UAE sees major institutional influx: Chainalysis

Institutional investment in the crypto space is surging in the United Arab Emirates.

Blockchain data platform Chainalysis found that institutional investments (each exceeding $1 million in value) constituted more than 67% of cryptocurrency transactions in the federation of seven emirates between July 2022 and June 2023.

Following these institutional transactions were transfers linked to professional investments, ranging from $10,000 to $1 million, and retail investments made up 4.63% of all transfers in the Emirates, according to a report published on Sept. 26.

The high incidence of institutional investments indicates that a more diverse group of professional investors is actively engaging in the market, bolstering its overall expansion.

“The fact that by far the larger portion of crypto investments in the UAE is for institutional and professional sized transactions, indicates an eagerness from organisations and high-net-worth individuals to add cryptocurrency to their investment portfolios,”  Kim Grauer, Chainalyis’ director of research, said in a statement.

“This market confidence is validation of the efforts being made by the country’s leadership to offer commendable regulatory clarity, and establish the nation as a global crypto hub.”

Chainalysis also found that the total crypto value received by the UAE during this period amounted to almost $35 billion. 

A 17% decrease from the prior year, the UAE’s crypto market also outperformed several other countries in the region, such as Qatar, Oman, Jordan and Lebanon, according to the report.

The UAE is seen as a business-friendly environment with minimal taxation, making it an attractive destination for companies wanting to maximize profits. It is also strategically located between Europe, Asia and Africa, which helps companies reach global markets easily in various time zones.

UAE regulators got into crypto early, especially Dubai, which has been a pioneer in embracing cryptocurrency since launching its blockchain strategy in 2016. 

To further advance its regulatory efforts, the emirate established VARA, the Virtual Asset Regulatory Authority, in 2022.

In the Middle East and North Africa region, Chainalysis identified the UAE as one of the few countries where a larger portion of crypto activity occurs on decentralized exchanges (48%) compared to centralized exchanges (46%).

Decentralized exchanges are preferred over centralized exchanges due to enhanced security, user control of funds and privacy preservation, among other things.

Significant enthusiasm for NFTs was also observed in the area, with UAE NFT websites receiving 4 million web traffic visits between July 2022 and June 2023.

“This retained interest in NFTs in the UAE offers businesses the opportunity to grow past the hype and start to introduce practical use cases based on this technology,” Grauer said.

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