Author：Zhuoruifu; Zhu columnist at BlockBeats, research interest: macroecon, monetary policy, financial crisis, Middle Eastern studies. Twitter: @zhuoruifu LinkedIn: @zhuorui.fu Also have atravel vlog channel.
After the crypto ban in mainland China, mainland giants changed their business and opened up new paths elsewhere through buybacks, backdoors, etc. The crypto ban in mainland had also greatly affected Hong Kong's Web3 world. Coupled with Hong Kong's once-criticised pandemic policy, a large number of new Web3 forces have since gone to Singapore.
Singapore is now the Web3 centre of East Asia, but the future ranking is unknown.
In October 2022, Web3 in Asia held the grand event Asia Token 2049. After attending the conference at the beginning of the month, many insiders came to Dubai non-stop for the world's largest technology carnival Gitex in the middle of the month to sit the Blockchain Summit and Metaverse event. With Singapore tightening its policies on Web3 and Dubai relaxing its policy, the booming Web3 industry in the Middle East and North Africa seems to be attracting the perpetual FOMO Web3 builders on the look for a more suitable environment.
In today's Web3 development, Dubai is a force not to be underestimated. The political and economic development of the most famous emirate in the United Arab Emirates has benefited from the national policies of several extremely far-sighted leaders, and now it has invested handsomely and relaxed its policies. The financial and transportation centre Dubai is taking advantage of its location in the Persian Gulf and its proximity to Hormuz. Although the city is small, its soft power is amazing, and it can have its own important voice in the frontier. Currently, Dubai is one of the fastest growing destinations for the Web3 industry.
The Legend of a Trading Port – Leveraging Big Power Influences
Before the 19th century, Dubai was a small fishing village. Because it was a port adjacent to Iran, it became a commercial station for trades to Persia. At the time, Dubai mainly engaged in fishing, shipbuilding, and pearl fishing. In the 19th century, Dubai began to undergo gradual modernisation and reached political goodwill with its rival, Abu Dhabi. Before the discovery of oil in the 1960s and the formation of the United Arab Emirates in the 1970s, Dubai had already benefited from a series of wise policy decisions. In 1833, Dubai was ruled by today's Al Maktoum family, which adopted commercially liberal policies. In 1901, the then chief Maktoum bin Hasher Al Maktoum announced that Dubai would be a tax-free trade port for imports and exports. Subsequent sheikhs also followed this tax-free trade policy. Before the discovery of oil, the family had built Dubai into an important port in the Persian Gulf with a large throughput. Because of Dubai's proximity to Iran, many Iranian businessmen sailed to the world via Dubai and many eventually settled in Dubai.
In 1958, Rashid bin Saeed Al Maktoum took over as the sheikh. Under his leadership, Dubai morphed from a pearl-gathering and fishing port to a splendid international metropolis and business centre. The sheikh's strategic instincts are a blessing for Dubai. In 1958, oil was yet to emerge, but the sheikh had already advocated for economic diversification. He used Dubai's surplus from trade to vigorously reinvest in infrastructure, build natural water pipelines, expand electrics, build hotels, construct airports, etc. The sheikh』s love for infrastructure had not always been well-funded or applauded by others. When Dubai was building the first bridge connecting the Dubai waterways (today』s Creek), the sheikh was so cash-strapped that he borrowed from his brother-in-law, Qatar』s leader, and used the tolls collected from the bridge for repayment after.
In 1966, oil was discovered underwater in Dubai, and since then the city had oil-empowered Louis Vuittons on its image to the world. However, Dubai is lucky, too. Oil, the Pandora's Box for most countries in the Middle East, did not destroy Dubai's independence and development too much. Sheikh Rashid bin Saeed Al Maktoum once said, "My grandfather rode a camel, my father rode a camel, I drove a Mercedes, and my son drove a Land Rover. His son will drive a Land Rover, but his son will ride a camel." The sheikh was prudent, seeing the absolute depletion of oil in the future, so the Maktoum family has been heavily committed to diversifying the economy with oil money.
