The 30% of Indian expatriates living in the United Arab Emirates (UAE) are responsible for 18% of the US$110 billion global remittance inflow to India, according to the RBI Remittance Survey 2021. The financial connections between the two nations now extend beyond remittances and include Web3, an internet evolution platform built on blockchain technology.
India and the United Arab Emirates saw a rise in bilateral trade to US$85 billion last year, and both nations are looking into integrating their central bank digital currency (CBDC) initiatives.
Over 90,000 Indian companies are registered with the Dubai Chambers in Dubai, the most populous city in the United Arab Emirates. Over 300 Indian startups attended GITEX, the largest tech event in the city, which is three times more than the previous year.
India is currently the second-largest cryptocurrency market in the world by raw transaction volume, having topped the Chainalysis Global Crypto Adoption Index in 2023. However, local players are being encouraged to seek out Dubai’s burgeoning crypto ecosystem as an oasis, as the local industry has been drying up as a result of the government’s strict tax rules.
Many Web3 founders would rather base themselves in Dubai or Singapore due to the regulatory clarity and certainty as well as the stronger community support in these places. Investors feel more at ease investing in a jurisdiction where there are no last-minute surprises when starting a business. Chief executive of the Indian cryptocurrency exchange CoinDCX, Sumit Gupta, told Forkast, “I am beginning to see this trend on the ground and it must be reversed.”
“We have witnessed a more than 90% drop in volume. That is a significant, sharp drop. And as you can see, India remains the leader in the adoption of cryptocurrency at the grassroots level, but due to high tax rates, a large portion of this activity is taking place on alternative channels.- said Gupta”
In the previous year’s budget announcement, Finance Minister Nirmala Sitharaman introduced a 30% tax on cryptocurrency trading profits, along with a 4% cess and any applicable surcharge.
The implementation of a 1% tax deducted at source, or TDS, on cryptocurrency transactions exceeding Rs 10,000 this year brought additional bad news for Indian cryptocurrency traders. A 15% interest rate on late payments, a penalty equal to the outstanding amount, and in certain situations, a jail sentence are the consequences of not paying TDS, as stated in an amendment to the Income Tax Act.
Gupta speculates that the “regulatory arbitrage” might not last very long. An interview request was made to the Indian Finance Ministry, but no response was received for this article’s commentary.
“There is a regulatory arbitrage that needs to end because it cannot continue for long. That’s something the government knows. When they choose to eliminate that arbitrage is what matters. According to Gupta, it is not scalable, dependable, or compliant to serve Indian clients from abroad.
However, the wave of Indian cryptocurrency firms heading towards Dubai is being driven by low taxes, ease of setting up shops, a dedicated regulator, and access to international markets like Asia and Europe.
Through Dubai, crypto projects can interact with the rest of the world. If I glance , The top 5% are new businesses, mostly from the UK, China, India, US, and Russia. At the Future Blockchain Summit, Belal Jassoma, head of business development at the Dubai Multi Commodities Centre (DMCC), stated that Dubai is essentially a hub.
3,700 of the more than 23,000 businesses that call DMCC home are Indian. In an effort to increase the number of its members and offer Indian companies specialized licenses, it established a representative office in Mumbai last year.
There are 550 Web3 businesses in its dedicated Crypto Center, 50 of which are in India. At the Future Blockchain Summit, the DMCC Crypto Centre welcomed the Solana Foundation as an ecosystem partner. It is home to a long list of Web3 businesses, such as the cryptocurrency exchange Bybit, the maker of digital asset markets DWF Labs, and a Web3 incubator TDeFi and Brinc, a venture fund.
Virtual Assets Regulatory Authority (VARA), the city’s specialized regulator for digital assets, is in charge of cryptocurrencies and associated activities in all of Dubai’s free zones with the exception of the Dubai International Financial Centre (DIFC). Through the Abu Dhabi Global Market, the UAE capital of Abu Dhabi offers a comparable range of services (ADGM).
According to Sunita Khatri, Commercial Director of Dubai World Trade Centre (DWTC), “VARA has crafted its regulations to be agile in addressing global market risks and adaptable to market demands, aiming to attract entrepreneurs to solidify Dubai’s position as a central hub for Web3.”
