Kraken’s New Milestone

FTX, Binance, and Crypto.com were already established in the UAE before Kraken’s arrival. Kraken will become the fourth virtual asset exchange to be authorized to operate in the Abu Dhabi International Finance Center (ADGM) and the Abu Dhabi Global Market Free Zone. This move signals Kraken’s expansion into the Middle Eastern market, with Abu Dhabi serving as its regional headquarters.

In an interview with CNBC, Curtis Ting, Kraken’s managing director for Europe, the Middle East, and Africa, expressed excitement about the exchange’s entry into the Abu Dhabi Global Market. He emphasized that the region now offers Dirham trading pairs for its investors. However, CryptoChipy suggests that most major crypto investors in the UAE may not prioritize Dirham trading, instead preferring to use cryptocurrencies for deposits or opting for Euro or USD, with many Europeans relocating to Dubai and Abu Dhabi after selling their businesses.

Direct trading of Dirhams against Bitcoin, Ether, and other virtual assets was a long-anticipated feature in the region. Dhaher Bin, CEO of the International Financial Center registration authority, stated that Kraken’s inclusion in the UAE will assist in enhancing financial and economic diversification in Abu Dhabi.

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Founded in 2011, Kraken operates in over 60 countries and its entry into the UAE market marks a significant milestone for the exchange. The Middle East has seen rapid growth in the cryptocurrency space, with the region contributing to 7% of global trading volumes, according to Chainalysis. The UAE alone has about $25 billion in annual cryptocurrency transactions, ranking third behind Lebanon ($26 billion) and Turkey ($132.4 billion).

The UAE’s clear regulatory framework provided by ADGM and federal authorities has attracted entrepreneurs, developers, and operators, with the country becoming a growing hub for crypto and Web 3.0 technologies. The nation has witnessed a surge in business adoption of cryptocurrencies, especially during the 24 months following the onset of the COVID-19 pandemic.

Growing Competition in the UAE

The largest cryptocurrency exchange by trading volume, Binance, had already set up operations in Abu Dhabi weeks before Kraken’s approval. Binance aims to secure over 10 positions in the UAE, as it seeks a larger presence in the Middle East. Bybit also received approval to operate in Abu Dhabi last month, while FTX was awarded a virtual asset license and is preparing to establish its headquarters soon.

The UAE is not the only financial center vying to attract investments and crypto trading volumes. Rival financial hubs, including Singapore and Hong Kong, are also working to develop regulated environments that encourage cryptocurrency trading while strengthening their regulatory mechanisms.

UAE’s Status as a Gray List Country

As the UAE attracts major crypto exchanges, it has come under increased scrutiny from global observers. Critics have raised concerns that the country is not doing enough to combat fraud and money laundering. Reports have surfaced suggesting that crypto firms were asked to liquidate billions of dollars in virtual currencies, with claims that Russians have been using Dubai’s property market amid the ongoing war in Ukraine.

The Financial Action Task Force (FATF), an anti-money laundering watchdog, has placed the UAE on its gray list, meaning the country requires additional monitoring of its financial activities. The UAE now joins other countries, including Turkey, Panama, and Syria, on this list.

Kraken’s Managing Director of MENA, Curtis Ting, reassured that the exchange is committed to complying with anti-money laundering regulations, including Know-Your-Customer (KYC) requirements. He emphasized that this approach increases accountability with regulators.

The introduction of ADGM’s virtual asset regulatory framework in 2018 helped solidify the UAE’s position as a global crypto hub, offering a platform for local, regional, and international organizations. Dubai, the UAE’s central hub, continues to attract a growing number of crypto firms and recently established its own Virtual Asset Regulatory Authority (VARA).

CryptoChipy views Israel as a strong competitor to the UAE in becoming the leading crypto center in the Middle East. Kraken’s entry into the UAE is seen as a positive step for the country as it continues to pursue its crypto ambitions. Kraken has met all the conditions set by the Financial Services Regulatory Authority (FSRA) of ADGM, and other exchanges are likely to follow Kraken’s lead in this burgeoning crypto hub.