Written by: Jerry, Leon
The former is the initiator of Dachale Research, and the latter is the researcher of Dachale Research
Will Dubai Become a Hub for Global Crypto Economy Trading?
When a group of outstanding blockchain technology developers and encrypted economic ecology builders gather in Dubai to plan for the future, Dachale Research tries to learn from the worlds major governments (institutions) in the context of metaverse construction. Answer this question in the comparison between governance and the layout of the UAE\Dubai blockchain industry.
We look forward to the arrival of a higher-dimensional metaverse era based on encryption technology. We may reconstruct organizational relationships, economic systems, and even civilization forms in the digital world, but it is unavoidable that there will definitely be changes in the construction process of the metaverse. There is a stage that needs to be integrated and co-constructed with the physical world\government (organization) government (structure).
After Satoshi Nakamoto opened the door to the blockchain, a group of pioneers have been forging ahead for ten years. During these ten years, there have been technological advancements and application iterations, as well as exploration and progress in asset transactions and circulation, which are also full of political (mechanism) ) The government (structure) tries to govern the desire and fraud of gray and black borders; in the next ten years, the iteration and advancement of Crypto technology, applications and assets will play a role in the construction of the Metaverse and give birth to a larger industry\market\Wealth space, and this is also the best time for the physical world\government (organization) government (organization) to take the lead in the next era. Most government agencies are stepping up their suppression of the encryption economy, including the United States, Japan and other countries with an enlightened attitude and strict supervision.
Coincidentally, a group of outstanding blockchain technology developers and builders of cryptoeconomic ecology, including the founders of Binance, Bloqwork, and Metahero projects, were well-known at the 2021 Future Blockchain Summit initiated by the Dubai government to seek the future. Executives from venture capital firm Andreessen Horowitz (a16z) are meeting with officials on Capitol Hill and the White House in Washington in an attempt to lobby U.S. policymakers on cryptocurrency and Web3 regulation. The topics of the Dubai summit include technology development, project application, and the circulation and trading of encrypted assets; Technologies including blockchain, encryption protocols, digital assets, decentralized finance and social platforms.
Robin, founder of Zero one, analyzed this and believed that the blockchain is booming and the trend is unstoppable. At present, multiple tracks based on the blockchain have been formed, including DeFi, NFT, Metaverse, GameFi, Web3.0, derivatives, etc. , the blockchain summit initiated by the Dubai government is a small number of national (government) and national (government) levels for the layout of the blockchain.
Analyzing and discussing in the context of metaverse construction and government (institution) governance, we will find that Dubai may become the center of global encrypted economic transactions because it has seized the opportunity; but this is not the most important Yes, because there is a bigger battlefield, and the prelude has just begun.
01 opportunity
Our story begins with Ripples choices.
On November 8, 2020, blockchain payment company Ripple (Ripple) announced that it has established a regional headquarters in Dubai International Financial Center (DIFC). Originally, this was just Ripple’s move to open up the Middle East market and set up a regional headquarters, but combined with the US SEC’s regulatory move that almost wiped out Ripple at Christmas time more than a month later, it can be known that this is a strategic shift of Ripple.
Ripple has also made an effort to have an air-to-air dialogue with U.S. regulation — at the Los Angeles Blockchain Summit, Ripple co-founder and chairman of the payments technology company Chris Larsen said the U.S. is killing Bitcoin and cryptoassets other than Ethereum.
In particular, Chris Larsen pointed out that the United States Securities and Exchange Commission (SEC) failed to ignite the flame of innovation in the blockchain space. He said: I have to say that in the United States, all the blockchain, digital currency things, from beginning to end, are related to the SEC... Instead of taking steps to encourage innovation in the United States, they have taken the opposite action. We must Make a change here, or we will lose our leadership, our management of the global financial system. That would be a tragedy.
Chris Larsen also said that if the regulatory environment does not improve, his company will leave the United States. The fact is also the same. Ripple has a premonition of the regulatory trends in the United States, so it has long planned to move its headquarters to regions outside the United States. Ripple CEO Brad Garlinghouse (Brad Garlinghouse) also publicly stated when setting up the Dubai regional headquarters that the unfavorable regulatory system for the XRP cryptocurrency in the United States means that other countries, including the United Arab Emirates, will be regarded as illegal. as a potential alternative base.
On December 23, 2020, the SEC announced a lawsuit against Ripple alleging that they raised more than $1.3 billion through an unregistered, ongoing digital asset securities offering. In the lengthy indictment, the SEC listed Ripples multiple crimes. This legal battle between Ripple and the US regulatory authorities was very difficult, and Ripple missed the opportunity to relocate under the rapid and severe supervision of the US SEC.
Facing repressive regulation, this is not just the situation of Ripple and Chris Larsen; but because of the existence of Dubai, more companies have the opportunity to choose.
