00:00:00 Speaker 1: Because you're listening to this Bloomberg podcast, we thought you'd be interested in a sponsored podcast called Economy of Scale. Produced by Bloomberg Media Studios and the Dubai Department of Economy and Tourism, it delves into the changing dynamics of business growth, from technology to capital and investment. Here's a recent episode. Scale has become synonymous with Dubai, a metropolis shaped by constant growth. In 2025, the Emirate retained its position as one of the world's leading destinations for greenfield foreign direct investment. But scale isn't just about size. Globally, it can be the difference between success and failure, whether bringing breakthrough technologies to market or building smart infrastructure that will shape the cities of tomorrow. Welcome to the Economy of Scale. In this podcast series, we'll explore one central question. What does it really take to scale? I'm your host, Jacob Greaves, and in this episode, we're delving into a type of scale that stands to reshape the world of finance, the growth of fintech, and how regulation, blockchain, virtual assets, and new forms of financial infrastructure are driving global change. Welcome to the Economy of Scale. To discuss this and more, I'm joined here in Dubai by Sean McHugh, Senior Director of Market Assurance at the Virtual Assets Regulatory Authority, also known as VARA, and by Rhys Merrick, Managing Director for the Middle East and Africa at Ripple. Thank you so much both for joining us. Rhys, if I could start off, can you expand on what Ripple does and how you've seen your growth journey of late? 00:01:30 Speaker 2: Absolutely. 00:01:30 Speaker 3: So Ripple are a digital asset infrastructure provider, probably best known in the market for our payments product, which utilises digital assets, notably XRP and the XRP ledger, to move funds cross-border in real time at a fraction of the cost. But we have evolved substantially as a company over the last few years now. Essentially, due to the demand of our products in terms of payments, we have released our own USD-backed stablecoin, RLUSD. We offer custody infrastructure now to some of the largest financial institutions in the market. And we've been busy in the acquisition world over the last 12 months. So lots going on. 00:02:05 Speaker 1: Fantastic. And Sean, VARA established in 2022. What are its core responsibilities and how has that evolved? Sure. 00:02:14 Speaker 4: We were the world's first dedicated virtual asset regulator. There's been a few that have jumped into space after and now, quite honestly, broader regulators of embracing the space at different levels. Our core mission was to set up not just to regulate the space within Dubai that already existed, but also to build up the space consistent with the D33 initiative by the Dubai government to expand and make this the city of London or the midtown Manhattan of virtual assets, you know, to kind of have some economies of scale and some critical mass. I've been here about two and a half years. We had 14 licensed firms when I got here. We just licensed our 57th. 00:02:44 Speaker 1: If we just zoom out for a second, in the US we have the likes of the Clarity Act making headlines. But globally, when it comes to virtual assets, regulation and adoption, where do you think we are, Sean? Sure. 00:02:57 Speaker 4: I think the entire space globally is very focused on that because it's going to have a broad impact, especially with how deep the US capital markets are. Clarity is kind of our religion, regulatory clarity around making sure people can set up and understand... our expectations. And of course, we have rules, but those expectations change when there are incidents and we add to a rule book. 00:03:15 Speaker 2: Et cetera. 00:03:16 Speaker 4: But we have a lot of regulatory engagement with the firms with the view that we're not a gotcha regulator. We want them to understand where we see the risks are. I think as we see, and this is something recent I spoke about in the past, the convergence of TradFi and virtual asset space on both sides, how do we help the firms that we kind of license kind of get in shape for that, again, within guardrails. This is an asset class where I personally see there'll be a day when there's a hedge fund in London, Hong Kong, or New York sending orders to equities, fixed income, commodity currency, and virtual assets. And it'll have shelf space in every big hedge fund, every big bank and investment bank in the world. 00:03:54 Speaker 1: So tokenization, seen a surge in growth recently. Bloomberg Intelligence estimates assets under management are around $ 50 billion as of 2026. Compare that to just early 2023, where it's around $ 1. 5 billion. What do you think's behind that? And are there any regions in particular, Reece, where you think you're seeing that growth being driven? 