How will the collapse of the FTX affect Dubai’s crypto ecosystem?

How will the collapse of the FTX affect Dubai’s crypto ecosystem?

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

From stricter regulations to better projects leading the way, several professionals shared their thoughts on how Dubai and the UAE crypto landscape will be impacted by the collapse of the FTX exchange.

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

“With the misuse of funds or limited disclosures by FTX, these licensing authorities must now dive deep into the technology. Just 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 the FTX could lead better projects to take the lead in the space. “Every major setback in a growing industry gives way to stronger projects to lead and clean up those that lack strong foundations,” she added.

Irina Heaver, partner at Keystone Law Middle East, also believes stricter regulation is on the way. Heaver told Cointelegraph that founders should be prepared for more scrutiny from authorities as well as users and investors. She explained that:

“They should also all implement stricter internal compliance and audit functions, consult an attorney when in doubt, and take additional steps beyond the current requirement to prove to users that the project is doing the right things.”

According to Heaver, authorities should also consider taking a close look at influencers promoting “rug pulling, pump and dump schemes and bogus token sales”. Citing Kevin O’Leary’s promotions of Shark Tank star Kevin O’Leary and how people have poured their money into FTX after being convinced, Heaver believes promoters should also be scrutinized.

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

“The collapse of one company does not change the UAE’s vision of becoming a global crypto hub. The FTX incident even confirms how important it is to have a comprehensive regulatory framework.”

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

CoinMENA’s CEO also compared the incident to the dotcom bubble. According to Tabbaa, when the dot-com bubble burst, it was not a problem of the internet, but a failure of companies building on the internet. The director noted that the same currently applies to the crypto space.

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

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

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