Original author: Thejaswini M A
Original translation: Block unicorn
Over the past five years, the United Arab Emirates (UAE) has built a remarkable digital empire: processing $30 billion in cryptocurrency transactions each year, having more than 700 blockchain companies, and attracting the world's largest cryptocurrency exchange to make Dubai its headquarters.
Empires are built on resources, and the UAE’s digital empire rests on a resource more valuable than oil: the tax liabilities of others.
Changpeng Zhao, the founder of Binance, who is worth $33 billion, lives in Dubai.
So do the executives of dozens of other major cryptocurrency companies, who have discovered that running their multibillion-dollar digital asset businesses in the UAE offers a significant advantage: They can keep more of their wealth.
The UAE’s digital transformation story is a model of economic strategy.
While other countries debated cryptocurrency regulation, the UAE was already building infrastructure.
When rivals imposed restrictions, Dubai provided clear rules.
While traditional powers hesitated, Abu Dhabi invested billions.
Behind the innovation narrative is a simpler truth: the UAE built the most sophisticated tax haven in crypto, draped it with a veneer of regulatory legitimacy, and had the world call it “digital leadership.”
What exactly does this mean for the future of global finance?
Imagine this: In 2020, most governments are still debating whether cryptocurrencies are a scam.
The UAE looked at its oil reserves, looked at Bitcoin, and thought, “Why not have both?”
Fast forward to 2025, and the UAE has executed the most successful national cryptocurrency strategy in history.
They’ve transformed from an oil-dependent economy to a digital asset powerhouse.
By 2024, 30% of the population will hold cryptocurrencies
Over $30 billion in cryptocurrencies traded annually
Dubai alone has over 700 blockchain companies
Top 40 in the world by on-chain transaction value
3rd largest crypto economy in the Middle East and North Africa
This isn’t just a retail frenzy.
The UAE’s sovereign wealth fund has invested billions of dollars.
Mubadala: $408.5M in Bitcoin ETF
MGX Funds: $2 billion in Binance (using Trump’s stablecoin because 2025 is a bit weird)
$30 billion AI infrastructure fund in partnership with Blackstone and Microsoft
When your government buys a Bitcoin ETF and your sovereign wealth fund invests heavily in the world’s largest cryptocurrency exchange, you know something fundamental is changing.
Regulatory innovation: In March 2022, Dubai launched the Virtual Asset Regulatory Authority (VARA) - the world's first independent regulator designed specifically for virtual assets.
Not a committee, not a working group, not a group of people in suits learning on the job, but a dedicated cryptocurrency regulator with real authority.
What VARA has accomplished in just three years:
Licenses for large global exchanges such as Binance, Bybit, OKX, Crypto.com and Bitpanda
Created an activity-based regulatory system (rather than a “one-size-fits-all” rule)
Established clear guidelines for everything from staking to tokenization
Set compliance deadlines that companies actually meet (e.g., the deadline for updating the rules is June 19, 2025)
Meanwhile, Abu Dhabi has created its own complementary framework through the Abu Dhabi Global Market (ADGM), which is focused on institutional-grade digital assets.
The result? A dual-emirate model, covering both the retail and institutional markets.
Infrastructure Investment: The UAE didn’t just change regulation – they built actual infrastructure:
Dubai AI and Web3 Park: A physical ecosystem for blockchain innovation
Sigma Capital launches $100M blockchain startup fund
The park is home to 977 blockchain companies, according to Tracxn
Largest AI park outside the US (in Abu Dhabi)
Banking Integration: Zand Bank became the first digital-only bank to receive a VARA custody license and now services nearly all VARA-licensed virtual asset service providers.
They are the bridge between traditional banks and digital assets.
Meanwhile, the central bank approved Coin AE — the first stablecoin backed by the UAE dirham — proving they are serious about digital currencies at the national level.
Tokenized Real Estate: Dubai has just launched the first licensed tokenized real estate project in the MENA region. For just 2,000 dirhams ($545), anyone can buy fractional ownership of a property in Dubai. The Dubai Land Department has even launched a project to tokenize the RWA for real estate registries.
Government Crypto Payments: Dubai has announced a partnership with Crypto.com to accept cryptocurrency payments for government services. Parking fees, utility bills, license renewals — all can be paid in crypto and automatically converted to dirhams.
Cross-border payments: In May 2025, Ripple launched a cross-border blockchain payments service in the UAE through a partnership with Zand Bank and Mamo.
AI integration: Abu Dhabi’s Bold Technologies just announced a $2.5 billion AI-driven smart city platform called Aion Sentia Cognitive City.
The UAE’s appeal starts with a mathematical principle that’s hard to ignore.
Companies pay no capital gains tax, cryptocurrency gains are exempt from personal income tax, and businesses with annual revenues of more than $102,000 pay only 9% corporate tax. Cryptocurrency transactions are completely exempt from VAT.
In contrast, in the United States, cryptocurrency gains are subject to capital gains taxes of up to 37%, companies pay 21% federal taxes plus state taxes, and regulatory uncertainty also increases compliance costs, which can be as high as millions of dollars a year for large exchanges.
