Original author: Thejaswini MA
Original translation: Block unicorn
Preface
Over the past five years, the United Arab Emirates (UAE) has built a remarkable digital empire: processing $30 billion in cryptocurrency transactions annually, hosting 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 relies on a resource far more valuable than oil: the tax obligations of others.
Binance founder Changpeng Zhao, who is worth $33 billion, lives in Dubai.
So too have executives at 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 are still debating cryptocurrency regulation, the UAE has already started building the infrastructure.
While competitors impose restrictions, Dubai offers clear rules.
While traditional powers hesitated, Abu Dhabi invested billions of dollars.
Behind the innovation narrative is a simpler truth: the UAE has built the most sophisticated tax haven in the cryptocurrency space, draped it in a veneer of regulatory legitimacy, and allowed the world to call it “digital leadership.”
What exactly does this mean for the future of global finance?
Grand entrance
Imagine this: It’s 2020 and most governments are still debating whether cryptocurrency is a scam.
The UAE looked at its oil reserves, looked at Bitcoin, and thought, “Why not have the best of both worlds?”
Fast forward to 2025, and the UAE has executed the most successful national cryptocurrency strategy in history.
They went from being an oil-dependent economy to a digital asset powerhouse.
By 2024, 30% of the population will own cryptocurrency
Cryptocurrency trading volume exceeds $30 billion per year
There are more than 700 blockchain companies in Dubai alone
Top 40 in the world by on-chain transaction value
The third largest cryptocurrency 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: $408.5 million invested in Bitcoin ETF
MGX Fund: $2 billion invested 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 happening.
Let’s analyze it
Regulatory Innovation: In March 2022, Dubai launched the Virtual Assets Regulatory Authority (VARA) – the world’s first independent regulator designed specifically for virtual assets.
Not a committee, not a task force, not a bunch of people in suits learning on the job, but a dedicated cryptocurrency regulator with real authority.
VARA's achievements in just three years:
Licenses issued to major 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)
Clear guidelines for everything from staking to tokenization
Sets compliance deadlines that companies must 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 focuses 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 regulations — they built actual infrastructure:
Dubai AI and Web3 Campus: A physical ecosystem for blockchain innovation
Sigma Capital Launches $100 Million Blockchain Startup Fund
According to Tracxn, the park is home to 977 blockchain companies
The largest AI campus outside the United States (located 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.
Practical Application
Real Estate Tokenization: Dubai just launched the first licensed tokenized real estate project in the MENA region. For just AED 2,000 ($545), anyone can buy fractional ownership of a property in Dubai. The Dubai Land Department has even launched a project to tokenize RWAs 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 payment 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.
Mathematics of Escape
The UAE’s appeal starts with a mathematical principle that’s hard to ignore.
Companies do not have to pay capital gains tax, cryptocurrency gains are not subject to personal income tax, and businesses with annual revenues exceeding $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 tax plus state taxes, and regulatory uncertainty also increases compliance costs, which can amount to millions of dollars a year for large exchanges.
Here’s an example: If Coinbase moved to Dubai tomorrow, it could theoretically save more than $250 million per year in taxes alone, based on its 2024 net revenue of $1.3 billion.
But the math of relocation only works if you can actually operate in Dubai.
This is where the UAE’s regulatory strategy is relevant – not because it is particularly innovative, but because it provides legal certainty that other jurisdictions lack.
Dubai’s Virtual Asset Regulatory Authority (VARA) has issued licenses to Binance, Bybit, OKX, Crypto.com and Bitpanda, all of which are able to operate legally under clear rules, a rare phenomenon in the cryptocurrency industry.
Regulatory arbitrage
VARA represents a different approach to cryptocurrency regulation: collaboration rather than adversarial. Rather than treating cryptocurrency companies as potential criminals, VARA works with them to establish a compliance framework.
This is in stark contrast to the U.S., 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 firms can gain legal certainty in Dubai while their competitors deal with regulatory uncertainty in larger markets.
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.
US companies dominate cryptocurrency development, with 19% of the world’s cryptocurrency developers based in the US, while the UAE’s share is negligible.
The concentration of wealth tells a similar story.
The world’s 17 cryptocurrency billionaires have a combined wealth of $93 billion, most of whom are in the U.S., including Chris Larsen (Ripple), Brian Armstrong (Coinbase), and Michael Saylor (MicroStrategy).
The UAE's contribution mainly comes from Zhao Changpeng.
The UAE has built an impressive infrastructure for cryptocurrency businesses, but the core innovation is still happening elsewhere?
Stablecoin Sovereignty Experiment
The UAE’s stablecoin strategy presents both opportunities and contradictions in its approach. The UAE Central Bank has approved the first stablecoin, AE Coin, backed by the United Arab Emirates Dirham (AED), creating 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. This choice highlights the UAE’s strategy: to remain neutral by working with those in power.
This pragmatic approach raises questions about the UAE’s long-term position. Building financial infrastructure around politically connected assets may bring short-term advantages, but it could also create long-term dependencies.
The UAE’s so-called dominance in the cryptocurrency space stems from its success in hosting 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 do not necessarily reflect underlying economic activity.
The UAE has become very good at cryptocurrency marketing, but this should not be confused with cryptocurrency development.
Our View
The UAE’s success story in cryptocurrencies is essentially about arbitrage — regulation, taxation, and geography. They identified inefficiencies in how other countries handled digital assets and built systems to capture the opportunities that presented. But there are limitations 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 its 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 significant 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 crypto businesses, and the growing developer community create network effects that go beyond tax advantages.
The regulatory clarity and tax advantages that have fueled the growth of crypto in the UAE are not sustainable forever. Eventually, major economies will offer similar benefits to keep their own crypto 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 will not be whether it can attract companies fleeing an unfavorable regulatory environment, but whether it can retain them when those regulatory disadvantages disappear.
For now, the mass relocation continues. Cryptocurrency executives are packing their bags and heading to Dubai, attracted by clear rules and favorable taxes.
Whether they are building a financial future or simply optimizing their tax bill will depend largely on what they do once they arrive.
