Middle East Power Struggle: Binance and FTX Acquire Virtual Asset Licenses in Dubai, Binance Also Secures Service Provider License from the Central Bank of Bahrain

Bloomberg cited sources familiar with the matter, stating that Binance has been granted a license from Dubai as a cryptocurrency service provider. Binance also announced that it has been licensed by the Central Bank of "Bahrain," a Middle Eastern country, demonstrating its ambitions in expanding into the Middle East market.

Binance | Bahrain

According to an announcement by Binance, the exchange has been granted a license as a crypto asset service provider by the Central Bank of Bahrain (CBB). Binance's founder, Changpeng Zhao (CZ), stated:

The license in Bahrain is a significant milestone for us in achieving comprehensive licensing and regulation globally. I would like to thank the Bahrain authorities for the excellent work done in achieving this milestone, showing great foresight in developing a regulatory framework for crypto and providing the consumer protection that the public expects from regulatory bodies around the world.

Bahrain, the smallest economy in the Gulf region, has been an early adopter in the digital asset space in the Middle East. This license will allow Binance to operate under the supervision of Bahrain's regulatory authority, providing users with crypto asset trading, custody services, and portfolio management.

The Governor of the Central Bank of Bahrain, HE Rasheed Al Maraj, stated:

Developing regulations that align with global trends is a key objective for CBB, and we will continue to work with partners like Binance, industry leaders, to develop relevant regulations that promote innovation.

Binance | Dubai

Previously reported, Bloomberg cited sources indicating that Binance is in negotiations for operational permits in Dubai to further strengthen its business in the Middle East, including discussions on a license as a virtual asset service provider in the Dubai World Trade Centre Free Zone.

The anonymous source from Bloomberg stated that Binance has obtained a crypto license from the Dubai Trade Centre, although CZ retweeted the news on Twitter, no further details were provided regarding Dubai.

FTX | Dubai

FTX recently received regulatory approval from the Cyprus Securities and Exchange Commission (CySEC) to establish "FTX Europe" in early March. Bloomberg also reported today that FTX Exchange has obtained a virtual asset license in Dubai and will set up a regional headquarters in the city.

FTX Europe is the latest division of FTX expanding its footprint in Europe and the Middle East. CEO SBF stated that this division will offer cryptocurrency derivatives to the local market. FTX and its European subsidiary FTX Europe have obtained a Virtual Assets (VA) trading and clearing license from the United Arab Emirates (UAE) in the MENA region and Europe, and have set up a regional headquarters in Dubai.

The license issued by Dubai regulatory authorities allows FTX Europe to operate a derivatives market in a "sandbox environment" in Dubai. Under the supervision of VARA, the trading market established by FTX Europe adheres to strict regulatory standards, similar to international FATF standards.

Does a License Guarantee?

The Gulf Cooperation Council (GCC) includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, jointly developing regulations to promote economic development. Major international exchanges have sought stable regulatory footholds in Southeast Asian countries, Pacific island nations, European small countries, and Central American island nations in the past. Is moving to Middle Eastern countries a better choice now?

David Pan, founder of Taiwan's ACE Exchange, who visited the Middle East, stated that Bahrain, although the first Gulf country to issue licenses, has significantly high costs and limited practical effects. The trading center license in Dubai mainly issued in the DMCC Free Zone, and local banks will not relax account opening standards for licensed companies. Currently, the most effective license is in Abu Dhabi, but it is still issued by the trade zone. Whether it can have international regulatory credibility or benefit exchanges remains to be seen.

Why are major international exchanges trying to establish a presence in the Middle East? David Pan believes that the local trading market may not be the primary target. Dubai, where 80% of the population are expatriates, has a local population of less than ten million in the UAE, with more foreigners than locals. Most exchanges target the Middle East to find low regulatory risk office locations with relatively low tax burdens and to expand compliance licenses.