In 1971, Dubai alongside Abu Dhabi, Sharjah, etc. formed the United Arab Emirates, so the political realm stabilised. After that, under the leadership of the current sheikh's elder brother and current sheikh Mohammed bin Rashid Al Maktoum, Dubai continued to explore different industries. The current sheikh vigorously developed the real estate industry, and the royal family's industry and the Dubai government's industry are often inseparable. Later, when Europe and the United States experienced the stagflation of the oil crisis in the 1970s, Dubai continued to grow. During this period, it saw the first airline of the Emirates, the construction of hotels, beaches, and bridges. In the 1970s, oil revenues accounted for 24% of Dubai's GDP, but in 2004, this ratio was only 7%.
After entering the 1990s, the UAE emerged from the Gulf War as a low-key winner, continuing to attract foreign businesses to Dubai. The UAE has a good relationship with the West, as it stays away from the shackles of ideology as far as possible and continues to expand the economy under the pragmatism of Western liberalism. Dubai is considered the Hong Kong of the Middle East, and its relationship with Iran in many ways is similar to the relationship between Hong Kong and the mainland China. Unlike Iran, the UAE is "talking the doctrine but doing the business", and its flexibility in the actual diplomacy and policy execution is far greater than that of Iran.
In 2029, Dubai will run out of its last barrel of oil. Led by some extremely politically forward-thinking (albeit heavily patriarchal) policymakers in power, Dubai is now making a big push into Web3 and the Metaverse, handing over an important stake of the city's economic diversification to this booming new industry.
In August 2022, the Sheikh of Dubai personally announced the Metaverse Strategy, aiming to further expand Dubai's influence in the Metaverse. Before the plan, 1,000 blockchain and metaverse companies had chosen to take root in Dubai. After the plan, Dubai expects to add 30,000 virtual jobs by 2030, adding $4 billion to the economy.
Advertisements from Web3 companies can be seen sparsely on the streets of Dubai. As users are yet to adopt a Web3 footprint, companies are competing for the attention of every possible potential user on this continent.
Metaverse and Blockchain Regulatory/Government Agencies in Dubai
The Virtual Assets Regulatory Authority (VARA) was newly minted in March 2022 and is responsible to issue licenses. VARA adopts a set of lightweight compliance model Test-Adapt-Scale and gives licenses to crypto companies with a relatively loose grip on supervision. Through VARA, Binance, crypto.com, Bybit, etc. have obtained licenses in Dubai and opened headquarters or branches in Dubai. Since India announced a 30% tax on virtual assets, Indian exchanges such as WazirX have also moved to Dubai. BitOasis is also licensed by VARA in Dubai. Back in May, VARA became the first regulator to purchase a piece of virtual land in the metaverse through Sandbox. VARA dares to be the pioneer to try opportunities in the Metaverse and promote "borderless" trades.
As an anecdote, I also noticed most of if not all of the senior management in Dubai can speak fluent English with sophisticated words and relatively accent-neutral. I was fortunate to be invited to participate in many activities in Dubai and listened to many speeches by senior officials from various contries. For example, during Gitex, I participated in events involving Iranian officials and UAE officials. At the event, the senior Iranian officials/technical company heads spoke poor English, while the UAE officials articulated their minds. The Iranian heads were drowsy when they spoke, and the UAE officials could lead the participants into the bright "future". Similarly, I also found that some high-ranking officials in mainland China could not speak English or spoke poor English. Since Binance and many Chinese Web3 entrepreneurial projects are also in Dubai, He Yi, the Chief Marketing Officer of Binance, has been criticized for not being good at English. Most of the world does not speak English and it is up to people』s rights to speak in the languages they are accustomed. However, it is hard to deny that English is one of the most important languages to master in the premium business and political world. The language is a medium and bridge for discourse. The linguistic advantage is Dubai's great strength.
The Dubai International Financial Center (DIFC) is a force to be noted. DIFC has an incubator and ecosystem FinTech Hive focused on FinTech incubation, focusing on incubating and supporting innovation in payment methods. FinTech Hive aims to seize the wind of the rapidly booming FinTech market in the Middle East. Besides capturing companies innovating on transaction methods, FinTech Hive also occasionally looks at cryptocurrency solutions that can solve transaction problems. In January 2020, the current sheikh invested 1 billion dirhams to open the Dubai Future District Fund, which belongs to the DIFC Innovation Center and is used to invest in VC groups and entrepreneurial institutions that invest in Dubai's financial future.