Here’s one example: If Coinbase moved to Dubai tomorrow, it could theoretically save more than $250 million a year in taxes alone, based on its $1.3 billion in net revenue in 2024.
But the math of relocation only works if you can actually operate in Dubai.
That’s where the UAE’s regulatory strategy becomes relevant — not because it’s particularly innovative, but because it provides legal certainty that other jurisdictions lack.
Dubai’s Virtual Asset Regulatory Authority (VARA) has licensed Binance, Bybit, OKX, Crypto.com, and Bitpanda. All of these companies are able to operate legally under clear rules, which is surprisingly rare in the cryptocurrency industry.
VARA represents a different approach to cryptocurrency regulation: collaboration rather than confrontation. Rather than treating crypto companies as potential criminals, VARA works with them to establish a compliance framework.
This is in stark contrast to the United States, where regulators tend to communicate through enforcement actions rather than guidance. While the Securities and Exchange Commission (SEC) has been arguing in litigation for years whether certain crypto assets are securities, VARA simply defines the categories and licensing requirements.
The practical result? Large crypto companies can gain legal certainty in Dubai while their competitors deal with regulatory uncertainty in the larger market.
Dubai is home to more than 700 blockchain companies by 2024. The UAE ranks third in the Middle East and North Africa region for cryptocurrency trading volume, with decentralized finance (DeFi) activity growing by 74% .
However, according to the Chainalysis 2024 report, the UAE ranks only 56th in global cryptocurrency adoption, while the United States ranks 4th.
The United States processes $1.3 trillion in cryptocurrency transactions each year—more than 40 times the volume in the UAE.
U.S. companies dominate cryptocurrency development, with 19% of the world’s cryptocurrency developers based in the U.S. and the UAE’s share minuscule.
Wealth concentration tells a similar story.
The world's 17 crypto billionaires have a combined wealth of $93 billion, most of whom are in the United States, including Chris Larsen (Ripple), Brian Armstrong (Coinbase), and Michael Saylor (MicroStrategy).
The UAE's contribution comes mainly from Changpeng Zhao.
The UAE has built an impressive infrastructure for crypto businesses, but core innovation is still happening elsewhere?
The UAE's stablecoin strategy presents both opportunities and contradictions in its development approach. The UAE Central Bank approved the first stablecoin backed by the UAE Dirham (AED), AE Coin, thus building a bridge between the UAE currency and the global cryptocurrency market.
More controversially, Abu Dhabi’s MGX Fund used Donald Trump’s USD1 stablecoin for its $2 billion Binance investment. The choice underscores the UAE’s strategy: to remain neutral by working with those in power.
This pragmatic approach raises questions about the UAE’s long-term positioning. Building financial infrastructure around politically linked assets may bring short-term advantages, but it may also create long-term dependencies.
The UAE’s alleged dominance in the cryptocurrency space stems from its successful hosting of industry events. Dubai’s Token 2049, various blockchain summits, and regular cryptocurrency conferences create the impression that local activity is thriving.
These events attract global participants and generate positive coverage, but they are not necessarily reflective of underlying economic activity.
The UAE has become very good at cryptocurrency marketing, but this should not be confused with cryptocurrency development.
The UAE’s success story in cryptocurrencies is essentially one of arbitrage – regulation, taxation and geography. They identified inefficiencies in how other countries handled digital assets and built systems to capture the opportunities that resulted. But there are limits to this approach. Arbitrage opportunities eventually disappear as markets mature and inefficiencies are corrected.
The UAE’s advantage relies on other countries maintaining suboptimal policies, which may not last forever. What happens if the tax advantage disappears, or other jurisdictions match regulatory clarity?
The model relies heavily on attracting foreign companies and talent, rather than developing domestic capabilities. If global tax coordination efforts succeed, or major economies like the United States achieve regulatory clarity, the UAE’s competitive advantage could quickly disappear.
That said, 25 years of political stability must have significance in the broader global geopolitical landscape.
The UAE has also demonstrated something valuable: how quickly a jurisdiction can adapt to new technologies when it chooses to act decisively. While other countries spent years debating cryptocurrency policy, the UAE simply implemented a framework and learned from the experience.
They have built real infrastructure and expertise that provides some protection against this scenario. VARA’s regulatory framework, the concentration of cryptocurrency businesses, and the growing developer community create network effects that go beyond tax advantages.
The regulatory clarity and tax advantages that have driven the growth of cryptocurrency in the UAE are not sustainable forever. Eventually, major economies will offer similar benefits to retain their own cryptocurrency businesses. When that happens, the UAE will need to compete based on innovation and infrastructure rather than arbitrage.
The test of the UAE’s cryptocurrency strategy is not whether it can attract companies fleeing unfavorable regulatory environments, but whether it can retain them when those regulatory disadvantages disappear.
For now, large-scale relocations are continuing. Cryptocurrency executives are packing their bags for Dubai, lured by clear rules and favorable taxation.
Whether they are building the future of finance or simply optimizing their tax bills will depend largely on what they do once they arrive.
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