How is the FTX collapse affecting Dubai’s crypto ecosystem?

As the FTX contagion affects various sectors of the global crypto ecosystem, industry leaders from Dubai commented on how the debacle will affect the burgeoning crypto hub in the United Arab Emirates (UAE).

From tighter regulations to better pioneering projects, various professionals offered their perspectives on how Dubai and the UAE crypto landscape will be affected by the FTX exchange collapse.

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

“In the face of FTX’s misuse of funds or limited disclosures, these regulatory bodies now need to dive deep into the technology. Merely filing financial documents will not be enough, continuous real-time monitoring of these platforms could be one of the ways forward.”

Alagh also told Cointelegraph that the collapse of FTX could result in better projects taking the lead in the space. “Every major setback in a growing sector makes way for stronger projects to lead and clarify those projects that don’t have a strong foundation,” she added.

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

“They will also need to implement more stringent internal compliance and auditing capabilities, consult an attorney when in doubt, and take additional steps beyond what is currently required to prove to users that the project is doing the right thing.”

According to Heaver, authorities also need to consider closely scrutinizing influencers who promote “rug pulls, pump-and-dump schemes, and fake token sales.” Citing Shark Tank star Kevin O’Leary’s promotion of the FTX exchange and how people may have invested their funds in FTX after being persuaded, Heaver believes the organizers also need to be looked at closely.

Meanwhile, Talal Tabbaa, the CEO of CoinMENA, a trading platform that has secured a preliminary license from VARA, said Dubai’s history is full of examples of great challenges and opportunities. He explained that:

“The collapse of one company will not change the UAE’s vision of becoming a global crypto hub. In fact, the FTX incident confirms the importance of having a comprehensive regulatory framework in place.”

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

The CoinMENA CEO also compared the incident to the dot-com bubble. According to Tabbaa, the bursting of the dot-com bubble was not an Internet problem, but a failure of companies built on the Internet. The executive noted that the same is currently true of the crypto space.

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

The FTX exchange was one of the earliest exchanges to receive approval from the Dubai Virtual Asset Regulatory Authority (VARA), a regulator that oversees 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 of the FTX exchange, VARA recently revoked the permits for FTX’s local counterpart, FTX MENA. The regulator also confirmed that the company has yet to receive approval to host clients and confirmed that no clients have yet been exposed.