00:04:14 Speaker 3: I think fundamentally, the whole kind of industry has shifted. And that's really where a few years ago, it was all about speculation. It was all about making money quickly and how can we do that. Now, I think what you're finding is that financial institutions are looking at actually what this technology can do and how you can rebuild what the financial rails look like. 00:04:33 Speaker 2: You have credible. 00:04:34 Speaker 3: entities, asset managers like Franklin Templeton, stepping into this place like BlackRock. They're really aggressively coming in here. And I think actually what that does is it adds credibility to the wider market. It gives their customers access. When you're talking about regions globally, we're seeing pockets of this growth. If we look at a president that's been set certainly in Dubai, where you have a government entity like the Dubai Land Department who are working with a regulator like VARA. They're working with private companies like Ripple, Controllor, Pripco. And together, we're coming to bring title deeds on chain. The first government entity to kind of do that within the real estate space. I think that shows kind of the level of leadership here and kind of where the market is going. So yeah, it's exciting. And I think there's more to come certainly from here and beyond. 00:05:21 Speaker 1: Sean, would you expect that trajectory to continue in terms of tokenization growth? 00:05:24 Speaker 2: I do it. 00:05:25 Speaker 4: And DLD is a perfect example how Dubai is positioned well around this. You've got real estate records that are digitalized to begin with. 00:05:32 Speaker 2: So it's easier. 00:05:33 Speaker 4: My hometown in America, those are in books and written down. What we've tried to do is figure out how do we encourage liquidity here? I think that's the real unlock. You know, tokenize something. It's a bit of a technology miracle and it's fantastic. But you want to have tradable markets around that. And also from a regulatory standpoint, we want people to understand what do you own? What do you not own? What's the difference between a tokenized asset and owning the actual deed to the land, for example? 00:05:57 Speaker 1: Sean, as more institutional investors move into the virtual asset crypto space, how do you think that will change it? 00:06:02 Speaker 4: We've seen it change a lot. When the Bitcoin ETF kind of rolled out, that really changed this market. And as we say, you're not going to get the toothpaste back in the tube around that. And I think that's encourage institutional players, not just in a money center here in Dubai, even in VAR, we're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high frequency traders, and that sort of thing. And folks who service institutional clients. 00:06:25 Speaker 2: You know, I've been at Ripple eight years now. 00:06:28 Speaker 3: I can tell you the conversations that I was having for my first three years that I was in London with large financial institutions there where, you know, ultimately, if you mention the word crypto, security were kind of called to kind of escort you off the building. Fast forward now, I think what we're seeing is those same financial institutions because of the demand and because of the growth and actually because of the utility, most importantly. They're looking at not just allowing the custody of these assets, but really how they can offer trading solutions, tokenizing things like money market funds, stocks, bonds, treasuries. And actually, the conversation has changed because it's not just sitting in an innovation team within a large financial institution. There's proper profit and loss, which is tied to business units within these institutions now, which is exciting. 00:07:13 Speaker 1: Maurice, what do you think are some of the biggest... Structural changes when it comes to cross-border payments and which markets are driving that? 00:07:21 Speaker 3: I think the expectation for funds to be sent cross-border and to be reaching their destination near instant is the expectation of the market now, right? 00:07:32 Speaker 2: You know, I can send an email. 00:07:33 Speaker 3: To anyone, you know, in this room or to my colleagues going to get there within a couple of seconds, no questions asked. However, if I send a cross-border payment, you know, over to the US, it could take a couple of days. Ultimately, I think actually the expectation of the customer has changed. Ultimately, that is driving the financial institutions, the fintechs, the payment service providers, the ability to offer and leverage digital assets in order for them to benefit. 00:07:57 Speaker 2: Stablecoins is a huge, huge benefit there. 00:07:59 Speaker 3: If you think US dollar payments globally, I think over 50% of total global payments are settled in dollars. A lot of those payments don't actually go to the US. It's quite inefficient if you're sending a payment here in the Middle East over to Asia And it's bouncing over to the US before it gets there. So enabling and having stablecoin acceptance, stablecoin payouts, I think is certainly an area of growth that we're seeing expand rapidly. 