BREAKING BORDERS WITHDIGITAL ASSETS

By Michael Carbonara, Founder and CEO, Ibanera

DIGITAL ASSETS – A RECIPE FOR SPEED AND SECURITY

With a market cap of US$2.68 trillion, cryptocurrency brings a key resource to financial services that can’t be ignored. Beyond the applications that come with decentralized technologies like security and pseudonymity, people around the world find it easier to make payments in digital assets like Tether or Bitcoin across borders because it is secure, instant, and cheaper.

The propelling force of digital assets can be clearly noticed in the UAE, with investors having accumulated US$204 million in capital gains from crypto investments in 2023. This is further witnessed from a business and regulatory point of view. UAE’s leadership in fintech to drive innovation is further seen in fintech investments, having surged by 92% in 2023, while global fintech investments dipped by 48% during the same period. Gone are the days of yesteryear when businesses were forced to wait up to 14 days for intermediaries to complete a simple financial transaction. Digital assets have set a precedent of efficiency that the world must now align with.

THE NEW INDUSTRY BASELINE

Fintech leaders must now ensure that they are regulated, compliant, and fully secure to allow for payments from anywhere in the world, instantaneously 24/7, for any currency, including digital assets. This goal is no longer an ideal of excellence so much as it is an industry standard to keep up with today’s developments. Companies have already begun addressing this, like Paypal, Binance Pay, and others, but with limited functionality. However, this gap will continue to close over time, especially in the next 24 months, with less regulatory uncertainty around digital assets.

CUTTING THE RED TAPE WITH A DIGITAL EDGE

As cross-border payments outpaced regulatory frameworks, businesses are faced with the overinflated governance of regulatory friction. For instance, the World Economic Forum revealed that 75% of institutions surveyed struggled with their financial performance due to different regulatory frameworks in different regions. Finance and money are the keys to economic growth through globalization. Imagine if it took 14 business days to send an email or a message to someone in a different country. That delay would send us back to the pre-internet era, when fax was the new technology. Now, banks are forced to raise their standards to match the functionality of digital assets, bringing us to a more innovative era from a financial perspective.

OPTIMAL TECHNOLOGY SECURED BY REGULATION

The growth of investments in fintech is propelled by encouraging regulations, such as Dubai International Financial Centre’s (DIFC) digital asset law and new security law. Such legislative developments were developed not only to keep pace with the rapid developments in international trade and financial markets but to provide security for users of digital assets. Beyond incentives for the use of digital assets in Dubai, such as tax exemptions, the establishment of regulatory bodies such as the Virtual Assets Regulatory Authority (VARA) serves to ensure the innovative efficiency of digital assets in breaking borders without compromising the safety of users from illicit activities such as money laundering.

PROGRESSIVE REGULATION CREATE DIGITAL HUBS

Regulation that encourages innovation and ensures security often breeds hubs through which emerging technologies skyrocket. Such was the case in the UAE with the development of the RAK Digital Assets Oasis (RAK DAO), the world’s first free zone dedicated to digital and virtual asset companies. As the world’s first and only common law free zone created for digital and virtual asset companies, RAK DAO has facilitated over 170 business activities, enabled B2B crypto payments, and facilitated funding by access to growth, networking, and incubation opportunities. This tailored ecosystem provides a fertile ground for the imagination, creativity, and innovation through which digital asset businesses can thrive.

IT TAKES TIME TO ADAPT

The simple rule with any new technology or innovation is that as time goes on, more people will learn its application. As people become acclimated to technology, the adoption rate increases. In 2007, not having WiFi or smartphones at home was the norm. Fast-forward to today, the norm has shifted to WiFi and smartphone access to a globally connected world.

A NEW PRECEDENT FOR THE FUTURE

Financial institutions must sail on the rising tide of digital assets to keep up with the new precedent for financial innovation. The MENA has been a key driver of this trend, with an estimated US$389.8 billion in cryptocurrency transactions, which stands at 7.2% of global transaction volumes between 2022 and 2023. With a transaction volume of US$36.6 trillion in 2023, digital assets have become a permanent force on the global financial markets that will have to be addressed—just like payments with cards or even tapping to pay.