was nurtured.

The initial results were manifest in the development and launch of several local home-grown companies with significant potential.

However, this is not the only measure of the UAE’s success in the industry. It is also demonstrated by the fact that many large international companies and established industry stakeholders have chosen to relocate and set up their headquarters in the Emirates.

These industry leaders have been attracted by a supportive ecosystem with solid regulation and massive growth potential, and they are being drawn in more significant numbers by the day.

One such entity is cryptocurrency exchange Binance, which recently received licences to begin operating in Dubai and Abu Dhabi. The fact that it has been attracted to the UAE and is actively engaged in the country’s growing digital space is possibly the strongest testament that the ecosystem is poised to succeed.

I recently caught up with Changpeng Zhao, chief executive and founder of Binance, to get a perspective on the company’s specific initiatives in the region as well as the broader themes in the blockchain and cryptocurrency landscape.

The UAE and the Middle East and North Africa region have growing young populations with increasing IT literacy, which encouraged Binance to put a strategy in place to capitalise on this potential. For example, through the Binance Labs incubation programme, it is looking for early stage projects from around the world.

Binance organises meet-ups between founders, helps them to set up connections and also provides UAE-based entrepreneurs with necessary funding, advice and resources to take their projects to the next level, Mr Zhao says.

The company also developed its own blockchain called the BNB Chain, which has gained considerable market share and is run by the cryptocurrency community, Mr Zhao says.

Since its launch in 2020, BNB Chain has grown at a fast pace; more than 2.5 billion transactions have been processed from 137 million unique addresses, reaching a daily transaction high of 16.26 million in November 2021. At peak time, it had more than two million daily active users, Mr Zhao says.

The main advantages of BNB Chain are low transaction fees, ease of use and low barriers to entry, while cryptocurrency regulation is essential for the industry’s healthy growth, he adds.

“Adoption is still very low,” he says. “Despite the huge awareness gains that crypto has seen over the last year or so, mainstream audiences are put off by the perceived risk of dealing with an unregulated industry when it comes to their finances. Responsible and trustworthy exchanges should welcome regulation as it can only be a net benefit to the industry.”

The fast-moving cryptocurrency and blockchain industry is also promising to revolutionise the employment sector, with many enthusiasts predicting that smart contract engineers will become a staple job at most companies, similar to data scientists and artificial intelligence developers 10 years ago.

As more brands get involved in Web3, there will be a requirement for people who understand and can design the systems that enable it, Mr Zhao says.

People who already have a coding background will have an advantage, but the key thing will be to understand how blockchain and cryptocurrency work at a fundamental level and see how they can solve challenges in innovative ways, he adds.

These are sentiments that the UAE appears to have embraced, allowing it to take the lead globally when it comes to promoting blockchain’s disruptive potential.

Mohammed Altajir is the founder and project custodian of Tratok Portal