ABU DHABI, U.A.E. — At high-powered business gatherings this week, government officials and executives here highlighted their unusually collaborative approach to regulating crypto, which they hope will turn the wealthy emirate into a global hub for legal use of the technology. Meanwhile, offstage, tales also circulated of “dark alleys” in Dubai where foreigners — this year, many of them Russian — with suitcases full of cash purchase Bitcoin anonymously to evade international sanctions, the sort of loophole that landed the U.A.E. on a global money laundering “ gray list ” in March. The Middle East, the region where crypto use is growing faster than anywhere else, is also the one that offers the starkest contrasts between cryptocurrency’s origins as anti-government money, and the growing desire of governments to use the underlying technology to modernize markets and monitor financial activity. On the one hand, Gulf State regulators have been among the most eager to work with and attract crypto entrepreneurs, with a vision of integrating the technology into mainstream financial markets. On the other hand, the Middle East features a high concentration of authoritarian regimes, rapidly inflating currencies and sanctioned entities — conditions ripe for the original use of crypto: to evade government control of money. The volume of crypto transactions is growing faster in the Middle East than in any other world region, according to a report released last month by analytics firm Chainalysis. That’s thanks to both kinds of uses. “Bitcoin adoption is at an all-time high in the Mideast, but it is very quiet due to harsh government policies towards Bitcoiners,” said Fadi Elsalameen, a Palestinian anti-corruption activist and fellow at the American Security Project, a nonpartisan Washington think tank. “It is already here, it’s being used, and it’s unstoppable.” Elsalameen said he began using Bitcoin after the Palestinian Authority shut down his bank account in response to his criticisms of its leader, Mahmoud Abbas. Unauthorized use of the technology is popular in many other parts of the region. Turkey, the country with the worst inflation on Earth, banned crypto payments last year, but it remains the largest market for crypto in the region, according to the Chainalysis report. In Lebanon, where inflation is also sky-high and the banking system is in tatters, it is technically illegal to accept crypto payments, but Bitcoin and the dollar-backed stablecoin Tether have become popular alternatives to the licit monetary system. In Saudi Arabia, some women secretly use Bitcoin as an alternative to bank accounts, which are subject to supervision by their male relatives, according to Alex Gladstein, chief strategy officer of the Human Rights Foundation. Despite this, there are signs that the Saudi government is warming to blockchain technology after initially shunning it. Meanwhile, its neighbors, Abu Dhabi, Dubai and Bahrain have gone out of their way to work with crypto firms and create regulatory frameworks that cater to the technology in recent years. “These dictatorships in the Gulf have every reason to support crypto as long as they can control it.” Gladstein said. The approach has largely been a hit with crypto executives. Changpeng Zhao, the founder of the world’s largest crypto exchange, Binance, works out of Dubai, and came here on Wednesday and Thursday to speak at Abu Dhabi Finance Week and the Milken Institute’s Middle East and North Africa Summit. Zhao, whose exchange is reportedly under investigation in the U.S. for possible money laundering violations, scoffed at the suggestion of crypto-skeptic economist Nouriel Roubini that Emirati authorities should eject him from the country. In fact, while he was here, his exchange won a new license from Abu Dhabi’s financial regulator. Read the rest of the story on the main website here .
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