MENA expansion is being considered by Unicorn Indian Exchange.
One of the nations that comprise the Middle East and North Africa (MENA) region is the United Arab Emirates. Chainalysis reports that between July 2022 and June 2023, the region’s crypto economy accounted for an estimated US$400 billion, or 7.2% of all transactions globally. This places it as the sixth largest in the world.
“The Middle East and North Africa (MENA) presents CoinDCX with an intriguing prospect as the market is expanding rapidly, adoption rates are high, and Web3 can open up a lot of doors in the India-UAE corridor.” From that area, new use cases involving payments and remittances are emerging, according to Gupta.
Because BitOasis, a cryptocurrency trading platform with its headquarters in the United Arab Emirates, “did not meet mandated conditions, required to be satisfied within timeframes of 30 to 60 days,” a notice from VARA stated. The exchange that received funding from CoinDCX reported that it is collaborating with the regulator to complete the outstanding requirements.
“CoinDCX used BitOasis as a strategic investment approach to potentially make a direct impact in foreign markets through partnerships with like-minded companies that share our values and mission.”
It extends beyond India
The most populous nation in the world and the sixth-largest economy in terms of nominal gross domestic product, India, is not the only one enforcing stricter regulations on cryptocurrency enterprises.
Australia has made little headway in regulating cryptocurrencies. Australian cryptocurrency exchanges might not receive a license until 2025, and the nation hopes to publish draft legislation for the licensing and custody of cryptocurrency asset providers in 2024.
Leading Australian banks, such as the Commonwealth Bank (CBA), imposed regulations on cryptocurrency exchanges, blaming them for being “scams.” Binance Australia had to stop accepting deposits and withdrawals from customers due to debanking.
“We’ve always only exchanged with Australians, but because of the obstacles and hurdles related to licensing and the length of time it takes for that to happen to reality, we’re currently actively seeking to grow internationally,” stated Caroline Bowler, CEO of the Australian cryptocurrency exchange BTC Markets.
“Dubai benefits from having chosen something extremely specialized and customized. Additionally, based on the way they phrased it, it appears that they intend to develop this industry over time.
With the recent acquisition of an operating license in Dubai, customers in Dubai can now access the services of the largest cryptocurrency exchange globally. The cryptocurrency exchanges Bybit and Gemini are also applying for licenses in the UAE.
US-based Brian Armstrong of Coinbase has discussed plans to establish a second headquarters in the UAE with regulators in order to gain access to markets in the Middle East and Africa also Asia. Three days after its April 2022 launch, Coinbase halted operations in India because of problems with the regional digital payment provider. One factor mentioned was informal pressure from the central bank of India. Although the exchange is no longer operational in India, its tech hub and wallet services are still available.
The Dubai Financial Services Authority (DFSA) has approved the use of Ripple’s XRP within the Dubai International Financial Centre (DIFC). The DIFC now permits licensed virtual asset companies to include XRP in their service offerings.
“Dubai continues to demonstrate global leadership when it comes to the regulation of virtual assets and nurturing innovation,” stated Ripple CEO Brad Garlinghouse in a press release.Ripple will keep expanding its footprint.
in Dubai and we’re eager to keep collaborating closely with authorities to reach the full potential of cryptocurrencies MENA is home to 20% of Ripple’s clientele.
According to Jimmy NGuyen, CEO of Web3 venture advisory firm New Win Global, “exchanges like Coinbase and other major players have announced that they’re going to be applying for licenses here. This is because the U.S. regulatory climate has been relatively hostile or unclear for digital asset businesses.”
“And the reason is that, since the establishment of the Virtual Assets Regulatory Authority and the publication of guidelines and policies regarding the necessary licenses, Dubai has been proactive in bringing regulatory clarity. Exchanges and other providers of digital asset services are thus establishing second headquarters all over the world.
Cryptolender Nexo, based in the UK is growing in the UAE with the goal of occupying 30% of its global footprint. The action comes after the Securities and Exchange Commission (SEC) imposed penalties on a cryptocurrency lending product in the US, for which Nexo made settlement payments to regulators totaling US$45 million.
By 2024, the U.K. government hopes to regulate the cryptocurrency market and bring it into compliance with the laws governing conventional banks and financial services.