Dubai is on its way to become a bitcoin trading center. Binance, ALPEX, Metahero and hundreds of companies (including more than 90 investment funds and 12 business incubators) have chosen to use Dubai as the base camp of the blockchain battlefield. It is understood that a number of blockchain and encrypted asset companies originated in China have moved to Dubai to seek compliance operations locally, including Huobi Exchange, which plans to complete the withdrawal of users in mainland China by the end of this year, and is also in Dubai There are sub-stations. When China’s regulations strengthened virtual currency control in May, Huobi asked some employees to go to Dubai to work.
There must be reasons behind their choices.
The United Arab Emirates, referred to as UAE, is a federation of seven emirates, Abu Dhabi, Dubai, Sharjah, Fujairah, Umm Al Quwain, Ajman and Ras Al Khaimah. Although the United Arab Emirates is a country with barren land and mainly deserts, it is also known as the flower in the desert because of its rich oil. The annual per capita GDP has reached 68,000 US dollars.
However, they have a sense of crisis - oil resources are not inexhaustible, and flowers in the desert will wither. They must find new opportunities for wealth.
The encrypted world since Bitcoin has brought new vitality to some small countries including the United Arab Emirates, Dubai, El Salvador, and Anguilla.
These countries all hope to gain more initiative in the new world of blockchain through an enlightened regulatory attitude towards the encrypted economy. For example, Anguilla, located in the Caribbean Sea in the tropical Atlantic Ocean in the Western Hemisphere, intends to build the worlds first blockchain special economic zone, in an attempt to overtake Cayman, which is also a British overseas territory, the global offshore financial center and tax haven.
Lets take a look at the ambitions of the UAE - the Central Bank of the UAE has announced a planning roadmap for 2023-2026, which will realize the operation of the countrys CBDC as early as 2023, aiming to make the UAE one of the top 10 countries in the world for the digital transformation of the financial sector . This means that it will be able to skip the dollar hegemony and skip the dollar payment system.
The strategy behind this is of great significance, comparable to the competition for global oil resources and pricing power, and the pattern of the US dollar hegemony system; behind this is the war in the human world to reshape the economic structure and compete for the right to speak in the next era.
Today, more than 70 years have passed since the largest war in human history. Large-scale armed battles may have ended and become history, but the conflicts of competing for resources and the right to speak will never disappear. Only this time, it is a battle without gunpowder.
In the past, the strongest weapons to defend the dollar were aircraft carriers and oil. With the support of the military, the US dollar can be circulated around the world through the oil carrier. However, they have also encountered a major change unseen in a century-the arrival of the epidemic and its lingering delay have left the U.S. economic prosperity in the foreseeable future. The U.S. CPI rose by 5.4% year-on-year in September, which is the 16th consecutive month of growth. Here Under the circumstances, the Feds interest rate hike can only be rumors like a wolf coming, and it will be difficult to realize it for a long time.
The United States raised interest rates in the late 1980s, causing Western Europe to lose 5 years and Japan to enter a 15-year period of silence;
The U.S. raised interest rates in the late 1990s, leading to financial crises in South Korea and Southeast Asian countries, and economic depression for more than ten years; however, this time the situation in the U.S. is not optimistic. In 2015, the news that the Federal Reserve started this round of interest rate hikes brought about a sharp drop in U.S. stocks.
The power of the U.S. dollar has been greatly reduced, and the power of monetary policy is not as good as it was in the past. The end of the long debt cycle has limited room for the central bank to stimulate; the huge gap between the rich and the poor and political polarization have brought about various internal contradictions. The world order dominated by the U.S. dollar is facing remodel.
With the changes in the economic cycle and the innovation of digital currency, every little opportunity will be exciting. Digital currencies appear to offer countries an opportunity.
And the ambition of the UAE is clearly revealed. It is not a dream to achieve greatness with a small one, but it is not enough to achieve it alone. Archimedes also needs a fulcrum to move the earth, and Dubai needs to use more enlightened policies to attract a powerful Encrypted economic ecological construction.
At the end of 2020, the UAE Securities and Commodities Authority ( SCA ) issued Decision No. (21/RM) of the Chairman of the Authority on the Regulation of Cryptoassets for 2020. The regulation aims to establish a clear licensing regime for any provider wishing to offer crypto asset services within the UAE. This includes initial coin offerings, exchanges, marketplaces, crowdfunding platforms, custody services and related financial services based on or utilizing cryptoassets.
The Crypto Regulatory Decision states that providers wishing to provide crypto asset services (or any related services) must be incorporated within the UAE or within one of the UAE’s financial free zones (i.e. Dubai International Financial Center or Abu Dhabi Global Market) , and must be licensed by the SCA. As part of the process, applicants must demonstrate that they will strictly comply with the UAEs Anti-Money Laundering and Counter-Terrorist Financing laws, cybersecurity compliance standards and data protection regulations.