Dubai Multi Commodities Center (DMCC) is traditionally a free trade zone. The branch DMCC Crypto Center mainly supports the landing and launching of blockchain companies in the Dubai Free Trade Zone. There are many favourable policies for developing companies in the free trade zone. Currently, DMCC has registered 460 local blockchain companies, more than 50% of blockchain companies registered in Dubai. Benefiting from the support of the Dubai government, Crypto Valley, a well-known blockchain ecosystem in Switzerland, jointly launched a local Crypto Oasis in the Middle East to build a local ecosystem.
Dubai Future Foundation was established in 2016. Its Dubai Future Museum is an important landmark building in Dubai. At present, the fund has a series of detailed projects, incubators, knowledge exchange platform, etc., to discover the next "future" fashion, "future" football, "future" AI, "future" civil services, etc. Founded in 2021, the UAE company BEDU (bedu.io) is a local company doing metaverse. Its current main business is to provide metaverse NFT content consulting services. The company announced a new plan, Project 2117, at a special event at the Museum of the Future, hoping to become a metaverse ecosystem in the next ten years and attract 100 million users into the metaverse. Some forward-looking projects can often also raise their portfolio to a higher level through the Dubai Museum of the Future.
Established in 1965, the Dubai Chamber of Commerce and Industry (Dubai Chamber) is also actively promoting the development of local commerce and trade, aiming to become the best chamber of commerce in the world by 2024. The Dubai Chamber of Digital Economy, a subsidiary of the Chamber of Commerce and Trade, recently announced the selection of 30 blockchain companies in Dubai to join the new metaverse education program. Under Dubai Chamber, the Dubai Business Women Council has also been set up to support female entrepreneurs.
In addition to these government-backed organizations, Dubai and Abu Dhabi have many large and small well-funded organizations within the Web3 ecosystem.
The government adopts the "sandbox testing" model, and tests promising projects in a sandbox environment isolated from the regulatory restrictions, so the approval and support of projects are efficient.
Dubai, which attracts a lot of Indian immigrants, is nicknamed "the Web3 capital of India" by some Indian Web3 entrepreneurs. The Indian government's attitude towards the cryptocurrency industry is uncertain, and the high taxes on crypto players have made India's Web3 personnel to flee India in large numbers. On April 1, 2022, India imposed a 30% income tax on all cryptocurrency revenues, and it imposed a 1% tax on electronic asset buyers on July 1. Although India has not explicitly banned the development of the crypto industry, different officials have made hawkish remarks in different settings, which puts pressure on the Web3 community in India.
Contrary to India, Dubai, which is just over 3 hours away by plane from Mumbai, not only has a loose visa policy and convenient transportation, but also does not impose taxes on the Web3 industry. The government has instead provided real money to support the infrastructure construction of Web3 and introduce a favourable visa policy. Sandeep Nailwal, co-founder of Polygon, said that there is a serious Web3 brain drain in India. Polygon's early investor is India's Sequoia Capital. Sandeep Nailwal said that he did not want to leave India either, hoping to help build a better Web3 ecosystem in India, but under the current chaotic regulatory environment, he had to leave and move to Dubai in 2020.
In the article of CoinYuppie interviewing the founders Astar, the founders said that the favourable policies in Portugal and Dubai are attracting many talents. Due to Japan』s high taxation, more Japanese Web3 entrepreneurs also choose to go to Switzerland, Singapore, Dubai, etc. Previously, Japan』s Financial Services Agency announced a 30% corporate tax on a company』s cryptocurrency assets, including unrealized income, meaning that once a token enters the open market, it is taxed even if the token does not generate income.
On September 30, the chief financial technology officer of the Singapore Monetary Authority stated that the government would severely crack down on cryptocurrency speculation in response to the inaccurate marketing of many projects during Asia Token 2049. As Singapore tightens the supervision of cryptocurrency, will Chinese cryptocurrency practitioners and companies choose to move?
A senior executive in the GameFi in Dubai told me that Singapore is very good for finance, but it is not good for building projects. Few VCs can afford projects in Singapore. Entrepreneurs come to Dubai to do the project. In Dubai, there are around 200,000 Chinese, many of whom do not speak English. Due to the prevalence of UnionPay and the rapid development of FinTech in the Middle East, UnionPay cards can be used everywhere in Dubai.
In addition, starting from Dubai, it is also very easy for cryptocurrency practitioners to go to other cryptocurrency centers such as Singapore, Switzerland, Portugal, Hong Kong, and North America for meetings with the help of the world's largest airline, Emirates.
The advantages of Dubai seem obvious.