UAE initiates landmark cross-border digital dirham payment

UAE strengthens regulatory oversight of virtual asset service providersThe Central Bank of the United Arab Emirates (CBUAE) and other relevant authorities in the Middle Eastern country have issued new joint guidance for virtual asset service providers (VASPs) operating within the UAE.Photo by Thomas Drouault on UnsplashPushing back against unlicensed VASPsThese guidelines aim to prevent VASPs from operating without proper licenses in the jurisdiction, demonstrative of the country’s efforts in fighting financial crimes and maintaining the integrity of its financial system.The document outlines the penalties for VASPs operating in the UAE without a valid license. They will face civil and criminal sanctions, including financial penalties against the entity, its owners and senior managers. Moreover, the guidance cautions that licensed financial institutions (LFIs), designated non-financial businesses and professions (DNFBPs) and licensed VASPs that engage with unlicensed VASPs will be subject to law enforcement actions.The National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) is the specific entity responsible for having issued the guidance in conjunction with the central bank.VASP ‘red flags’As part of those guidelines, a list of “red flags” for VASPs has been included. Through reliance on these indicators, it’s hoped that bad acting VASPs can be identified by consumers and other industry stakeholders. The document refers to red flags such as the lack of regulatory licensing, no physical presence in the UAE, pressure being applied by a platform to invest quickly and a lack of regulatory disclosure as items to look out for.Otherwise, the guidance encourages stakeholders to be suspicious of unsolicited contact being employed as a means of operation by a platform, the lack of a record of compliance, poor website and communications and the offer of unrealistic promises.Lastly, the document suggests that people should be observant of any illicit use of virtual currency, the use of fake wallets, engagement in terrorist financing and a lack of consumer protection as red flag items.The new guidance instructs all LFIs, DNFBPs and licensed VASPs to report transactions involving suspicious parties. The guidance also emphasizes that information related to unlicensed virtual asset activities can be reported through whistleblowing mechanisms.Exiting FATF ‘grey list’The release of these guidelines is part of an effort by the UAE to be removed from the Financial Action Task Force’s (FATF) “grey list.” The grey list indicates deficiencies in a country’s anti-money laundering (AML) and counter-terrorist financing (CTF) regimes.Improving control mechanisms relative to crypto has been a theme for several countries who are similarly looking to exit the FATF grey list. Last week, it emerged that Turkey is crafting new regulations governing crypto in an effort towards “grey list” removal. Earlier this year, Pakistan announced a renewed ban on cryptocurrency, as part of its efforts to remain off the grey list it had been listed on over an extended period.The UAE was placed on the FATF’s grey list in March 2022 due to AML and CTF deficiencies. However, the country made a commitment to work with the global watchdog to improve its regulatory frameworks in these areas.

Recent weeks have seen a positive policy shift in Pakistan with regard to digital assets and blockchain and that initiative has gathered further momentum with the appointment of a special assistant on blockchain and crypto to the Pakistani prime minister and the allocation of 2,000 MW of surplus electricity to Bitcoin mining and AI data centers.Photo by Abuzar Xheikh on UnsplashOn May 26, the Pakistan Observer, an English language daily newspaper, reported that Bilal bin Saqib has been appointed to serve as a special assistant on blockchain and crypto matters to Pakistani Prime Minister Shehbaz Sharif. Forbes ‘30 under 30’ social entrepreneurIn this role, Saqib assumes the status of a minister of state under Rule 4(6) of the Rules of Business, 1973, with the appointment effective immediately. Saqib had been featured by Forbes through its “30 under 30” list of social entrepreneurs in Asia in 2020. He is the founder of Tayaba.org, a non-governmental organization (NGO) focused on the provision of clean drinking water to vulnerable communities in Pakistan. Saqib came to prominence in the crypto sector earlier this year when he was appointed CEO of the newly formed Pakistan Crypto Council (PCC), an agency established to promote blockchain technology and digital assets within the South Asian country. In April he was added by World Liberty Financial, a crypto project connected with the family of U.S. President Donald Trump, as an advisor. Earlier this month, Pakistan’s Ministry of Finance gave the go-ahead for the establishment of the Pakistan Digital Assets Authority (PDAA), a body that will be responsible for the implementation of regulations governing the crypto and blockchain sector.  Utilizing surplus energyAt the time, one area of focus that had been highlighted in the announcement of the establishment of the PDAA was a desire to make better use of Pakistan’s surplus energy. The country runs an annual average surplus of 4,000 megawatts. A report by 24 Digital on May 25 indicated that action has already been taken in this regard. It outlined that Pakistan has allocated 2,000 megawatts of surplus electricity for the exclusive use of operators of AI data centers and Bitcoin mining facilities.  This plan is being rolled out in phases. The first phase makes surplus energy available to these operators. Phase 2 will focus on enabling crypto mining operators to avail of renewable energy to power their facilities, in an effort to develop the sector in Pakistan in an environmentally responsible manner. According to the Ministry of Finance, interest has already been expressed by international operators in the crypto mining and AI data center sectors. A number of international firms are understood to have visited the country in an effort to explore potential collaboration opportunities.  Earlier this month, Saqib claimed on social media that Pakistan “is moving at crypto speed.” He made the case that the country is a breeding ground for crypto innovation, citing the opportunity to exploit surplus electricity via crypto mining and the potential for crypto adoption given a $36 billion remittance market, millions of unbanked citizens and 64% of the population under 30.

