Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Wednesday, January eleven. The United Arab Emirates
Speaker 1: or the UAE has spent quite a lot of time
Speaker 1: and considerable resources positioning itself as a crypto friendly hub.
Speaker 1: It's efforts have attracted some of the top names in
Speaker 1: crypto to the region. The CEO of the world's largest
Speaker 1: crypto exchange Finances, Chang Pang Zao or c Z, has
Speaker 1: a residence in Dubai. It's also where Suzu and Kyle Davis,
Speaker 1: the co founders of the crypto hedge fund Three Arrows Capital,
Speaker 1: have most recently set up shop, and Sam Bankman freed,
Speaker 1: of course, travel to Dubai from meetings with investors just
Speaker 1: weeks before the collapse of FTX. Fd X, incidentally was
Speaker 1: one of the very first firms to be granted a
Speaker 1: license to operate in the region by Zubai's regulators for
Speaker 1: virtual assets, and around four per cent of FDx is
Speaker 1: global customers were based in the u A, according to
Speaker 1: court filings in that bankruptcy case that makes the UA
Speaker 1: one of the top ten jurisdictions affected by the FTX fallout. Overall,
Speaker 1: a pretty mixed picture. For more on the crypto ambitions
Speaker 1: of the u a E, I'm joined today by Bloomberg
Speaker 1: proposes suba stry Bush the way is coming to this
Speaker 1: party and really warming up to to these investors and
Speaker 1: Ben Bartonstein. When you talk to authorities here, they describe
Speaker 1: how they want to be at the cutting edge. They
Speaker 1: want to capitalize on the fact that a lot of
Speaker 1: companies are you know, find the u a AT an
Speaker 1: attractive home to to set up and they want to
Speaker 1: keep those those companies here. Suva, Ben, Welcome to the podcast. Ben.
Speaker 1: Why don't we start with you. You're one of our
Speaker 1: Dubai based report is. What's it been like getting kind
Speaker 1: of pulled into the crypto story for the past couple
Speaker 1: of years. Yeah, it's been a real education for me.
Speaker 1: It's not something I knew too much about a little
Speaker 1: over a year ago, but as a lot of the
Speaker 1: key players in the industry have either moved here or
Speaker 1: spent part part of their time here, it's been a
Speaker 1: real education getting to know a new industry and see
Speaker 1: how it's evolved. Quite significantly in a short time horizon.
Speaker 1: The crypto story really picked up in that's when Abudabi
Speaker 1: Global Market, which is a hub for a lot of
Speaker 1: the multinationals in the capital city Abu Dhabi, a d
Speaker 1: g M as it's called, established its own Virtual Assets
Speaker 1: Regulatory Authority framework, considering itself one of the sort of
Speaker 1: one of the early adopters in that space, and it
Speaker 1: really sort of accelerated in of course, COVID hit the world.
Speaker 1: There was the lockdown, but the UAE really emerged from
Speaker 1: lockdown a lot more quickly than than the average country
Speaker 1: with a very quick vaccination rollout, and really as other
Speaker 1: sort of multinational hubs such as Hong Kong and Singapore
Speaker 1: we're still in lockdown, a lot of sort of fintech
Speaker 1: entrepreneurs started moving to this city. So this kind of
Speaker 1: accelerated efforts by authorities to try to recruit a lot
Speaker 1: of talent, especially in the fintech crypto space. Right one
Speaker 1: of the biggest names that you know, the UAE and
Speaker 1: DUBAIS specifically has been able to attract at least as
Speaker 1: a resident, if not necessarily somebody who has a business headquarters.
Speaker 1: There is of course c Z the CEO of Finance,
Speaker 1: which is the world's largest exchange. Can you talk more
Speaker 1: about the perception of finance in the region. Why CZ
Speaker 1: is there, what rule are Dubai and the UE hoping
Speaker 1: that someone with such a high profile can play. CZ
Speaker 1: actually relocated to Dubai late two thousand twenty one, you know,
Speaker 1: and that was because he failed to get a license
Speaker 1: from the Singapore authorities. And before that he was in
Speaker 1: Hong Kong. So he has been shifting his space quite
Speaker 1: a bit after you know, China crackdown and banned all
Speaker 1: of crypto and then, as he said, he relocated to
Speaker 1: Dubai and he's got a home there and he is
Speaker 1: the front runner for all of crypto world really, right,
Speaker 1: and when the so called king you know, lands in
Speaker 1: a region which is relatively more friendlier than other regions,
Speaker 1: other countries, then he could say that the entire ecosystem
Speaker 1: also really warms up. And that is what we saw
Speaker 1: after c Z moved to Dubai and shifted his base,
Speaker 1: and he's hired hundreds of people in his so called
Speaker 1: headquarters in Dubai where is set up his office. So yes,
Speaker 1: the CZ moving has actually encouraged a lot of development
Speaker 1: in Dubai as well as in the in the U
Speaker 1: region per se on the crypto industry. So that's very
Speaker 1: interesting contracts, right because Ben, as you know, one of
Speaker 1: the pieces of reporting that you, of course have been
Speaker 1: doing very consistently for several months is this shall we say,
Speaker 1: symbiotic relationship between the regulators and the regulatory framework in
Speaker 1: the u E and those efforts to attract not just
Speaker 1: crypto but also fintech entrepreneurs, companies and businesses more broadly. So,
Speaker 1: what are some of the big regulatory priorities for the
Speaker 1: UE given that they've had success with finance so far,
Speaker 1: but they also gave a license to fd X, which
Speaker 1: you know, collapse to not super long after that happened. Certainly,
Speaker 1: when it comes to the broader economic strategy within the
Speaker 1: U a E, the U as home to six percent
Speaker 1: of the world, has proven oil reserves, but they're thinking ahead,
Speaker 1: you know, decades into the future, how can we diverse
Speaker 1: fire economy And they're talking a lot about the digital
Speaker 1: economy and how crypto is a key pillar in that strategy.