Based on the Dubai International Financial Center, Dubai initiated the construction vision of Blockchain Capital. This is the most enlightened government (institutional) governance measure in the current era, which may be the reason why some blockchain projects choose Dubai. But why did Dubai make this choice? Or why did Dubai have this opportunity to make such a choice?
02 opportunity
Inheriting the UAEs digital transformation of the worlds financial sector and the construction of Dubais Blockchain Capital, the Dubai International Financial Center has a special status and is of great significance.
In September 2004, the Dubai government decided to establish the Dubai International Financial Center DIFC, with the goal of aligning itself with New York, London, and Hong Kong. This is a tagline on the website of the Dubai International Financial Centre. Unlike offshore financial centers, Dubai is completely a land-based financial center, essentially no different from New York, London, and Hong Kong. At the beginning, the conditions and environment provided by DIFC for financial institutions seemed to be more attractive. With financial institutions and other enterprises listed in DIFC, markets such as DIFCs stock exchange and commodity futures exchange were also quickly established. .
When the financial crisis broke out in 2008, international capital withdrew one after another, leading to the outbreak of the Dubai financial crisis. Therefore, to a large extent, the root cause of Dubais financial crisis can be said to lie in its high dependence on foreign capital. Since then, Dubais road to recovery has been quite difficult. Although the central government of the United Arab Emirates and the local government of Dubai have taken a series of measures to help Dubai survive the crisis, Dubai is still struggling to get out of the financial crisis. In December 2012, Moodys issued a warning on the recovery of Dubais financial industry. Out of concerns about the accumulation of non-performing loans, the rating agency downgraded the credit ratings of Emirates NBD, the largest bank in the United Arab Emirates, and two other banks. In addition, Moodys also included Dubai Islamic Bank in the rating list for possible downgrade.
Since then, observers have been analyzing whether Dubai will become more smart in the process of becoming an international financial center after experiencing ups and downs. More pragmatic in the process of building an international financial center?
In 2013, the United Arab Emirates launched the Smart Dubai initiative. The core part of the plan is to improve government efficiency through the use of blockchain technology, including promoting blockchain from 1.0 (payment tool) with its own actions. From 2.0 (financial industry application) to 3.0 stage (other industries and government affairs management applications), we are committed to making Dubai a global leader in this field.
It can be seen that from now on, Dubai has begun to enter a new era. In that era, it could be said that this was a helpless choice in the international financial climate, but it could also be said that they were keenly aware of the new way out.
Let’s review the development of blockchain in Dubai since then:
In 2016, Dubai established the Global Blockchain Council, which currently has more than 30 members, including government entities, international companies, and blockchain startups. It plans to fully launch blockchain applications by 2020, making it the worlds first A country where the blockchain is fully applied; the Global Blockchain Council held the 2016 industry theme conference and announced 7 new blockchain concept proofs, including: medical records, guaranteed jewelry transactions, ownership transfer, business registration, digital Wills, Tourism Management, Improvement of Freight. It can be said that Dubai is currently the blockchain research and development center in the Middle East.
In 2017, the Dubai government announced that Emcredit, a subsidiary of Dubai Economy, would partner with US-based startup Object Tech Grp Ltd to create an encrypted digital currency called emCash.
In 2018, Dubai Prime Minister Sheikh Mohammed announced that the Dubai government will implement blockchain technology in half of government business by 2021; this year also held the Future Blockchain Summit for the first time, inviting blockchain experts to discuss blockchain technology The application in smart cities attracted more than 8,000 participants and 134 speakers; in July, the Dubai International Financial Center (Dubai International Financial Center) Court announced the establishment of a formal partnership with the Smart Dubai Project to establish a block Chain Court”; in September, the Smart Dubai Office announced the introduction of blockchain technology into the online payment platform DubaiPay.
In 2020, based on the vision of Dubai Blockchain Strategy 2020, Smart Dubai (Smart Dubai) realized the promise of establishing a prosperous blockchain ecosystem in Dubai, launching countless use cases, A joint blockchain platform and Dubai blockchain policy. Government and private sector agencies are working on 24 blockchain use cases. These use cases cover eight sectors, namely finance, education, real estate, tourism, commerce, health, transportation and security.
In 2021, the Global Financial Centers Index (GFCI) ranks Dubai as the eighth most important financial center in the world, its highest ever ranking in the index. As recently as March, Dubai was ranked 12th in the index, up from 25th in 2007 when the index was first launched.
Judging from this progress and achievements, the blockchain capital of Dubai is successful, leading many countries, completing the mission of survival in the post-financial crisis era, and attracting a large number of excellent encryption economy (financial and transaction) projects to station here , which will also help it become a center in this era of digital transactions centered on BTC asset transactions.
