Dubai Watchdog Warns on Risks of Crypto’s Global Regulatory Gaps

Suvashree Ghosh, Bloomberg News

The Burj Khalifa skyscraper, center, among other commercial buildings in Dubai, United Arab Emirates, on Friday, Nov. 18, 2022. Dubai’s property market is benefitting from an influx of newcomers including bankers fleeing strict Covid restrictions in Asia, crypto investors and wealthy Russians escaping their sanctions-hit country after its invasion of Ukraine. Photographer: Christopher Pike/Bloomberg , Bloomberg

(Bloomberg) -- Dubai’s financial regulator warned that global watchdogs need to step up talks with each other to avoid “bad actors” exploiting gaps in crypto rules, according to an official.

The Dubai Financial Services Authority plans an update to rules on crypto tokens, in force since November for the city’s business hub, that may come out later this year, said Elisabeth Wallace an associate director at the regulator.

“A lot of crypto businesses tend to operate a significant number of activities within one umbrella and that really concerns us,” Wallace said at a virtual conference on Friday. “They are across the whole world and as regulators we need to talk to each other a lot more in this area because there can be quite a few gaps and we have seen a lot of bad actors trying to plug some of those gaps,” she said.

Regulators globally are grappling with ways to handle the crypto industry. Jurisdictions like Hong Kong and Dubai are trying to attract crypto-related investment. Singapore plans curbs on retail-investor participation. US regulators, however, have been clamping down on crypto firms following the collapse of digital-asset exchange FTX and a deep market rout last year.

--With assistance from Stefania Bianchi.