Speaker 1: So I think when you talk to authorities here, they
Speaker 1: describe how they want to be at the cutting edge.
Speaker 1: They want to capitalize on the fact that a lot
Speaker 1: of companies are you know, find a U at an
Speaker 1: attractive home to to set up, and they want to
Speaker 1: keep those those companies here. Of course, in the past
Speaker 1: six months, some of the authorities have been quite unsettled
Speaker 1: with what's transpired in the industry. A lot of development
Speaker 1: since the stunning collapse of former billionaire Sam Bankman freed
Speaker 1: ft X Empire last week one of the two. But
Speaker 1: certainly when you talk to certain UI officials, they recognized
Speaker 1: there will be some failures, but they'd rather you know,
Speaker 1: strike out a few times but still be right in
Speaker 1: the thicker things than let this opportunity pass them by
Speaker 1: and and let some other place sort of capture more
Speaker 1: of the market share in this industry. It's interesting to
Speaker 1: hear you describe it like that, because that sounds kind
Speaker 1: of more like how venture capitalists think and not so
Speaker 1: much regulators in a lot of ways. But Suva, I
Speaker 1: want to come back to you in this point because
Speaker 1: it seems like what's developing here is regulatory arbitrage, which
Speaker 1: you alluded to a bit in talking about the challenges
Speaker 1: that CZ has faced in trying to secure those operational
Speaker 1: licenses for finance, So where are those folks who And
Speaker 1: to be clear, this is not a crypto didn't invent
Speaker 1: regular story, I b rage. Financial services companies and people
Speaker 1: who work in financial services are very good and identifying
Speaker 1: jurisdictions that let them do what they want to do
Speaker 1: or give them amenable terms to do so. But what
Speaker 1: has been the response of other countries, other cities, other
Speaker 1: states who might be looking at the relative success that
Speaker 1: Dubai in the UA, you're having an attracting business flows, attention, marketing, hype.
Speaker 1: These other places are looking inward and are they saying, well,
Speaker 1: do we need to change our own approach as a
Speaker 1: regulator in order to compete? There has been a lot
Speaker 1: of regulatory arbitrage and like like we've seen that how
Speaker 1: Singpore has tightened their rules. Yes, we still want to
Speaker 1: be a crypto hub, but if you mean whether we
Speaker 1: want to be a hub for the trading of cryptocurrencies, no,
Speaker 1: that's not part of the vision. We did not state
Speaker 1: it so emphatically before, but now we are stating it
Speaker 1: much more rophatically than almost proposed to make it impossible
Speaker 1: for retail investors to trade in crypto in the same way,
Speaker 1: you know, you've seen some other countries as like Thailand
Speaker 1: doing the same thing. However, Hong Kong is again, you know,
Speaker 1: trying to establish themselves as a crypto hub in Asia.
Speaker 1: It shows that there is a lot of differences in
Speaker 1: the approach that regulator stay. That is also helping to
Speaker 1: some extent for some crypto natives and crypto investors to
Speaker 1: understand where to go and when not to go. And yes, Dubai,
Speaker 1: as you were saying in the beginning and was Ben
Speaker 1: Ben was also saying that you know that they are
Speaker 1: trying to kind of warm up to this new wave
Speaker 1: of so called capitalism if I can say, or or
Speaker 1: the wealth creation or whatever. Like, you know, Dubai is
Speaker 1: coming to this party and really warming up to to
Speaker 1: these investors because these are deep pocketed investors. You can
Speaker 1: get rich fast. It's a way of making money and
Speaker 1: without much regulations. We'll be right back after the break
Speaker 1: with more from Suber and Ben on the UEA S
Speaker 1: future in crypto. We still have to address one of
Speaker 1: the biggest criticisms here, is this really the best moment
Speaker 1: to be chill about crypto regulations? As you know, it
Speaker 1: felt like on a weekly and in some cases hourly
Speaker 1: basis from the second half of two that we were
Speaker 1: reporting on folks filing for bankruptcy or just generally collapsing
Speaker 1: or halting withdrawals or being incredibly accused of various types
Speaker 1: of you know, bad things. And at the center of
Speaker 1: all this has been a real concern that retail investors
Speaker 1: have not really had a lot of recourse. Ben one
Speaker 1: of the stories that he reported on was on that
Speaker 1: kind of tension, like how to balance the need to
Speaker 1: not stymy innovation, to continue to encourage people who want
Speaker 1: to come and take risks and try new things, but
Speaker 1: also to protect the investors in those companies as well
Speaker 1: as the retail investors who put their money and their
Speaker 1: trust in those companies. And one of the things that
Speaker 1: been you identified in your reporting, and this comes from
Speaker 1: bankruptcy documents, is that the UAE had a not small
Speaker 1: number of investors with money locked up in f t X.
