If you are a resident of the United Arab Emirates and have wondered how you can securely invest in the crypto market, then this article is for you.
We will consider the investment value of Bitcoin to show you how to invest in cryptocurrency in the UAE.
Should you buy Bitcoin (BTC)?
Before outlining how to buy cryptocurrency in the UAE, it is important to begin by considering if buying it even makes good investment sense.
Since Bitcoin remains the most popular crypto, we start there.
The investment value of Bitcoin
Store of value
Bitcoin’s limited supply (limited to 21 million) makes it a good store of value.
When the supply of an asset cannot be arbitrarily increased, then its price cannot be eroded through increased supply – as is the case with fiat currencies.
This means that Bitcoin’s value is only tied to its demand – which can reduce or increase depending on various factors.
Once an asset is a good store of value, then it can be embraced as an investment asset, particularly if there are reasons to believe that demand for it will increase.
Acceptance as a payment method
Since Bitcoin is an alternative to fiat currencies, with many practical benefits including anonymity, decentralised money transfer, and fast international remittances, it makes sense to believe that demand for it can increase over time.
Acceptance of Bitcoin as a payment method has been increasing among businesses and merchants. You will even find a Bitcoin ATM in Dubai where you can purchase Bitcoin with cash or withdraw cash in exchange for Bitcoin.
Acceptance as an investment asset
Given that Bitcoin is a store of value with potential for rising demand, many have accepted it as an investment asset.
Recently, Bitcoin ETFs were approved by the US Securities and Exchange Commission, and many investment management firms have started providing them to investors and clients.
Over the years, many people have earned outsized returns from investing in Bitcoin. Long-term investors have also added it to their portfolios to improve diversification and reduce investment risk.
Bitcoin as digital gold
Because its supply is limited many have labelled Bitcoin the ‘digital gold’ since gold has been embraced as a hedge against inflation and economic uncertainties.
Though the theoretical link between Bitcoin and inflation hedge makes sense, there isn’t enough empirical data to support the correlation..
The challenges of Bitcoin
Of course, Bitcoin continues to face challenges like high volatility, regulatory uncertainties, cyber-attacks and frauds, and high energy use.
Nevertheless, its value as an investment asset cannot be denied (especially given the recent approval of Bitcoin ETFs). Consequently, UAE investors convinced that its pros outweigh its cons may consider investing in it.
Is Bitcoin legal in the UAE?
According to Global Media Insights, a global news agency: “There are no prohibitions against crypto assets and they can be traded on crypto exchange platforms. UAE citizens can own cryptocurrencies, and deposit and trade them.”
Various regulations are guiding the operations of crypto companies and exchanges (trading platforms) in the UAE.
The Financial Services Regulatory Authority, which regulates the Abu Dhabi Global Markets (ADGM) issued regulatory guidelines in 2018 (updated in 2023). Dubai passed its crypto law – Virtual Assets Regulation Law – in 2022 and created a regulatory body – Virtual Assets Regulatory Authority – to handle compliance (among other issues).
The Securities and Commodities Authority, which regulates financial markets in the UAE, has also been issuing and updating guidelines since 2020.
None of these regulations deemed Bitcoin trading or the trading of altcoins illegal. These laws and guidelines aim to protect customers by regulating cryptocurrency exchanges and companies.
But is cryptocurrency halal?
Since Mufti Muhammad Abu Bakar, a Sharia adviser and compliance officer at Blossom Finance in Jakarta published a paper defending Bitcoin as halal, Muslims across the globe have embraced it (and cryptos in general).
However, some scholars have disagreed pointing to its fraudulent use for money laundering, lack of a legitimate central authority, speculative nature, and lack of intrinsic value.
Other scholars have argued that cryptocurrency is halal since it provides contractual uncertainty, does not charge interest, and its volatile nature does not necessarily equate to gambling (since all assets are volatile to one degree).
In between these two sets of scholars are those who won’t say cryptocurrency is halal (given the concerns above) but won’t also deem it haram.
There is no consensus yet on this topic and individual Muslims will have to consider the relevant arguments and make their own decisions.
Before considering how to buy and sell Bitcoin in Dubai and the greater UAE, let’s consider why you should consider investing in other cryptocurrencies apart from Bitcoin.
