Sep 1, 2023

Komainu, the cryptocurrency custody joint venture of Nomura, Ledger and CoinShares, has received an operating license from the Virtual Asset Regulatory Authority (VARA) in Dubai.

Video transcript

We are heading off to Dubai where Kumu, the crypto custodian joint venture of Nomura Ledger and Coin shares has received an operating license. Joining us now to discuss the state of crypto in Dubai is Kuma head of strategy Sebastian Vied. Welcome to the show, Sebastian. Thank you John. Great to be here. All right. Uh Kumu offers a full range of custodial services in the UAE. Talk to me about the process in getting licensed by the virtual asset Regulatory Authority. Yeah, absolutely. So we've work, we've been working with uh ran the virtual asset regulator authority for around a year now, the process has really been engaging whereby Vara has been very engaged to understand and the complexities of digital assets as the name suggests, Vara really focuses on creating a new regulatory regime that um encompasses virtual assets as a new asset class as opposed to other regulators and regulatory bodies that really look at how virtual assets can fit into existing legislation. And so we've been working closely with them to really establish a rule set that would meet um the growth and the current trajectory of the digital as ecosystem. And, and so it's been a very engaging story and, and uh journey. And I think we now have a very clear rule set that allows us to operate in a very regulated and institutional basis and offer a wide range of services that we can offer also in a number of other jurisdictions to our institutional clients in the region. And these include Qualities Vera is the world's first independent crypto regulator. Tell us a little bit more about your experience. You've been working with them for a year. I believe you got the first MVP license about 10 months ago. Um We talk so much about what's happening in the United States with the SEC. Maybe do a, a little comparison for us. What's it been like working with Vera? What are the steps you've had to take over the past year? Yeah. So we haven't been engaged with the SEC to date so I can comment on the specific differences. But I think looking at the overall regulatory landscape, there is regulators um and we hold ourselves to the very high standards, notwithstanding what regulator we work with, but there's regulators that really look at virtual assets and then still have to decide as we've seen in the US. Is this asset or specific Cryptocurrency a commodity? Is it a security? So there's often regulatory battles as I would call them to really understand what regulatory body has dreamed or oversight of this asset class we've seen and really welcomed in the UAE is that there's been a new regulatory body that really understood the potential of virtual assets as a whole, much bigger than cryptocurrencies, but also tapping into the future potential of this asset class. And then looking at how they can regulate it without limiting innovation. And so we've been working with them to really explain the characteristics of what we do, the specific characteristics of the assets. We deal with anything from staking to collateral management to what a Blockchain is and they're really working with them to apply very rigorous but thorough and applicable policies to this asset class to allow us to operate um at scale and really to meet the requirements of institutional um clients in the region. Now, I know you haven't worked directly with the SCC. Um but I guess American firms frustrations with the agency have been very public. The SCC has brought um lots of lawsuits against firms that are offering services to American clients. Do you think that other countries could benefit from independent regulators like this? Do you expect to see this framework um get put into place in different countries and different jurisdictions around the world? Given your experience, I think it depends. I'm not sure if countries will set up their own regulatory bodies specifically focus for virtual assets. I think we're seeing a number of jurisdictions really progress and try to create new legislation in existing regulatory bodies. I think the FC in the UK is doing a very good job around that. We're seeing European countries, for example, and m coming out in 2024 really focusing within traditional legislations on the top, on the virtual asset class. So you don't specifically need a new regulator, I think Dubai. Um and you have taken the opportunity to really go deep into the subject matter, they really understand the potential of virtual assets to date, but also the potential of virtual assets in the coming decade. And so they're very interested in creating a purpose built regulator that um taps the potential but also allows it to innovate at scale. Um without setting too many barriers to the innovation. There's a big focus in Dubai and attracting crypto firms there creating jobs for people who work in the crypto industry. Uh Talk to us about what's going on on the ground there. What's the experience like for crypto firms in Dubai right now? Absolutely. I think it's not just crypto. So I think since the COVID pandemic, Dubai has seen a huge influx of capital and talents as well as new businesses setting up shelter or moving there. Um There's great infrastructure, it's a great uh geography and um it's also a very good place to live in. I personally moved there in April and so far I've been enjoying it very much. I also see how the crypto ecosystem is really growing on one side. We see firms that are operating in, not so favorable um jurisdiction from a regulatory perspective, set up an operating entity that we see a lot of talent and investment coming into the region. So we expect especially also with now established rules around the operation on virtual asset services, the ecosystem to continue to grow. And we're super excited to be part of this growth and to really tap the opportunities as they scale. Have you taken advantage of any of the subsidies offered by the Dubai government? I'm not specific um on what subsidies there are. Um We followed the rules that has outlined, I think there's um intrinsic subsidies obviously from a tax perspective to also the geography um and um standard of living that I think Dubai offers that many other jurisdictions don't offer. Um So we're very excited to be there. Yeah, I know that Dubai did say that there were some web three specific um subsidies but that is neither here nor there. Let's talk about Kuma. Now the venture offers custody services including institutional staking collateral management. We've been talking a lot about institutional interests, given the ETF news that is going on in the United States. What's institutional interest like for crypto in the Middle East? Yeah, I think it's definitely growing. So I think globally um as a whole institutions have been preparing their strategies as to how to gain exposure to digital assets, obviously, especially these global institutions or the real institutions as I call them that have global mandates. So they can't really tap their toes and do something in one jurisdiction, whereas they can't do it in their home jurisdiction. But we see that most of these institutions have been preparing the strategies and even in the current market downturn, are now ready to activate the strategies and really gain exposure globally as well as in the U A. And we see ourselves as the perfect partner to, to some extent, handhold these institutions and really act as their trusted partner to gain exposure to the digital asset class as a whole. We learned that central banks in Hong Kong and the UAE met back in May. Um would Kumano consider um you know, setting up shop in Hong Kong also another very web three friendly jurisdiction, a lot of similarities in terms of their policy. When when we're looking at web three between Dubai and Hong Kong to date, we have a presence in Singapore um as our a strategy. Um we're always looking to really become the most globally regulated custodian in the ecosystem. So we're working with clients, most of our regulator strategy is really client driven. So understanding what are our client requirements in different jurisdictions and how can we really meet these? So we are continuously speaking with regulators as well as institutional players and partners in various regions to understand how we should prioritize um our goal life in new jurisdictions. All right. And lastly, Sebastian, I know the UAE is aiming to attract 1000 Blockchain and meds companies and create 40,000 virtual jobs by 2030. I know you said you recently moved to the area. Uh Do you think that they're on track? Does it feel like they're on track? Given um the movement that's happening in the industry there? I definitely do feel they're on track. There's more and more people that's also messaging me personally saying that they're planning or already in the moving process. I think, um as you know, there's a very hot summer in the UAE. So I think now that we come into September and the summer or European summer ends and the UAE summer starts, we'll see a lot more inflow. There's a lot of more conferences coming on. It's always becoming bigger and smarter people as well. So I definitely think that they're on track um or potentially even exceeding their targets. All right, Sebastian, thank you so much for joining the show this morning. I hope you have a great weekend. Thank you for having me. That was Kumu head of strategy, Sebastian Wiedman.

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