Coinbase cuddles up to UAE policymakers as tensions with US regulators grow

Crypto exchange Coinbase is bolstering its relationship with regulatory authorities in the United Arab Emirates as it faces mounting challenges back home in the U.S.

"There is no doubt that UAE has the potential to be a strategic hub for Coinbase, amplifying our efforts across the world," Coinbase said in a blog post on Sunday. "It further serves as a particularly strategic bridge between Asia and Europe — two of our existing focus international regions to date."

Coinbase's executive team, including CEO and co-founder Brian Armstrong, is in the UAE this week for meetings with policymakers, regulators, crypto founders and clients. Armstrong will also provide a keynote address at the inaugural Dubai Fintech Summit. Armstrong admired the UAE for its proactive and progressive regulatory approach to crypto in a tweet, saying the region "deserves a lot of credit for being forward thinking on crypto."

"First dedicated crypto regulator in the world, a clear rule book published (!), business friendly plus strong customer protections. Really enjoying my visit so far," he added.

Coinbase's tensions with US regulators grow

Coinbase's first visit to the UAE, in Dubai and Abu Dhabi, comes amid souring relations with American regulators and a nascent effort to move beyond the U.S. In March, the U.S. Securities and Exchange Commission sent Coinbase a Wells notice alerting the exchange to "possible violations of securities laws." In April, Coinbase sued the SEC in order to force the agency to respond to a petition that the company filed demanding the SEC publish specific rules for digital assets. Last week, the SEC was ordered by a U.S. court to respond to Coinbase's complaint within ten days.

Also last week, Coinbase launched an international derivatives exchange from Bermuda, allowing users to trade perpetual futures with currently 5x leverage.

"It is no secret that Coinbase is also working with Abu Dhabi Global Market (ADGM) regulators to further expand the licensing and availability for Coinbase International Exchange," Coinbase said in the Sunday blog post. "We have also been engaging with Dubai's Virtual Assets Regulatory Authority (VARA), a dedicated regulator for virtual assets, as they put forward a comprehensive retail framework built on the principles of economic sustainability and cross-border financial security. This expands our global footprint, helping get us closer to bringing 1 billion users to crypto."

UAE's growing crypto ecosystem

The UAE has witnessed significant growth in its crypto ecosystem over the past few years, attracting attention from giants such as Binance.

Dubai's Virtual Assets Regulatory Authority was set up last year, and earlier this year, it issued its crypto regulatory framework, laying out a concrete licensing regime for crypto service providers. Last month, the registration authority of ADGM issued a consultation paper to explain the proposed Distributed Ledger Technology Foundations Regulations 2023 and sought public feedback on the proposed new legislative framework for foundations that facilitate DLT and token issuance.

"In short, the region is standing-out as a leader in the development of a web3 ecosystem, making it an attractive location to consider investing in," Coinbase said. "The vacuum created by other notable jurisdictions means that international counterparts, such as the UAE, are racing to fill the regulatory gap."

Despite regulatory uncertainty in the U.S., Coinbase is "100% committed" to the home country over the long term, Armstrong said last week during the company's earnings call.

"Let me be clear, we're 100% committed to the U.S. I founded this company in the United States because I saw that rule of law prevails here," Armstrong said. "That's really important, and I'm actually really optimistic on the U.S. getting this right."