Speaker 1: They were at least one of the top ten or
Speaker 1: twenty jurisdictions in terms of creditors to f t X.
Speaker 1: So from their own perspective, it seems like they have
Speaker 1: a real interest in getting this right at least the
Speaker 1: next time. I guess i'd be curious, um what the
Speaker 1: sort of nationality breakdown is there, because I guess the
Speaker 1: interesting and somewhat unique thing about the use the fact
Speaker 1: that about of the population is non Emirati. So when
Speaker 1: I talked to officials here about consumer protection in the
Speaker 1: context of crypto, it's not something that they dismissed, but
Speaker 1: it's not at the top of the priority list, And
Speaker 1: I guess it makes you wonder how the demographics within
Speaker 1: the country perhaps factor into that a bit, because the
Speaker 1: general line that I hear when talking to Emirati officials
Speaker 1: about this is they don't want to have too much
Speaker 1: government intervention and preventing retail investors from an insting in something.
Speaker 1: Perhaps it's quite risky, but they say that's you know,
Speaker 1: buyer beware. We don't want to be stepping in the
Speaker 1: middle of things. Of course, if if Amarati locals are
Speaker 1: burned by particular investment, that's when the government takes a
Speaker 1: much greater interest in trying to crack down and understand
Speaker 1: what exactly went wrong. There's the fact that this is
Speaker 1: a hub for lots of people, for lots of different places.
Speaker 1: In addition to that, you have local family offices for example,
Speaker 1: or other types of entities that might have different types
Speaker 1: of risk considerations like fintech or energy or real estate.
Speaker 1: But have you found that crypto is making real in
Speaker 1: roads into that local Emirati population as well as that
Speaker 1: broader base of folks from multinationals who are attracted to
Speaker 1: the u E. Absolutely, Although the Amiati nationals make up
Speaker 1: the minority of the population, it is a quite youthful population,
Speaker 1: a lot of folks who are early adopters in the
Speaker 1: crypto space. What you'll see is some of the more
Speaker 1: senior decision makers within the u a E. Their children,
Speaker 1: their nieces, their nephews, got into crypto at a quite
Speaker 1: an early stage and have since convinced, you know, their
Speaker 1: parents or uncles or aunts, Hey, this is where we
Speaker 1: need to put the family money. So yeah, again, even
Speaker 1: if you know ten percent the population here is Amati,
Speaker 1: you know there is probably a greater share of their
Speaker 1: net worth that's in crypto on a percentage basis than
Speaker 1: probably the majority of countries in the world. And then
Speaker 1: going back to boom and bus cycles, the UA has
Speaker 1: seen some pretty intense examples of this. The vibe in
Speaker 1: was not fun. There was a lot of distress, There
Speaker 1: was a lot of concern that things had gotten too frothy,
Speaker 1: too fast, and that the shakeout was going to be
Speaker 1: really intense, and frankly it was for a while now.
Speaker 1: For someone who has not necessarily been paying attention to
Speaker 1: all financial markets for the past, you know, fifteen or
Speaker 1: twenty years, things now might seem completely chill and totally fine.
Speaker 1: So have folks learned any lessons from previous market cycles?
Speaker 1: Certainly that there have been some changes in the real
Speaker 1: estate sector for one. But I guess the other thing
Speaker 1: that's really changed since the O eight crisis when it
Speaker 1: comes to the U a E is just the the
Speaker 1: size and heft of the wealth funds. In Abu Dhabi
Speaker 1: in particular, you sort of have these two counterweights as
Speaker 1: far as attracting people to the U a E. You
Speaker 1: have Dubai's the hub for multinationals and the glitz and
Speaker 1: glamour appealing to a lot of the sort of crypto set.
Speaker 1: But then Abu Dhabi has really, I think one of
Speaker 1: the bigger global stories right now is become sort of
Speaker 1: a funder of last resort for a lot of companies.
Speaker 1: Those two kind of go hand in hand, and at
Speaker 1: least for right now, keeping a lot of attention on
Speaker 1: the u a E and a lot of traffic into
Speaker 1: the country. But certainly, as you alluded to, the booms
Speaker 1: and the bus have both probably been felt a bit
Speaker 1: harder in the UAE than than elsewhere. It's it's a
Speaker 1: real roller coaster, so there is concern when you talk
Speaker 1: to bankers, when you talk to the lawyers and others
Speaker 1: in the financial industry about when the hard times may
Speaker 1: come back. And on that cherry note, thank you both
Speaker 1: for joining the podcast. I appreciate you taking the time.
Speaker 1: You can find more of their reporting on the Bloomberg
Speaker 1: terminal and on Bloomberg dot com, and of course check
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