There has been a lot of talk about Dubai and Hong Kong establishing themselves as global crypto hubs. They have both recognized the potential for virtual assets and blockchain technology and are working hard to attract the industry’s best and brightest to their shores.
Much of the discussion has focused on whether Dubai, Hong Kong or indeed some other jurisdiction will come out on top. However, the debate is much more nuanced than that. The emergence of Dubai and Hong Kong as crypto centers is really a testament to the power of healthy competition in spurring innovation in the Web3 space.
The two markets have been proactively seeking opportunities to unlock cross-border Web3 synergies. The announcement recently made by the Hong Kong Monetary Authority and the Central Bank of the United Arab Emirates on crypto and fintech collaboration shows how joint initiatives are rising up the economic agenda.
It’s easy to dismiss such cross-border interaction as statesmanship. But when you frame it in the context of how digital assets are shaking the foundations of the financial system as we know it, you start to appreciate just how significant such collaboration could be for future global power dynamics.
As economic powerhouses — including the U.S. — grapple with crypto regulation, there is a real opportunity for other countries to assert themselves on the more level playing field provided by a digital-first global economy. With favorable yet robust regulatory environments, both Dubai and Hong Kong are well-positioned to lead the way.
The driving forces
Despite being on similar paths, Dubai and Hong Kong have different motivations for their push into crypto and the Web3 space.
Hong Kong is an established financial hub, primarily acting as an important gateway between the Chinese mainland and the rest of the world. The main purpose of Hong Kong’s move to the forefront of Web3 is arguably part of broader efforts to help reinvigorate the Greater Chinese economy and attract more foreign investment and talent.
Similarly, Dubai has opened up in recent years, also to attract capital and talent. It’s seeking to shift away from its dependence on oil and carve out a new channel of sustainable wealth creation for its future.
The opportunity for Dubai lies in broader blockchain applications. For example, the Dubai Blockchain Strategy is looking at how the latest blockchain innovations can impact urban experiences across a range of verticals. This approach is arguably more holistic, focusing on the wider societal benefits of blockchain rather than the pure economic opportunity of being home to the world’s leading digital assets businesses.
Although the motivations may differ, the end goals are aligned: to establish themselves as leaders in a future economy complemented, if not underpinned by digital assets.
Both Dubai and Hong Kong have recognized that robust, clear and fit-for-purpose regulatory frameworks are the bedrock for enabling digital assets businesses to thrive, thus driving future economic growth.
As the world’s first independent regulator for virtual assets, Dubai’s regulator VARA has introduced a world-leading regulatory framework specifically designed for digital assets entities across seven different activities. Hong Kong’s new virtual assets regulations have also recently come into force, largely to applause from the industry.
In both cases, the aim is to create a regulatory environment that is suitable for the unique nuances of crypto while also being robust enough to be taken seriously on the international stage. VARA, in particular, has already struck a chord with major crypto players such as Coinbase, whose executive team recently visited the UAE and described the region as “a leader in the development of a Web3 ecosystem.”
While the U.S. remains stuck in a “regulation by enforcement” rut — which could continue for years to come — both Dubai and Hong Kong are filling the regulatory void. The leadership both jurisdictions have shown with regard to regulation has created the foundations needed to spearhead innovation and growth for the benefit of the entire Web3 ecosystem.
A new world order?
By placing Web3 and blockchain technology at the heart of their economic strategies, Dubai and Hong Kong are putting themselves in pole position for leading the way as the global economy and financial system become more digitalized.
The major Western economies have been dominant forces in the global economy for the entirety of modern history. Not only has this meant that wealth has been concentrated in the West, but the centralized nature of our financial system has created uneven access to finance, with many around the world left unbanked.
Digital assets create an opportunity to change all that. For the first time, we have the opportunity to create equal access to finance for everyone and to remove the inherent risk posed by relying on a handful of centralized institutions to fulfill our financial needs.
Dubai and Hong Kong have both recognized the scale of opportunity in front of us and are seizing the opportunity with both hands. They understand that by pooling resources, expertise and research capabilities, they could be at the forefront of a new wave of digital innovation. Joint research and development initiatives could, for example, lead to advancements in the scalability, privacy and interoperability of blockchains, therefore benefiting the entire crypto ecosystem.
Of course, the existing world order will not change overnight. And there is no guarantee that we will ever unlock the full potential of a blockchain-based global economy. We’re already seeing resistance to change, particularly in the G7 countries where crypto is largely viewed as a threat rather than an opportunity.
But the fact remains that digital assets open the door to a fairer world order. With world-leading regulatory approaches and a healthy attitude towards collaboration, Dubai and Hong Kong are poised to become leading figures in a digital assets economy.