00:08:23 Speaker 4: I agree with everything Risha said. I'd mentioned our ecosystem buildup. We are seeing now a lot of payment firms come into our licensing process. And I think the early stages of Dubai and VAR, it was the trading case study. And that's still very strong. because of the rise of stablecoin. Now, the payment case study, Dubai is very unique around that. You're four hours away from one-third of the world's population, eight hours away from two-thirds of the world's population. So, we're seeing a lot of players come in. And I won't name names because some of them aren't public in our process yet. But they come in, they're expanding globally, and they find Dubai is the right place. Hopefully, we've been a part of that to give regulatory clarity and rules that they understand and engagement when it's unclear on a new business. 00:09:05 Speaker 2: I look after Middle East and Africa. 00:09:07 Speaker 3: The growth just between the Middle East and Africa is up 40%, 50% year on year in terms of that corridor, that trade corridor. In emerging markets, they want the ability to be able to settle instantly. And that's certainly where we're seeing a ton of that growth and that intra-country kind of ability to do that. 00:09:23 Speaker 1: Sean, you mentioned regulatory clarity. As a regulator, how do you strike that balance between enhancing innovation whilst also ensuring their safeguards as more and more finance is built on these digital rails? 00:09:37 Speaker 4: So our rulebook is principle-based, but our licensing process is very prescriptive, right? So we try to be agnostic around business model or tech. And so we really have to get to know the applicant going through. Sometimes that takes for certain firms a little longer, for every firm a little longer than they want to, but we end up wanting to get to the right where we've really diagnosed the patient that, your business, you need these types of licenses. You need to beef up your cybersecurity, things like that. We then try to pivot that part of the relationship To kind of help them innovate. And I mentioned we do a lot of regulatory engagement. A lot of that is risk management. But we have a team dedicated to regulatory enablement. And a big part of this is trying to figure out where our rules are silent or the tech or the opportunity set has changed. It's not a free pass. You have to give us information. We go back and forth. We trust each other. We learn from each other. And then that graduates to a rule. And then while we're doing that, we try to give clarity to other folks that, hey, our interpretations might be changing. Our tolerance might be changing. We're getting tighter and that sort of thing. 00:10:38 Speaker 3: Sean mentioned a good point. And one thing that I mentioned earlier is that Ripple are keen to engage people. 00:10:44 Speaker 2: With regulators. 00:10:45 Speaker 3: And what I would say about Dubai, a number of regulators that are involved in the digital asset space, I've been here five years, we have been heavily involved. It's a two-way dialogue. The regulators here are, like VARA, like the FSA, are looking to learn, to understand your business. and to iterate kind of rules along the way. And actually, that's the biggest takeaway that why I think international businesses are coming to this region is because they're feeling that the technology is being adopted in a safe environment that benefits them, their business, and ultimately their customers. 00:11:16 Speaker 1: Is that quite rare, that two-way dialogue? 00:11:17 Speaker 2: Absolutely. Yeah, I would say it's very rare. 00:11:19 Speaker 3: You know, a lot of regulators globally would like to keep the industry at arm's length. 00:11:25 Speaker 2: That's the opposite here. 00:11:26 Speaker 3: I think also what you'll find is that regulation and frameworks can come out, but some of them are, you know, maybe a slight iteration on some 80 year old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai. So, you know, we're very excited to be here. We're doubling down because ultimately the business is growing incredibly here. But a part of that enablement comes from the framework and the regulation that is in place. 00:11:52 Speaker 1: VARA has recorded around $ 680 billion when it comes to regulated transaction volumes. How mature would you say the Dubai market is? And what do you anticipate growth to be over the coming years? 00:12:05 Speaker 4: A lot of the attention we've gotten has been the global players we've licensed or super regional players. By the end of the year, we'll have every major retail platform in our ecosystem. What's less understood is we also have a mission to encourage startups and smaller local players or regional players. something we take very seriously. So in terms of maturity of the market, it's quite mature in terms of the talent and the products and that sort of thing. But we do, I mean, my personal goal would be how can we make Dubai the Silicon Valley of blockchain technology and development, right? 