Bitcoin Options Exchange Deribit Looks to Relocate to Dubai

Olga Kharif and Ben Bartenstein, Bloomberg News

The Burj Khalifa skyscraper, center, stands among commercial and residential properties on the city skyline in Dubai, United Arab Emirates, on Friday, Sept. 16, 2022. Office rents in Dubai are rebounding for the first time in six years, rising faster than in New York or London as global banks and businesses expand into the financial hub known for its love of glitzy construction. Photographer: Christopher Pike/Bloomberg , Bloomberg

(Bloomberg) -- Deribit, the world’s biggest Bitcoin and Ether options exchange, is making plans to relocate to Dubai as soon as the third quarter if authorities in the crypto-friendly emirate provide more clarity on regulations.

The trading platform, which has been based in Panama since 2020, is preparing to open a Dubai office with about 10 people, a mix of core employees and local hires, David Dohmen, chief legal compliance and regulatory officer at Deribit, said in an interview. Some employees will continue to be based in Panama. Deribit’s Netherlands-based parent company and related subsidiaries currently employ 95 people globally, roughly double year-ago levels.

The November collapse of the rival FTX crypto exchange shook trust in the sector, resulting in outflows across the industry, including between 10% and 15% at Deribit.

“We’ve had a number of clients who basically intimated to us that they would like to trade on a crypto exchange that’s actually regulated,” Dohmen said. “In Panama we are not regulated. Also we also saw where the regulatory winds were blowing, and there was a drive toward regulation across the globe.”

Dubai, the sun-splashed multinational hub of the Middle East, has made extensive efforts to woo the world’s largest firms with crypto-friendly policies. As some financial centers tightened regulations last year, many UAE officials were touting virtual assets as a key pillar for economic growth and diversification. Companies like Binance, the world’s biggest crypto exchange, have expanded in Dubai.

“We felt that the whole regulatory regime was more tailored to crypto than other jurisdictions,” Dohmen said. “It’s more flexible. The government and the regulator are welcoming crypto as a product.”

But the recent blowups of several crypto companies that had flocked to the UAE have prompted a regulatory rethink in the Gulf state. Earlier this month, the federal government introduced more formal rules, which local lawyers said could rein in some of the powers previously left to the nation’s dozens of free zones.

Deribit plans to submit an application and supporting documents for a Full Market Product license to Dubai’s Virtual Assets Regulatory Authority once the agency gives an update on its regulatory regime, Dohmen said.

Deribit is now also working to appoint a well-known auditor, said Luuk Strijers, Deribit’s chief commercial officer. The company was profitable in 2022 despite being impacted by the collapse of hedge fund Three Arrows Capital, he said.

In the next few years, Deribit also want to obtain broker licenses in countries like the UK, Brazil and Singapore, in an effort to drive more clients onto the exchange, Dohmen said.

--With assistance from Anna Irrera.