The virtual asset laws are in place and soon the crypto exchanges licensed by ADGM will go live. Image Credit: Shutterstock

Dubai: Get UAE-based institutional investors and family offices interested in crypto assets – that would be the breakthrough for the newly licensed crypto exchanges in the country.

“These family offices have not gotten into crypto – but when they are making a generational transition, it will soon change,” said Mustafa Kheriba, Executive Chairman of Yoshi Markets, which is licensed by Abu Dhabi Global Market (ADGM) to operate as a crypto exchange, one of only three licensed to do so in the UAE under its FSRA rules. “Providing these institutional investors access to regulated exchanges and secured means of doing so gives them a reason to consider parking investments in crypto assets rather than just brick-and-mortar (or other traditional assets).

“The retail investors who want to trade in any of the 7,000 odd crypto coins out there can use what they think suits them – a decentralized exchange or a regulated one. It’s entirely up to them. With institutional investors and family offices, we see this big opportunity emerging.”

Yoshi, which plans to go live next month, has an FSRA license that allows investors to trade using their local bank accounts and make all transactions go through highly regulated channels.

“That’s compared to trading on crypto exchanges outside of the country in FX transactions or using credit cards,” said Kheriba. “A locally licensed exchange allowing investors to trade in dirham accounts is about bringing all such transactions closer.

“These will operate under the highest corporate governance standards, scrutiny and KYC requirements. The investors we are targeting can take a lot of comfort from these.”

Digital tokens
Yoshi Markets is partnering Tezos Gulf to develop securitised digital tokens on the Tezos blockchain.

As per the agreement, the assets using the Distributed Ledger Technology (DLT) can be used for trading, custody and settlement. The underlying assets will take the form of ‘Digital Security Tokens’ using Tezos’ proprietary protocol and open-source blockchain protocol.

Yoshi Markets would then offer these tokens for trading and also store these in its custody. Yoshi Markets is gearing up to launch vanilla crypto assets such as BTC, Ether and others.

“(With) security tokens clients can invest in various forms of instruments usually linked to underlying assets like real estate, a car, title deeds, corporate stocks, bonds, artworks, etc.,” said Mustafa Kheriba, Executive Chairman, Yoshi Markets. “It is compliant with regulations, functions like stocks with standardized ownership and can be deemed securities or units in a fund.

“Issuers value security tokens because It makes it easier and cheaper to raise capital by means of blockchain technology. Investors prefer security tokens because of the democratization of ownership of large assets, i.e., access to formerly private assets and assets they wouldn’t necessarily afford alone like real estate or VC fund deals. Regulators prefer them because there is a public record of all the trades which makes it auditable as all transactions are enabled through and recorded on the Blockchain.”

UAE’s crypto push

ADGM in Abu Dhabi and DWTC Authority are spearheading the regulatory framework to make trading in crypto/virtual assets as mainstream as possible. Multiple license, including for trading services, have been issued. “Abu Dhabi and Dubai will emerge as regional hubs for virtual assets,” said Kheriba. “So far, only ADGM has issued licenses for crypto exchanges like ourselves. We are of UAE origin and we want to there in the middle of the action.”

It was ADGM that introduced what was the world’s first virtual asset regulatory framework in 2018. This week, Kraken became the first global cryptocurrency exchange to receive a Financial Services Permission (FSP) license from ADGM. This allows it to operate as a ‘Virtual Asset Multilateral Trading Facility (MTF) and Custodian in Abu Dhabi and the UAE.

Dubai has its framework, under the Virtual Assets Regulatory Authority (VARA).

“The UAE is one of the most financially innovative jurisdictions in the world, with region-leading crypto participation rates by both consumer and professional investors,” said Curtis Ting, Managing Director of EMEA at Kraken. “We are delighted to have received full approval, and to soon launch regulated AED markets that will sit adjacent to Kraken’s industry-leading ecosystem of crypto products, including staking, spot markets across 120+ crypto assets, regulated futures, and our forthcoming NFT marketplace.”