from Dubai new virtual asset law can become a global model for governments and central banks regulate cryptocurrency and protect investors while fueling economic growth and innovation, said the co-founder of blockchain data platform Chainalysis.
“There are many settings and conversations at the international level about creating a best in class approach into the asset class and there really is an opportunity for Dubai to take the lead on that,” Jonathan Levin, who is in Dubai to speak at this week’s conference. World Government Summitsaying The National.
“What [Dubai] goes into implementing and building the regulatory environment for crypto businesses to operate, it has the potential to become a model for how this sector regulation should be done,” said Mr. Levin, who is also the chief strategy officer of Chainalysis.
“It will allow for a much more tangible example that people can look to as a regulatory architecture for the industry…and it will strike the right balance between economic growth, fostering innovation behind the industry, and protecting investors and public safety.” “.
This month, Dubai adopted the Dubai Virtual Assets Regulation Act, which aims to create an advanced legal framework to protect investors and provide international standards for the governance of the virtual assets industry that promotes responsible business growth in the emirate. .
Dubai also established the Virtual Assets Regulatory Authority (VARA) as an “independent authority” to regulate the sector throughout the emirate, including special development zones and free zones, but excluding the Dubai International Financial Centre.
The authority, which will also be responsible for licensing, has legal and financial autonomy over the virtual assets sector, which includes cryptocurrencies such as Bitcoin and non-fungible tokens, and will be linked to the Dubai World Trade Center Authority (DWTCA). .
Central banks around the world have been reluctant to support cryptocurrencies due to their high volatility, speculative nature, use for illicit activities, as well as lack of value and regulatory oversight.
The Central Bank of the UAE also does not recognize cryptocurrencies as legal tender.
The Middle East received $271.7 billion worth of crypto between July 2020 and June 2021, accounting for 6.6 percent of global activity, according to chaining data.
The region is one of the fastest growing markets in the world. Turkey has the highest transaction volume with $132.4 billion between July 2020 and June 2021. The United Arab Emirates ranks third, behind Turkey and Lebanon, with a transaction volume of $25.5 billion. .
New York-based Chainalysis, which Mr. Levin founded with Chief Executive Michael Gronager in 2014, works with government agencies, stock exchanges, financial institutions, and insurance and cybersecurity companies in more than 60 countries. The company provides them with data and market intelligence software used to help solve some of the world’s biggest financial crimes.
These crimes include the DarkSide ransomware attack on Colonial Pipeline in May of last year, in which the operator of the American pipeline system paid 75 Bitcoin to regain control of the system.
In June last year, the US Department of Justice managed to recover part of the ransom paid by Colonial Pipeline (63.7 Bitcoin valued at about $2.3 million) by gaining access to DarkSide’s systems, it said in a statement. statement.
Cryptocurrency-based crime peaked in 2021, with illicit addresses receiving $14 billion over the course of the year, up from $7.8 billion in 2020, according to Chainalysis. 2022 Crypto Crime Report.
However, those numbers don’t tell the “full story,” according to the report.
Across all cryptocurrencies tracked by Chainalysis, total transaction volume increased to $15.8 trillion in 2021, up 567% from the previous year.
“Given that roaring adoption, it is no surprise that more cybercriminals are using cryptocurrencies,” Chainalysis said in the report.
“But the fact that the increase in illicit transaction volume was only 79 percent, almost an order of magnitude lower than overall adoption, might be the biggest surprise of all,” he said.
All of that adds up to a more sophisticated financial system that can actually help broaden adoption and power general financial instruments beyond what we normally think of as the cryptocurrency industry.
Jonathan Levin, Co-Founder of Chainalysis
“With the growth of legitimate cryptocurrency use far outpacing the growth of criminal use, illicit activity’s share of cryptocurrency transaction volume has never been lower.”
The future of the cryptocurrency sector lies in the widespread adoption of digital currencies and the “financialization” of the asset class, Levin said.
This would entail more sophisticated financial products being offered to consumers, such as offering interest on cryptocurrency deposits or borrowing against cryptocurrency deposits, he said.
“All of that adds up to a more sophisticated financial system that can actually help broaden adoption and power general financial instruments beyond what we normally think of as the cryptocurrency industry.”
However, the financialization of the industry would take time, Levin said.
“It is affecting the lives of hundreds of millions of people right now, but not like billions of people. We need to get to the point where there are billions of people actually accessing crypto technology in their lives. [for this to happen].”
Updated: March 30, 2022, 10:05 am