How does FTX’s collapse affect Dubai’s crypto ecosystem?

How does FTX’s collapse affect Dubai’s crypto ecosystem?

With the FTX contagion affecting various sectors of the global crypto ecosystem, Dubai-based industry leaders have commented on how the debacle will affect the budding crypto hub in the United Arab Emirates (UAE).

From stricter regulations to top projects paving the way, various professionals gave their views on how Dubai and the UAE crypto landscape will be affected by the collapse of the FTX exchange.

Kokila Alagh, founder and CEO of KARM Legal Consultants, believes the collapse of FTX will lead to more scrutiny and due diligence before projects are approved through Dubai’s licensing process. She explained this:

“With the misuse of funds or limited disclosures by FTX, these licensing authorities now need to dig deeper into the technology. Simply submitting financial documents will not be enough, continuous and real-time monitoring of these platforms could be one of the ways forward.

Alagh also told Cointelegraph that the collapse of FTX could lead to better projects taking the lead in the space. “Any major setback in a growing industry paves the way for stronger projects to drive and clean up projects that don’t have a solid foundation,” she added.

Irina Heaver, a partner at Keystone Law Middle East, also believes tougher regulations are on the way. Heaver told Cointelegraph that founders should be prepared for greater scrutiny from authorities as well as users and investors. She explained this:

“They must also each implement stronger internal compliance and auditing functions, seek legal counsel when in doubt, and take additional steps, beyond those currently required, to prove to users that the project is doing what it does. that need.”

According to Heaver, authorities should also consider taking a close look at influencers who promote “rug pulls, pump and dump schemes, and fake token sales.” Citing shark tank star Kevin O’Leary’s FTX exchange promotions and how people were able to get their funds into FTX after being convinced, Heaver thinks promoters also need to be given a shout out. meticulous examination.

Meanwhile, Talal Tabbaa, CEO of CoinMENA, a trading platform that got a provisional license from VARA, said Dubai’s history is full of examples of great challenges and rising to the occasion. . He explained that:

“One company’s collapse will not change the UAE’s vision of becoming a global crypto hub. In fact, the FTX incident confirms how important it is to have a comprehensive regulatory framework in place.

The executive also pointed out that the Luna, Voyager, Celsius and FTX incidents were failures of governance and effective risk management and not a crypto failure. “These were institutional failures rather than technical failures,” he noted. According to Tabbaa, this distinction is very important.

The CoinMENA CEO also likened the incident to the dotcom bubble. According to Tabbaa, when the dot-com bubble burst, it was not an internet problem but a failure of companies building on the internet. The exec noted that the same applies to the crypto space at the moment.

Related: The FTX Contagion: Which Companies Have Been Affected by the FTX Collapse?

The FTX exchange was one of the first exchanges to gain approval from the Dubai Virtual Asset Regulatory Authority (VARA), a regulator overseeing virtual asset service providers that aim to operate locally. In July, the FTX exchange was approved under the Minimum Viable Product (MVP) program to proceed with testing and operations.

However, given the circumstances surrounding the FTX exchange, VARA recently revoked the approvals of FTX’s local counterpart, FTX MENA. The regulator also confirmed that the entity has not yet obtained permission to onboard customers, confirming that no customers have yet been exposed.