The UAE, particularly through its Dubai and Abu Dhabi financial hubs, continues to introduce initiatives and regulatory frameworks to attract crypto companies and investors.

Consider the latest update: The UAE announced value-added tax (VAT) exemptions for crypto transfers and conversions.

The UAE’s published changes will take effect on Nov. 15.

The Federal Tax Authority (FTA) on Oct. 2, published Cabinet Decision No. (100) of 2024 to update the executive regulation related to VAT.

The updated executive regulation includes more than 30 amendments affecting various industries.

The nation’s Federal Tax Authority, as per the details shared by business consultancy firm PwC, will apply these exemptions to managing investment funds and other crypto-related activities.

Additionally, PwC reports that the exemptions for the transfer and conversion of virtual assets are treated as effective from Jan. 1, 2018.  

Furthermore, the amendments address input tax recovery for crypto companies. PwC explains that in the UAE, crypto is defined as a “representation of value that can be digitally traded or converted and can be used for investment purposes.”

UAE wants to be crypto-friendly

While several countries, including China and India, have been taking a step back when it comes to crypto adoption, the UAE is embracing it.

The country has been actively working to create a favorable environment for blockchain and crypto businesses. Dubai’s Virtual Assets Regulatory Authority is also playing a crucial role in regulating virtual assets in the UAE.

The VAT exemptions for crypto transfers and conversions could attract more crypto businesses to the UAE.

The country’s positive outlook on crypto is also visible from its growth in the market. A recent report from Chainalysis highlighted that the UAE received over $30 billion in crypto between July 2023 and June 2024.

This number has brought the country to the top as MENA’s third-largest crypto economy. Chainalysis also mentioned the rise in the number of venture capital funds and blockchain businesses in the UAE as a factor contributing to the country’s growth.

As businesses turn to dollar-pegged options, stablecoins now represent over 40% of Sub-Saharan Africa’s crypto economy.

Stablecoins have emerged as a vital component of Sub-Saharan Africa‘s crypto economy, accounting for approximately 43% of the region’s total transaction volume, according to a recent report from Chainalysis.

In nations grappling with volatile local currencies and limited access to U.S. dollars, dollar-pegged stablecoins such as Tether (USDT) and Circle (USDC) have gained prominence, enabling businesses and individuals to store value, facilitate international payments, and bolster cross-border trade.

In a commentary to Chainalysis, Yellow Card chief executive Chris Maurice said that “about 70% of African countries are facing an FX shortage, and businesses are struggling to get access to the dollars they need to operate.”

Stablecoins to become primary use case for crypto in South Africa

As a result of this struggle, Ethiopia, Africa’s second-most populous nation, has seen retail-sized stablecoin transfers grow by 180% year-over-year, fueled by a recent 30% devaluation of its local currency, the birr.

While traditional financial institutions struggle to meet the demand for U.S. dollars, stablecoins are increasingly viewed as a “proxy for the dollar,” Maurice said, adding that “if you can get into USDT or USDC, you can easily swap that into hard dollars elsewhere.”

Looking ahead, Rob Downes, head of digital assets at ABSA Bank, a major African bank operating in 12 African countries, foresees stablecoins playing a pivotal role in Africa’s economic landscape, stating that dollar-pegged tokens are going to be the “primary use case for crypto in South Africa over the next three to five years.”

The Middle East and North Africa region has become the seventh-largest cryptocurrency market as both retail and institutional adoption grows.

According to a Chainalysis report, MENA received $338.7 billion in cryptocurrencies between July 2023 and June 2024, securing the seventh spot. This accounted for 7.5% of the global on-chain value.

Türkiye leads the region with $137 billion in on-chain value received, followed by Morocco’s $12.7 billion. These two are the only countries in Chainalysis’ global crypto adoption index.

The report found that 93% of the transactions in the region were worth over $10,000, driven by professional and institutional movements. 

Per Chainalysis, the United Arab Emirates witnessed impressive growth in retail and institutional on-chain value due to its favorable regulatory landscape.

Last month, Tether, the issuer of the largest stablecoin USDT, announced to create a dirham-pegged stablecoin in the UAE which will be backed by the country’s liquid reserves. 

The stablecoin issuer joined forces with Fuze, a crypto infrastructure company, to educate both individuals and large institutions in Türkiye and the Middle East about cryptocurrencies and raise their awareness.

According to data from Chainalysis, Saudi Arabia’s crypto market saw a 154% year-over-year growth in the mentioned timeframe, emerging as the fastest-growing digital asset economy in the region.

Most of the on-chain activity in MENA happened on decentralized exchanges. 32.4% and 30.9% of the on-chain movements in the UAE and Saudi Arabia occurred on DEXs, per the report.

It’s important to note that Saudi Arabia and Qatar still don’t have an operational regulatory framework for crypto companies which could be the main reason behind their DEX use.

The Saudi Arabian Ministry of Investment invested $250 million in the Hedera blockchain in February to boost web3 development in the country.