Banking & Finance Expert calls for crypto regulatory loopholes to be tightened By Megha Merani February 24, 2023 Reuters/Eduardo Munoz The FTX exchange had secured approval from Dubai's Virtual Assets Regulatory Authority last July before it collapsed. Its former chief executive Sam Bankman-Fried is now facing fraud charges Lack of single federal regulator poses challengesStreamlined rules can help avoid ‘regulatory arbitrage’Conversations continuing between Abu Dhabi and Dubai The UAE must close potential loopholes between cryptocurrency regulations established by competing financial free zones, a senior industry figure has highlighted. Different rules in Dubai and Abu Dhabi and a lack of a single federal regulator pose challenges, said Wai Lum Kwok, senior executive director of authorisation at the Financial Services Regulatory Agency at the Abu Dhabi Global Market. “The one thing that, as a regulator, I don’t want is any regulatory arbitrage,” he said. First Abu Dhabi Bank to launch crypto servicesBinance focuses on security as crypto crimes hit $20bnThe beginner’s guide to cryptocurrencies Regulatory arbitrage occurs when a firm structures activities or business functions to take advantage of differences in regulations in order to capitalise on loopholes and opt for jurisdictions with “easier” rules. While it is difficult to prevent entirely, regulatory arbitrage can be reduced by streamlining the regulations between jurisdictions. Kwok said his team was in contact with his counterparts at the Dubai International Financial Centre and Dubai’s Virtual Assets Regulatory Authority (Vara) to address the issue. “I think conversations will have to continue to prevent regulatory arbitrage,” he said. New federal level virtual assets legislation came into force in the UAE in January, adding another layer of oversight to the industry. However, it did not introduce a UAE virtual assets regulator. “I believe there should be one,” Kwok said. The need for tighter regulation comes following the collapse of the FTX exchange, which had secured approval from Vara in July 2022. Its licence was suspended in November after the exchange crashed. Global entities, such as Binance, the world’s biggest cryptocurrency exchange, and Kraken, OKX and Huobi have set up in the UAE, and in July a list compiled by Luxembourg-based Forex Suggest ranked the emirates as the world’s fourth most crypto-ready country, behind Hong Kong, the US and Switzerland.