Inside Dubai’s big $4bn metaverse push

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The UAE is punting big on the next iteration of reality. Crown prince Sheikh Hamdan bin Mohammed announced the launch of the Dubai Metaverse Strategy earlier this month, with an aim to place the emirate among the top 10 metaverse economies in the world.

Many observers may have been sceptical but there are already early signs the move may pay off and the emirate could achieve its goal to attract more than 1,000 firms in the sector, generate up to $4 billion in extra GDP by 2030 and support as many as 40,000 virtual jobs.

Globally, the numbers are encouraging. Investment giant JP Morgan predicts that the metaverse will generate $1 trillion in yearly revenues globally. While Citibank says the metaverse economy could be worth $13 trillion by 2030.

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“If you look at the market caps of Decentraland, Pax.World, NFT Worlds, these are singular projects that are building out a space worth more than a billion dollars each,” Sean Ellul, co-founder of Dubai-based Metaverse Architects, a full tech development studio whose aim is to design and develop spaces, shops, and experiences for the metaverse, told AGBI.

“They’re all multibillion-dollar market cap projects. If Dubai was to get just one of those simple startups to start in the emirate, gold effectively could be hit with one single project.”

Chicken and egg

Vikram Ahuja, co-founder of digital recruitment firm Talent500 by ANSR, said the launch of the metaverse strategy is aimed squarely at making Dubai as a serious tech hub for professionals.

“Right now, the UAE is not as known for tech as other markets like Silicon Valley, London, Bangalore, and Tel Aviv,” he said. 

“It’s a bit of a chicken and egg situation. You need to have good companies to attract top talent and good talent to attract top companies.

“As these companies start to set up bases in the UAE there’s going to be demand for the talent and we are going to see an influx of global talent into the region.” 

Ahuja added that in the last six months about 80 percent of India’s Web 3 ecosystem has moved to the UAE, which he attributed to the Gulf state’s innovation-friendly regulatory environment and ease of doing business.

“I think a lot of people are just looking for certainty and this region offers a lot of incentives,” he said.

Ruslan Karimov, managing director, product manager and co-founder at mimic.digital, a virtual platform that enables 2D and 3D content, said one of the biggest challenges for Dubai will be to make sure the metaverse is “open for everyone”. 

“For example, if you look today at how big tech companies are building their metaverses – they’re trying to build it on self-enclosed systems.

“For governments, it’s going to be challenging to realise where the technology will actually progress. I’m a big believer in open standards. I believe they will make up the future of the metaverse. But I think the decisions are going to be hard.”

A confluence of factors – including the increasing availability of 5G, improving technology and affordability of augmented reality (AR) and virtual reality (VR) headsets, and the turbocharged adoption of virtual lifestyles – has produced an opening for a collective shift towards the metaverse, where people can communicate and move virtually in their three-dimensional avatars or digital representations. 

In parallel, blockchain enabled the creation of cryptocurrencies, digital tokens and transaction systems, giving birth to new economic opportunities. 

“There’s going to be hard decisions on the economic side too,” Karimov said. 

“If the Dubai government considers the metaverse economy to be part of the blockchain and cryptocurrency economy, then it brings a lot of questions on the legislation side.

“How banks operate and how fintech and DeFi [decentralised finance] versus centralised finance are going to [operate],” he said, adding that these will be “some of the toughest decisions” for government officials.

Red tape rigour

Regulators will also need to take into account the social and technological impact inside the network, he added. 

The UAE has made a number of significant strides to integrate the metaverse and its related technologies, including cryptocurrencies, into the economy.

In May, Dubai’s Virtual Assets Regulatory Authority (Vara) — which was established under the Dubai Virtual Asset Regulation Law, the first such law in the emirate — said it had established its Metaverse HQ, making it the first regulator to have a presence there.

“At least they’re taking the initiative to try,” Ellul said. “As a government they’ve recognised that this is a disruptive technology, that there’s work that needs to be done and the choice to be proactive instead of reactive is pushing the government and the entire ecosystem to making the most of these technologies, shifting the risk from one that’s disruptive to one that’s a potential opportunity. 

“The fact that the public sector is building a structure to empower entrepreneurs and to set a framework for their ideas to be regulated and passed through a system that could allow them to build these ideas in a space that’s more controlled is definitely attractive to people.”

Trust issues

The functioning of a virtual world outside of traditional sovereign borders presents new risks around transactions, assets, data, security, interoperability, taxation, and social behaviour.

Concerns around lack of insight into transactions and clear jurisdiction poses trust and control challenges, leaving policy makers in doubt.

Most metaverse platforms will require use of cryptocurrencies, non-fungible tokens (NFTs) and other digital assets as their main form of value exchange. 

“There is scepticism,” Ellul said. “But you need a framework to make it work. Sometimes apathy also comes into play. That is one of the biggest problems we see from the perspective of regulation. 

“There’s always going to be players playing in both good faith and bad faith.

“There are people who are going to be Machiavellian and people who are going to use it to do good.

“The truth is no government entity has faced those barriers. But Dubai is best positioned to solve them because they’re the first ones taking it seriously and trying to build out this framework.”

Ellul called it “a missed opportunity” for any government not to take disruptive technologies seriously. “Providing a framework to nurture these technologies in a way that promotes innovation instead of stifles it is one that’s in everybody’s interest. 

“If the regulatory process is completely ignored until these technologies are being used to overwhelmingly bad things, which is something that tends to happen, then we’ve missed the opportunities of using these technologies in our favour. 

“The fact the Dubai government is already recognising it and building a framework for it is incredibly beneficial for the sector, for the country and for innovation as a whole.”