03 challenge
However, all this does not seem to be enough to achieve the ambitious goals that the UAE and Dubai later established with the development of blockchain technology and encrypted economy. The Central Bank of the United Arab Emirates has announced a planning roadmap for 2023-2026 to realize the operation of CBDC and make the United Arab Emirates one of the top 10 countries in the world for the digital transformation of the financial sector.
We have already discussed the strategic ambition of this part in the second part. It will be more meaningful to analyze and discuss this strategic ambition in the context of metaverse construction and government (organization) governance. At present, in addition to the development of Dubais own blockchain capital and the efforts to create a global encryption economic trading center, the challenge they face will be how to realize the comprehensive capabilities of encryption technology, applications and assets in the process of metaverse construction. These are crucial to the status of the next era, far more important than becoming the existing BTC asset-based encryption economic trading center, which will also help its strategic ambition to surpass the hegemony of the US dollar.
It is necessary for us to analyze the process of metaverse construction here. The concept of the metaverse first originated in the novel Snow Crash by the famous American science fiction writer Neal Stephenson (Neal Stephenson) in 1992. In the book, Neal Stephenson described a network world parallel to the real world , and named it Metaverse. It must be admitted that in the initial construction of the metaverse, the technically capable person is the protagonist, so some project developers will try to give a definition to the metaverse, the more well-known one is the eight elements given by Roblox, the first company in the metaverse : Identity, Social, Immersion, Low Latency, Diversity, Anywhere, Economic System, Civilization.
Obviously, in order to complete these eight elements and realize the construction of the metaverse, the joint advancement of all-round technology industries is required. Why do we think that Crypto technology, applications, and assets are better than the progress of AI, 5G and other new infrastructure and the development of big data, as well as AR? \The possibility of VR and brain-computer interfaces is more important?
Zhu Min, Dean of the National Institute of Financial Research of Tsinghua University, recently delivered a keynote speech entitled The Era of Data Assets at the 2021 BAAI Zhiyuan Conference. He talked about the property rights of digital assets and the circulation\transaction of digital assets. After the leader (chairman) appealed to all mankind at the World Internet Conference that we should embrace the digital age together and build a community with a shared future in cyberspace, the traditional political, business and academic circles have discussed this at the core.
We judge that without the advancement of Crypto technology, applications, and assets, the Metaverse (a community of shared future in cyberspace), even with the advancement of 5G and AR\VR, as well as the development support of AI and big data, will only be a more ambitious industry form, it is impossible to form a metaverse world corresponding to the civilization order of the physical world.
Therefore, we analyze from two points why we believe that the construction of Crypto technology, applications, and assets in the metaverse (close to the concept of building a community of shared future in cyberspace) is better than the progress of new infrastructure such as AI, 5G, big data, and encryption economy. Development, and the possibility of AR\VR and brain-computer interface are more important.
One is that private ownership is the basis for the progress of human society, and property rights establish the evolutionary direction of human civilization. A precondition for the transformation from the prehistoric age of ignorance and barbarism to the stage of civilization is the clear awareness of property ownership and the establishment of order. Obviously, user data and big data in this era are in the hands of centralized large companies, and the confirmation of digital asset rights requires Crypto technology to achieve.
Second, asset circulation\transaction is an accelerator for the development of human society. Especially from the prosperity of commercial trade and the gradual establishment of the joint-stock system in the era of great voyages, to the securitization of assets and the financialization of capital, efficient circulation has accelerated the development of human economic society. How to realize the circulation/transaction of data assets? We do not rule out that off-chain transactions and the asset derivatives design of DEX still have many advantages in this era, but in the process of constructing the metaverse, the confirmation and circulation of assets between a large number of tribes, isolated islands, and sub-metaverses must be in Implemented in Crypto technology and applications.
Taking DeFi and NFT as examples, the development in Dubai is still lagging behind, and only individual projects have taken action. But this is obviously not enough for Dubais ambitions. Because if you want to realize the operation of CBDC in Dubai and the United Arab Emirates and realize its digital transformation, you must operate in a systematic encryption economic ecology. The advancement of Crypto technology, applications, and assets including DeFi and NFT will ultimately determine Who can take the lead in the next era in the process of integrating the encrypted world and the physical world\government (institution) government (organization) and jointly building the metaverse.
The Zero one team Mingzhi introduced that the Zero one team, which has the investment gene of China (machine) and country (institution), has also developed a derivative Vigoss, which uses the Vamm mechanism and is in internal testing. In the context of metaverse construction and current government (organization) governance, Zero one is not alone. Zenlink, DODO, X World Games, Celer, Neo, Scaleswap, WePiggy, PlatON, MCDEX, Cook Protocol, etc. The blockchain project is developing and running.
Perhaps Dubai has not yet understood clearly. So this is an opportunity for Dubai, and its an opportunity for us.
