Standard Chartered’s crypto spinoff Zodia Markets plans to expand into Abu Dhabi next year, making the emirate its first outpost in the Middle East and Africa as it targets cross-regional growth.
Zodia Markets has prepared an application to operate in Abu Dhabi, but plans to submit a new one in early 2023 after extended talks with regulators.
CEO Usman Ahmad told that Financial news Abu Dhabi is attractive because it has been “forward-looking in terms of putting the regulations in place”.
Regulators in the UK, US and Europe have taken a tough stance on crypto, but have been slow to establish formal rulebooks for the sector. Of the three, only the EU has drawn up a complete framework for how the industry is to be monitored, which will probably enter into force in 2024.
The oil-rich United Arab Emirates is one of a number of jurisdictions that have tried to exploit this. Abu Dhabi adopted a regulatory framework for virtual assets in 2018, while Dubai adopted a law to regulate virtual assets in March.
The UAE is now the fifth largest crypto market in the Middle East behind Turkey and Lebanon, with a transaction volume of around $28 billion, according to data from July 2021 to June 2022 compiled by Chainalysis.
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Abu Dhabi has already attracted crypto firms including Kraken, the retail-focused exchange, which received a license to operate there earlier this year and has set up its regional headquarters in the UAE capital.
Rival Binance also received in-principle approval to operate as a broker-dealer in the emirate in April, while crypto billionaire Sam Bankman-Fried’s exchange, FTX, has made a similar move in Dubai.
Zodia Markets, which offers crypto trading for institutional investors, is one of two digital asset businesses established by Standard Chartered. The other is Zodia Custody. Zodia Markets received its Financial Conduct Authority crypto asset registration in July and is applying for similar accreditation in Ireland.
However, the key growth targets are in the Middle East and African countries, Ahmad said, a move likely to mirror Standard Chartered’s wider footprint in the regions. The bank has a historical focus on emerging markets, and the Middle East and Africa accounted for £652m of operating income in the third quarter of 2022, compared to £632m in Europe.
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Ahmad said Abu Dhabi’s existing crypto rulebook “allows businesses to have some degree of security with the framework within which they can operate. It lends itself to innovation without worrying about what will happen.”
“We have been in discussions with the regulators there for some time,” he said, adding that the firm feels “more confident about its engagement there” than in countries that have yet to set clear standards for the crypto industry.
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