In a bid to escape the tightening regulatory grip and tax restrictions in India, numerous cryptocurrency firms are turning their attention to Dubai, which is fast becoming a hub for the burgeoning cryptocurrency ecosystem. The move is driven by factors such as low taxes, ease of business setup, a dedicated regulator, and access to international markets.
The relationship between India and the United Arab Emirates (UAE) is not only flourishing in terms of remittances, with 30% of UAE’s expat population accounting for 18% of the global remittance inflow to India, but it’s also expanding into the realm of Web3, driven by blockchain technology. Last year, trade between India and the UAE reached $85 billion, and both countries are exploring interoperability between their central bank digital currency (CBDC) projects.
Despite India topping the Chainalysis Global Crypto Adoption Index in 2023 and being the world’s second-largest cryptocurrency market by transaction volume, the local industry has been struggling due to the government’s strict tax rules. This has led Indian cryptocurrency firms to seek refuge in Dubai’s cryptocurrency-friendly environment.
Sumit Gupta, the CEO of Indian cryptocurrency exchange CoinDCX, noted a significant decline of more than 90% in trading volume in India due to high tax rates. The regulatory environment in Dubai, marked by low taxes and regulatory clarity, provides a more attractive setting for cryptocurrency businesses.
Dubai, with over 90,000 Indian companies registered, is witnessing a surge in cryptocurrency-related activities. The city’s largest tech event, GITEX, saw a threefold increase in the number of Indian start-ups participating.
The Dubai Multi Commodities Centre (DMCC), with over 23,000 companies, is becoming a hub for cryptocurrency projects. The DMCC Crypto Centre houses a variety of Web3 companies, including cryptocurrency exchange Bybit, digital asset market maker DWF Labs, Web3 incubator TDeFi, and venture capital fund Brinc.
Dubai’s dedicated regulator for digital assets, the Virtual Assets Regulatory Authority (VARA), oversees cryptocurrencies and related activities in free zones, attracting entrepreneurs and solidifying Dubai’s position as a central hub for Web3. With regulatory clarity, low taxes, and international market access, Dubai is increasingly becoming the destination of choice for Indian cryptocurrency firms seeking growth and stability.
However, industry experts caution that the current “regulatory arbitrage” may not persist indefinitely, as the Indian government is likely to address the situation. The shift to serving Indian customers from offshore locations is seen as a temporary solution, and the long-term sustainability of this approach remains uncertain.
