Popular digital currency options for UAE investors in 2024

With the UAE's digital currency landscape evolving rapidly on the back of proactive government initiatives, technological advancements, and increasing investor appetite, crypto consumers have an ideal opportunity to capitalize on promising short to medium-term investment opportunities in the aftermath of the US elections, according to crypto experts.

Donald Trump's return to power has rekindled investor confidence, and analysts suggest that his policies may encourage a favorable regulatory environment for cryptocurrencies. "Historically, Trump's administration has been more lenient on digital assets, which could attract more institutional investment," states crypto economist Dr. Emily Carter.

In the UAE, where the number of digital currency users is expected to reach 3.78 million by 2025, popular digital currency options for investors include Stablecoins, Bitcoin, and Ether, according to Arun Leslie John, chief market analyst at Century Financial.

While Stablecoins have emerged as the top choice, accounting for 55 per cent of total crypto activity in the UAE, Bitcoin and Ether take up the second and third position, commanding a share of 19 per cent and 9.0 per cent, respectively, John said.

On Wednesday, the price of Bitcoin, which is considered a gold standard in the digital currency space, extended gains above $88,000. BTC is now consolidating gains near $90,000 and might see a minor decline soon.

According to crypto expert and analyst, Sarah Johnson, "Bitcoin's scarcity and increasing institutional adoption make it a strong contender for those looking to invest in the short to medium term."

Last year, the UAE joined the ranks of a handful of countries to launch a central bank digital currency (CBDC). The Arab world's second-largest economy has made significant strides in enhancing its regulatory framework to ensure the seamless integration of dirham-backed Sstablecoins for payments and non-dirham-backed cryptocurrencies for virtual asset transactions. Between July 2022 and June 2023, the UAE processed around $400 billion in on-chain value – elevating its position to the sixth-largest crypto economy in the world. Between July 2023 and June 2024, the UAE received $34 billion in cryptocurrencies, marking a year-over-year growth of 42 per cent. This made the UAE the third-largest crypto economy in the MENA region.

The number of digital currency users in the UAE is expected to reach 3.78 million by 2025 with the penetration rate projected to be 39.20 per cent in 2024 and expected to remain at 39.13 per cent by 2025 on the back of a move by the Federal Tax Authority to exempt cryptocurrencies and digital assets from VAT.

In October 2024, the Central Bank of the UAE granted in-principal approval for a Dirham Stablecoin under its Payment Token Service Regulation framework

“In H1’2024, the total value of Stablecoins transacted on the centralized and decentralized exchanges in the UAE amounted to $9.8 billion,” John said.

The April 2024 survey conducted by Bitget Research indicates that over 72 per cent of all UAE residents have invested in Bitcoin, with increased participation from Emirati investors. Dogecoin, Solana, XRP, Shiba Inu, and Cardano are also amongst the most closely watched cryptocurrencies in the UAE.

“Recently, the Federal Tax Authority (FTA) announced that cryptocurrencies and digital assets would be exempt from VAT in the UAE. This has offered much-needed clarity about tax treatment to crypto businesses – crucial when dealing with such a volatile asset class. This will not only ease their tax burden but also help attract foreign investment.

Analysts pointed out that the UAE government has proactively created a conducive environment for digital currencies. The Abu Dhabi Global Market (ADGM) and the Dubai Multi Commodities Centre (DMCC) have established regulatory frameworks that encourage innovation while ensuring compliance with international standards.

According to crypto strategist Mark Thompson, Ethereum is positioned for substantial growth. "Ethereum's robust ecosystem and the upcoming upgrades make it a key player in the crypto space."

Analyst Rachel Lee suggests, "Investors should consider Binance for its strong market position and utility within the Binance ecosystem."

Other two cryptos gaining traction among investors are Solana and Cardano. "Solana's speed and efficiency could make it a top choice for investors looking for high-growth potential," says blockchain expert Ahmed Al-Farsi. "Cardano has a solid foundation and a vision for sustainable growth," says crypto researcher Lena K. Globally, other digital currencies offering growth potential include the US Dollar Coin, Ripple, Dogecoin, Toncoin, and Tron.