Standard Chartered’s crypto spinoff Zodia Markets is planning to expand into Abu Dhabi next year, making the emirate its first outpost in the Middle East and Africa as it targets growth across the regions.
Zodia Markets has drafted an application to operate in Abu Dhabi but plans to submit a new one in early 2023 after extended talks with regulators.
Chief executive Usman Ahmad told Financial News Abu Dhabi is attractive because it has been “forward-looking with respect to putting the regulatory framework in place”.
Regulators in Britain, the US and Europe have taken a tough stance on crypto, but have been slow to establish formal rulebooks for the sector. Of the three, only the European Union has drawn up a complete framework for how to police the industry, which is likely to come into force in 2024.
The oil-rich United Arab Emirates is one of a clutch of jurisdictions that have sought to capitalise on this. Abu Dhabi adopted a virtual asset regulatory framework in 2018, while Dubai passed a law to regulate virtual assets in March.
The UAE is now the fifth-largest crypto market in the Middle East behind Turkey and Lebanon, with a transaction volume of about $28bn, according to data from July 2021 to June 2022 compiled by Chainalysis.
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Abu Dhabi has already attracted crypto firms including Kraken, the retail-focused exchange, which received a license to operate there earlier this year, and has set up its regional headquarters in the United Arab Emirates capital.
Competitor Binance also received in-principle approval to operate as a broker-dealer in the emirate in April, while crypto billionaire Sam Bankman-Fried’s exchange, FTX, has made a similar move in Dubai.
Zodia Markets, which offers crypto trading for institutional investors, is one of two digital assets businesses established by Standard Chartered. The other is Zodia Custody. Zodia Markets got its Financial Conduct Authority crypto asset registration in July and is applying for similar accreditation in the Republic of Ireland.
However, its main growth targets are in Middle Eastern and African countries, said Ahmad, a move which is likely to mirror Standard Chartered’s broader footprint in the regions. The bank has a historical focus on emerging markets, and the Middle East and Africa accounted for £652m of its operating income in the third quarter of 2022, compared to £632m in Europe.
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Ahmad said Abu Dhabi’s existing rulebook for crypto “allows firms to have a degree of certainty with the framework in which they can operate. It lends itself to innovation without worrying about what’s going to happen.”
“We’ve been in discussions with the regulators there for quite a while,” he said, adding that the firm feels “more confident about the engagement there” than in countries which have not yet set clear standards for the crypto industry.
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