OKX Ventures, the investment arm of the well-known crypto exchange and Web3 technology company OKX, has recently disclosed a strategic investment in Singapore’s Orbiter Finance. Developing ZK-proof technologyThe investment marks a significant step forward in advancing the evolution of blockchain infrastructure, given that Orbiter Finance has achieved recognition for its innovation in the process of developing its zero-knowledge (ZK) technology-based omni-chain rollup on the Ethereum network. This initiative goes beyond Orbiter Finance's initial role as an asset cross-rollup bridge. Over the last two years, Orbiter has processed over 12 million transactions with a total transaction volume surpassing $7.8 billion. The protocol has amassed a user base of over three million and cultivated a community exceeding 700,000 users and enthusiasts.Photo by Shubham Dhage on UnsplashOrbiter Rollup announcementAccording to a series of posts on the X social media platform over the course of the weekend, the project is gearing up to launch a ZK-tech-based instant omni-chain rollup on Ethereum. A standout feature of the protocol is the integration of ZK Simplified Payment Verification (SPV) to authenticate Layer 2 transactions on the mainnet and combat fraudulent re-layers via the Ethereum Virtual Machine (EVM).  This development introduces a secure, efficient, low-cost and rapid communication mechanism for Ethereum, with the added security benefits of ZK-SPV enabling Orbiter Finance to grant complete access to the "Maker" role. This marks a significant milestone in achieving decentralization within blockchain infrastructure. Dora Yue, founder of OKX Ventures, expressed enthusiasm about spearheading the strategic investment in Orbiter Finance. She highlighted the protocol's ability to overcome traditional bridge limitations, specifically in terms of speed, and its crucial role in enhancing the efficiency of cross-chaining between various Layer 2s and the Ethereum mainnet. Other investors in the project include Redpoint China, Hash Global and Skyland Ventures. Supporting 19 networksCurrently supporting over 19 Layer 2 rollups and a multitude of native Ethereum assets, Orbiter Finance is positioning itself as a vital infrastructure component for the Layer 2 ecosystem. Yue commended the team's ongoing commitment to product upgrades and their dedication to ensuring a more decentralized and trustless foundation for the Layer 2 ecosystem's growth in 2024. With an initial capital commitment of $100 million, OKX Ventures is focused on exploring and supporting the best global blockchain projects, fostering cutting-edge technology innovation, and investing in projects that provide long-term structural value. The venture aims to nurture innovative companies by offering global resources and leveraging historical experience in the blockchain industry. Orbiter Finance also maintains an openness to incorporating additional networks. It has established strategic partnerships with key players such as Arbitrum, Optimism, Polygon, Linea, zkSync, Base, Starknet, Scroll, Manta Network and others. In this manner, it has solidified its position in the ecosystem. Notably, the protocol announced a collaborative strategic partnership with Ingonyama earlier this month, taking a step forward in advancing ZKP acceleration. Ingonyama is a next-generation semiconductor company specializing in ZK-proof technology. With that, it is actively exploring the integration of ICICLE, a GPU library for zero-knowledge acceleration, into Orbiter's ZKP system through multiple meetings and code-sharing initiatives.