With help from Derek Robertson
PROGRAMMING NOTE: Digital Future Daily will return to its regularly scheduled publication time of (usually) 4:00 p.m. EST on Monday 11/21, before taking next Thursday and Friday off for the Thanksgiving holiday.
ABU DHABI, U.A.E. — At high-powered business gatherings this week, government officials and executives here highlighted their unusually collaborative approach to regulating crypto, which they hope will turn the wealthy emirate into a global hub for legal use of the technology.
Meanwhile, offstage, tales also circulated of “dark alleys” in Dubai where foreigners — this year, many of them Russian — with suitcases full of cash purchase Bitcoin anonymously to evade international sanctions, the sort of loophole that landed the U.A.E. on a global money laundering “gray list” in March.
The Middle East, the region where crypto use is growing faster than anywhere else, is also the one that offers the starkest contrasts between cryptocurrency’s origins as anti-government money, and the growing desire of governments to use the underlying technology to modernize markets and monitor financial activity.
On the one hand, Gulf State regulators have been among the most eager to work with and attract crypto entrepreneurs, with a vision of integrating the technology into mainstream financial markets.
On the other hand, the Middle East features a high concentration of authoritarian regimes, rapidly inflating currencies and sanctioned entities — conditions ripe for the original use of crypto: to evade government control of money.
The volume of crypto transactions is growing faster in the Middle East than in any other world region, according to a report released last month by analytics firm Chainalysis. That’s thanks to both kinds of uses.
“Bitcoin adoption is at an all-time high in the Mideast, but it is very quiet due to harsh government policies towards Bitcoiners,” said Fadi Elsalameen, a Palestinian anti-corruption activist and fellow at the American Security Project, a nonpartisan Washington think tank. “It is already here, it’s being used, and it’s unstoppable.” Elsalameen said he began using Bitcoin after the Palestinian Authority shut down his bank account in response to his criticisms of its leader, Mahmoud Abbas.
Unauthorized use of the technology is popular in many other parts of the region.
Turkey, the country with the worst inflation on Earth, banned crypto payments last year, but it remains the largest market for crypto in the region, according to the Chainalysis report. In Lebanon, where inflation is also sky-high and the banking system is in tatters, it is technically illegal to accept crypto payments, but Bitcoin and the dollar-backed stablecoin Tether have become popular alternatives to the licit monetary system.
In Saudi Arabia, some women secretly use Bitcoin as an alternative to bank accounts, which are subject to supervision by their male relatives, according to Alex Gladstein, chief strategy officer of the Human Rights Foundation.
Despite this, there are signs that the Saudi government is warming to blockchain technology after initially shunning it. Meanwhile, its neighbors, Abu Dhabi, Dubai and Bahrain have gone out of their way to work with crypto firms and create regulatory frameworks that cater to the technology in recent years.
“These dictatorships in the Gulf have every reason to support crypto as long as they can control it.” Gladstein said.
The approach has largely been a hit with crypto executives. Changpeng Zhao, the founder of the world’s largest crypto exchange, Binance, works out of Dubai, and came here on Wednesday and Thursday to speak at Abu Dhabi Finance Week and the Milken Institute’s Middle East and North Africa Summit. Zhao, whose exchange is reportedly under investigation in the U.S. for possible money laundering violations, scoffed at the suggestion of crypto-skeptic economist Nouriel Roubini that Emirati authorities should eject him from the country. In fact, while he was here, his exchange won a new license from Abu Dhabi’s financial regulator.
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Don’t get mad, get audited financial statements.
Earlier this week, the Financial Times reported that as part of its deal to take a stake in SkyBridge Capital in September, Sam Bankman-Fried’s FTX forced the fund manager to buy $10 million worth of the exchange’s house crypto token, FTT.
SkyBridge founder and crypto bull Anthony Scaramucci declined to comment to the FT, but by the coffee urn at Milken this morning he told DFD there’s no hard feelings over getting saddled with the now-worthless tokens. “I’m a big boy,” he said. “I’m not mad.”
As for the future of the industry, Scaramucci is sticking to the crypto party line on the meltdown. “If anything, it’s made me more confident,” he said, “because I think it’s going to flush out some of the weaker miscreants.”
(And as for the future of the United States, the former White House communications director vowed to oppose former President Donald Trump if his old boss wins the Republican nomination, saying he puts “democracy over policy.”)
Elon Musk’s 99th problem for the day (at least): Twitter’s top regulator in Europe is putting him on notice for the fast-and-loose policy changes he’s already made to his new toy.
As POLITICO’s Nicholas Vinocur and Vincent Manancourt reported today, Ireland’s data protection chief Helen Dixon, who oversees Twitter’s operations in Europe, voiced concerns about the new regime and especially Musk’s plans to revamp the platform’s verification system. Dixon told Nicholas and Vincent that her office is “proactively engaging [with Twitter] and asking, ‘look, there is a lot of reporting around changes to verified accounts and blue ticks and phishing accounts. What risk assessments are being run and what are the implications for European users?’”
As if that weren’t enough, Dixon’s office is also concerned with the mass defections from the company — namely when it comes to security, where “of course, we’ve also read that the chief security officer is gone,” she said. In America, such problems are most likely to lead to angry creditors as advertisers flee the platform (not to mention angry users). In Europe, as Nicholas and Vincent point out, Musk could be on the hook for more than $1 billion for violating the EU’s data protection and privacy law. — Derek Robertson
If Meta’s big metaverse project is going to succeed, the company needs people to actually enjoy spending time there. So the company has been quite vocal about how seriously it’s taking moderation, rolling out a series of policies that moderate both conduct and content, especially in light of Facebook’s long and rocky moderation history — but according to security researchers at UC Berkeley, the company still has a long way to go.
In a report titled “A Secure and Equitable Metaverse: Designing Effective Community Guidelines for Social VR,” Rafi Lazerson of UC Berkeley’s Center for Long-Term Cybersecurity road tests Meta’s community standards and moderation policies across their 2D and 3D platforms. The short takeaway: To make users feel safe and secure in the latter world, the company has a long way to go to even match the aspirational baseline currently in place for the former one. A few key takeaways:
- Three different sets of community guidelines might currently apply in Meta’s VR spaces, with a high degree of ambiguity between when and where each of them take effect.
- Said policies don’t yet clear the bar that security researchers set for clarity or comprehensiveness, such as specifying whether, as the report asks, a Nazi salute in VR is prohibited.
- Meta needs to make their rules more transparent, by logging and explaining their edits, Wikipedia-style. — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Steve Heuser ([email protected]); and Benton Ives ([email protected]). Follow us @DigitalFuture on Twitter.
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.