UAE’s clear regulations have fostered a balanced, diversified crypto ecosystem – Chainalysis

In most countries, the rate at which crypto activity grows across transaction size brackets varies significantly. However, the United Arab Emirates (UAE) is an outlier with growth across all brackets, which indicates a ‘balanced and comprehensive adoption landscape,’ according to a recent Chainalysis report.

The UAE received over $30 billion in crypto between July 2023 and June 2024, ranking in the top 40 globally. The report highlighted that his growth is driven by a combination of factors, including regulatory innovation, institutional interest, and expanding market activity.

Crypto received through small and large retail investor activity, with transaction sizes of less than $1,000 and between $1,000 and $10,000, respectively, increased by over 75% year-on-year.

Meanwhile, value received through institutional investor activity — transaction sizes between $1 million and $10 million — increased by over 50% annually.

Rapid yet diversified growth

The UAE is the third-largest crypto economy in the MENA region. However, its crypto ecosystem is more diversified than other countries within the region, where crypto transactions primarily take place through centralized exchanges.

DeFi adoption in the UAE is higher than the global average, with a significant proportion of transactions taking place through decentralized exchanges (DEXs). Globally, 27.8% of crypto transactions occur via DEXs, whereas in the UAE, the percentage stands at 32.4% — the highest across MENA.

The total value of crypto received via DeFi services in the UAE grew by 74% compared to last year, while tokens received through DEXs increased 87% to $11.3 billion from around $6 billion.

Crypto activity in the UAE has also escalated since it started attracting blockchain and crypto firms. Many companies, including Chainalysis and Bybit, have established headquarters in the UAE, while others, like Crypto.com, have set up regional bases in the country.

Arushi Goel, head of policy for the Middle East and Africa (MENA) at Chainalysis, said:

“Traditional financial institutions such as banks are actively exploring their roles within the crypto ecosystem, showcasing the growth of a crypto-TradFi nexus. This engagement is further supported by a robust and evolving regulatory framework.”

Regulatory landscape

Regulators across the UAE have been striving to balance crypto innovation with investor protection. In the UAE, the Securities and Commodities Authority (SCA) regulates crypto services, while the central bank supervises payment token services.

The establishment of Dubai’s Virtual Assets Regulatory Authority (VARA) in 2022 has played a critical role in attracting crypto businesses and talents to the country. Dubai’s regulatory framework has received a global spotlight and has provided a precedent for other jurisdictions within the UAE.

Deepa Raja Carbon, managing director and vice chairperson of VARA, told Goel:

“We’ve identified over a thousand entities conducting crypto-related activity within Dubai, and we’re working through a legacy transition. Over the next year, we expect to see these entities licensed.”

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