00:12:35 Speaker 2: And so. 00:12:36 Speaker 4: Some of the licensed players attract, they attract infrastructure players and law firms and other people. You know, the good thing is Dubai is created a place people want to live, right? So people have moved here for that. But from a client adoption standpoint, I would say this globally as well, not just Dubai, we do worry about that. We want new players to come in. That's the goal. And so we want to make sure it's a safe place for them to swim. And so that's why a big part of our focus is on customer protection. 00:13:01 Speaker 1: Chris, what do you think might be the next scalable tokenization? Is there something on the horizon that you see emerging? 00:13:07 Speaker 3: I think that tokenization of money market funds is certainly getting some tractions. There's already kind of billions of dollars worth of assets under management there. And I think what we start to see is an evolution within the capital markets world to kind of put those tokenized assets to use. So we're looking and speaking to a large amount of institutions about using it as collateral, for example. And we see the repo growing. kind of market and opportunity as a big space that I think will kind of explode not only the tokenization world, but being able to kind of leverage them and take the advantages that it offers. 00:13:38 Speaker 1: And Sean, crypto, virtual asset markets, they do remain volatile. So as a regulator, what does confidence look like for you? And how do you instill that? 00:13:46 Speaker 4: This will remain a volatile asset class for a little while. I'm not talking about stables, obviously. The more popular trading, not necessarily the more liquid, but there's lots of meme coins, there's lots of end perps and that sort of thing. I think that as long as the clients know that the volatility of the piece, that anyone who has 100% of their money in virtual assets is 100% long. 00:14:06 Speaker 2: Vol, right? 00:14:07 Speaker 1: And Rhys, the UAE is a major cross-border payments and remittance market. Is that a key reason for you establishing a presence in Dubai? 00:14:16 Speaker 2: Absolutely. 00:14:16 Speaker 3: I think it's critical to that decision. We've been in the DIFC six years now. I think if you look and you remove oil from this equation, I think the trade from the UAE sits at a trillion dollars. So first and foremost, what you have is you have that market ability to be able to go after and they're looking for innovative ways to move money cross-border. So I think what you have in Dubai is you have, firstly, the market conditions that allow you to scale. Secondly, you also have the regulatory landscape in order for that to happen. It's quite rare that you kind of get both together, which is why, you know, Ripple being here, we've seen so much growth since our launch. 00:14:55 Speaker 2: And actually, we've just. 00:14:56 Speaker 3: doubled, given our ability to double our office headcount here in Dubai. Last year, we received our DFSA license to become the first blockchain-enabled payment service provider here in the DIFC. We also, as I mentioned, have RLUSD, which is our USD-backed stablecoin, which is approved by the DFSA and the FSRA. I think as we expand our products in terms of we're looking at custody, we're looking at prime brokerage, we're looking at treasury management solutions, Again, this region and this market allows us to be able to look beyond payments and look at more about what that digital asset infrastructure play looks like. We're centralized here, headquarters here, but we look after our customers across Africa, Turkey and Central Asia. So it's the perfect place and hub for us to be. 00:15:40 Speaker 1: And Sean, as we look to the future, what are your ambitions and hopes for the virtual asset and fintech market here in Dubai? 00:15:47 Speaker 4: To continue to have the right players, good players that are going to be stewards of this space, especially because we have a lot of crypto native players. And they realize that we've been at this inflection point the last year or so as to the adoption and that sort of thing. I often say, is it a movement or a moment? And a lot of that is going to depend on the behaviors of the firms. It's going to depend on the guidance from the regulator. So, you know, I've got a part. We at Barr have a part in that too. What we've seen in terms of development, a lot of these big firms and these small startups, they brought in infrastructure providers and law firms, folks that are important. There's no other cluster like this anywhere in the world in this particular industry, right? So I think I would like to see as we grow that, and again, once again, protect customers and stay on the right side of financial crime and that sort of thing, to as we expand that, and bring that talent pool in, and we see a maturity of other folks here in Dubai who work at these companies, I think all of a sudden we're off to the races in terms of having a proper ecosystem and becoming a money center capital for the virtual assets. 00:16:48 Speaker 1: Sean, Rhys, thank you so much for your insight. And thank you for joining us at Economy of Scale. This podcast series has been brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.