For both outsiders and those on the ground, navigating the UAE’s digital asset landscape can be a disorienting experience, with multiple (often competing) centres of activity to contend with.
In addition to the digital asset guidelines at the federal level from the Central Bank of the UAE and the Securities and Commodities Authority (SCA), there are the high-profile regulatory digital asset regimes of Dubai (the Virtual Assets Regulatory Authority; VARA) and Abu Dhabi (Abu Dhabi Global Market; ADGM), not to mention the activities in the space within the Dubai International Financial Centre (DIFC) and the Dubai Multi Commodities Centre.
Those struggling to keep up have a new name to contend with: Ras Al Khaimah’s (RAK’s) Digital Assets Oasis (DAO), which is described as “the world’s first and only common law free zone dedicated to digital and virtual asset companies”.
Affordable business environment
Opening its doors in mid-October, the DAO is marketing itself as a refuge for smaller and more experimental firms to operate and experiment in a lighter-touch regulatory setting — one that offers a more affordable business environment than some of the country’s other jurisdictions.
Initially conceived as a high-profile digital assets hub in the same space as Abu Dhabi, Dubai and Bahrain, authorities in RAK chose instead to shift the DAO’s focus towards Web3 developers with less onerous regulatory requirements.
“For companies that are looking to licence VASP [virtual asset service provider] activities, such as an exchange, issue tokens and offer custodian services, other authorities in the UAE and elsewhere will be able to give you a licence,” says Sameer Al Ansari, RAK DAO’s CEO.
“But the digital assets space is much wider than that. There are plenty of firms that are building on the blockchain and Web3 that are working on creating bespoke solutions, software and technology infrastructure and so on for the sector. 99% of these companies are not conducting ‘regulated activities’, and it’s these companies we’re looking to attract. They may even be working with regulated companies as a service or technology provider.”
The centre is founded on a common law foundation, in line with both local investment entity RAK International Corporate Centre and many of the UAE’s other major free zones, not least the DIFC and ADGM.
“To attract clients from all over the world, legal certainty is important. They need to be comfortable with the legal system in place if anything goes wrong, and to have access to courts and dispute resolution systems that understand the issues around Web3, such as smart contracts,” says Mr Al Ansari.
A key aspect to the centre’s appeal for Web3 professionals is its link with the banking sector, in the form of a partnership with local lender RAKBank, announced earlier this year.
“The access to basic banking services is particularly important for smaller players that are operating in the Web3 space,” says Irina Heaver, a crypto lawyer that has advised RAK DAO.
“It’s a common complaint for companies that are operating in this space, in jurisdictions like the Bahamas and the Seychelles, that it’s a real struggle to open a bank account.”
While far less wealthy than Dubai and Abu Dhabi, RAK is known for its ceramics industry and a tourism sector that is popular with local residents, as well as visitors from Germany and Russia. Like its fellow northern emirates, RAK is seen both locally and internationally as a more affordable option than its more prominent cousins.
“Dubai and Abu Dhabi are now extremely expensive places to live and do business,” says Mr Al Ansari. “RAK is literally a 45-minute drive from Dubai International Airport, but the cost of doing business and the cost of living are about half of what you would pay in Dubai or Abu Dhabi.”
Beyond these considerations, RAK’s other economic diversification initiatives are also likely to stoke the interest of those in the digital asset space.
As part of an effort to court investment in the wider gaming space, the emirate is set to play host to the first casino in the Arabian Gulf region in the form of a $4bn Wynn resort, following the establishment of the UAE’s federal General Commercial Gaming Regulatory Authority in September.
Ali Jamal, CEO of Dubai-based Cryptos Consultancy, draws attention to this fusion where gaming points collected upon completion of achievements seamlessly transition into virtual assets, eventually finding their value in fiat currencies.
Mr Jamal, whose company helps firms navigate the regulatory compliance landscape, noted the growing intrigue among clients regarding RAK DAO’s offerings, even though VARA and ADGM presently stand as the most appealing hubs within the country.
In addition to DIFC and RAKBank, RAK DAO has signed an agreement with federal government bodies including SCA, as well as with the HBAR Foundation, the ecosystem accelerator of the Hedera network.
Mr Al Ansari declined to comment on how many companies had registered with the centre in the weeks since its launch, but said that he was confident of signing up more than 100 partners during its first year of operations.
Among RAK DAO’s immediate priorities is work around decentralised autonomous organisation structures, which the centre hopes to be able to offer partner companies in the coming months, says Mr Al Ansari.
ADGM in Abu Dhabi recently announced the availability of such company structures as part of its new distributed ledger technology foundations regulations, published in early November.
While ADGM may have stolen a march on RAK DAO, the new centre doesn’t fear the competition from its larger rival.
“ADGM’s framework does not add competition in the DAO space; rather, it validates and expands the market, indicating growing interest and acceptance of DAOs in the region,” says Mr Al Ansari.
“We view this as a positive development for the ecosystem as a whole.”
Source : The Banker