UAE crypto rules spur investor confidence, Ripple executive says

The UAE's regulatory approach to cryptocurrencies is setting a benchmark for other countries and offering a competitive advantage that is boosting investor confidence in the Middle East, an executive of blockchain company Ripple has said.

The clear regulatory environment of the Emirates has enabled it to foster an innovation-friendly business environment compared with many other countries, including the US, Reece Merrick, managing director of Ripple's Middle East and Africa operations, told The National in an interview on Wednesday.

“In contrast to other jurisdictions that are yet to begin the process of setting clear regulatory guidelines for the industry, the UAE's supportive regulatory environment creates a highly attractive environment for blockchain development,” he said.

The UAE leads the Middle East, which is witnessing a “significant” surge in the adoption of the technology, underpinned by progressive government frameworks supportive of innovative businesses, he added.

“The UAE's regulatory framework for digital assets is focused on overseeing and facilitating the growth of the sector rather than restricting it,” said Mr Merrick, who was speaking ahead of the launch of a partnership between Ripple and the Dubai International Financial Centre's Innovation Hub.

This growth is being driven by enhanced remittance flows and improved cross-border trade efficiency.

As such, adoption is becoming more popular among digital payments and FinTechs, he said.

The San Francisco-based blockchain company and the Innovation Hub are teaming up to further drive blockchain and cryptocurrency adoption among the latter's start-ups, and give them access to developers to help position the technology within their operations.

“The continued advancement of regulatory frameworks for crypto-enabled cross-border payments will provide the necessary confidence for banks and other regulated entities to fully adopt this technology,” Mr Merrick said, pointing to the regimes enabled by Abu Dhabi Global Market, the Dubai Financial Services Authority and the Virtual Assets Regulatory Authority.

Ripple's users in the Middle East represent a fifth of its global customer base, Mr Merrick said. Ripple builds its products on the XRP ledger and uses XRPL's native token to facilitate cross-border payments.

XRP is the seventh-biggest by market capitalisation, with a value of about $29 billion as of Wednesday, data from CoinMarketCap shows.

To date, Ripple's payments service has processed about 27 million transactions worth $50 billion, with payout capabilities in nearly 70 markets, Mr Merrick said.

“Ripple’s business traction and growth is primarily outside of the US in regions such as the UAE, where there is regulatory clarity,” he said.

The Emirates aims to establish itself as one of the next high-growth cryptocurrency capitals of the world, with institutional investors, hedge funds and financial businesses moving in and setting up operations, also bringing along talent.

Investors in the UAE realised capital gains worth $204 million from cryptocurrency investments in 2023, blockchain data company Chainalysis said in a March report.

“We continue to enhance our ecosystem, powered by a world-class regulatory jurisdiction, to drive the future of finance,” said Arif Amiri, chief executive of the DIFC Authority.

The regulations that have been enforced aim to offer certainty and greater clarity on the expected level of operator responsibility, and also mitigate market risks, especially after the cryptocurrency industry has struggled with a spate of challenges, most notably regulators attempting to establish some control over the industry.

The situation came to a head in 2022, one of the most tumultuous in cryptocurrency history, with the implosion of several large companies including Celsius Network, Three Arrows Capital and, most prominently, FTX.

FTX filed for bankruptcy amid allegations its owners had embezzled and misused customer funds, with founder Sam Bankman-Fried sentenced to 25 years in prison.

Ripple called on governments to co-operate in initiatives to learn and understand the potential benefits of cryptocurrencies, including more affordable payment options for residents, instead of engaging in legal battles, its president Monica Long told The National last year.