Dubai authorities have reprimanded the founders of the 3AC cryptocurrency investment fund for launching a new crypto exchange, called Blockworks, without proper approval. The founders, Su Zhu and Hasu, have been told to halt all activities related to Blockworks until they obtain the necessary regulatory licenses.
The reprimand comes amid growing concerns globally about the regulation of cryptocurrencies and crypto exchanges. Authorities are taking a more proactive approach to ensure that crypto companies comply with existing rules and regulations, or face penalties and fines.
The founders of 3AC, which manages over $100 million in assets, launched Blockworks in May 2021 with the aim of providing a secure and reliable platform for trading cryptocurrencies. However, they did not obtain the required licenses from the Dubai International Financial Centre (DIFC), where the exchange is based.
The DIFC is a leading financial hub in the Middle East, offering a range of financial services and a regulatory framework that adheres to international standards. The center has strict rules for crypto companies, requiring them to obtain licenses and register with the relevant authorities before operating in the UAE.
In a statement, the DIFC said that it had “not granted any license for the activities of the company named Blockworks Limited or permitted it to engage in any activities in the DIFC.”
The statement added that the DIFC is “committed to maintaining the integrity of the financial services industry in the center and adhering to the highest standards of regulatory compliance.”
The founders of 3AC have reportedly complied with the DIFC’s request and halted all activities related to Blockworks. Zhu and Hasu have also issued a statement apologizing for the oversight and committing to obtaining the necessary licenses to operate their new exchange.
“We deeply regret any inconvenience caused by this situation and are committed to working closely with the DIFC to ensure that Blockworks follows all applicable laws and regulations,” the statement read.
The incident highlights the challenges that crypto companies face when expanding into new markets. While cryptocurrencies have gained widespread acceptance and are being adopted by more mainstream investors, they still operate in a largely unregulated space, with complex and evolving rules and regulations.
Numerous countries around the world are grappling with how to regulate cryptocurrencies, with some taking a more lenient approach, while others are cracking down on crypto companies that do not comply with existing laws.
In the UAE, the government has taken a measured approach to cryptocurrencies, recognizing their potential benefits while also acknowledging the risks they pose. In 2019, the UAE Securities and Commodities Authority issued guidelines for crypto assets, requiring companies to register with the regulator before offering their services to investors.
Other countries, such as China and India, have taken a harder line, banning cryptocurrency exchanges and imposing strict restrictions on crypto companies. This has led to a proliferation of unregulated exchanges and a rise in crypto-related scams.
As cryptocurrencies become more mainstream, it is likely that we will see greater regulatory scrutiny of crypto exchanges and other companies operating in the space. This will provide greater protection for investors and help to weed out fraudulent or dubious operators.
However, it may also stifle innovation and drive away legitimate cryptocurrency companies that are unable or unwilling to comply with regulatory requirements. Striking a balance between regulation and innovation will be one of the key challenges for the crypto industry in the years ahead.
Dubai’s regulatory body, the Dubai Financial Services Authority (DFSA), has reprimanded the co-founders of a new cryptocurrency exchange, EXDX, for their alleged failure to follow regulatory guidelines. The exchange, founded by three executives of the Asia Africa Investment and Consulting (3AC) group, was warned by the DFSA to stop all activities related to its platform.
EXDX claims to offer a “decentralized ecosystem for cryptocurrency trading, lending and portfolio management,” with a focus on the Middle East and North Africa regions. The platform’s founders, Stanley Choi, Ken Chen, and Lee Sze Moe, have a history of involvement in Asian investment banking and fintech.
However, the DFSA has raised concerns over the exchange’s lack of compliance with regulatory guidelines, including a failure to obtain the necessary licenses and approvals. In a statement, the regulatory body said that “the DFSA views this conduct as a serious breach of its rules and has directed EXDX to cease all activities.”
This is not the first time that Choi, Chen, and Lee have faced regulatory scrutiny. In 2019, the trio made headlines for a failed bid to buy a controlling stake in the UK’s largest betting exchange, Betfair. The deal was blocked by the UK’s Competition and Markets Authority (CMA), which cited concerns over the group’s lack of experience in the gambling industry.
The DFSA’s reprimand is just the latest sign of the growing regulatory scrutiny facing the cryptocurrency industry. As digital assets become more widely traded and used, governments and regulatory bodies are increasingly seeking to establish guidelines and oversight. This trend is particularly evident in the Middle East, where countries such as Qatar and Saudi Arabia have banned cryptocurrency trading outright.
However, some commentators argue that excessive regulation could stifle innovation and limit the potential of cryptocurrencies. “While regulation is certainly needed to prevent fraud and scams, too much regulation can create unnecessary barriers to entry and stifle innovation,” says David Olsson, managing director of Blockworks, a fintech media company.
Olsson suggests that a more collaborative approach is needed, with regulators working closely with industry players to develop guidelines that balance consumer protection with innovation. “It’s important that regulators and industry players work together to develop guidelines and best practices that ensure the safety and security of investors, while still allowing new and innovative projects to flourish,” he says.
Overall, the reprimand of EXDX underscores the challenges facing the cryptocurrency industry as it seeks to establish itself as a legitimate and mainstream form of finance. As regulatory scrutiny grows, industry players will need to find ways to work with regulators to develop a balanced and sustainable framework that encourages innovation while protecting consumers.
