The Gulf Cooperation Council, which consists of The Kingdom of Saudi Arabia (KSA), United Arab Emirates (UAE), Bahrain, Qatar, Oman and Kuwait, have seen large economic and digital transformations. Previous articles from The Fintech Times have highlighted some of those changes, such as how the UAE has been a leading in digital transformation, Saudi Arabia building a foundation for future fintech growth, and the wider GCC’s economic development and diversification as a whole. Digital currencies are still a topic of discussion but how do they play in the current GCC economic and legal landscape? Thomas Bicknell, partner, financial services and fintech expert at global law firm Pinsent Masons’ Middle East Office based in Dubai, offers his insight.
Tom is a partner in the financial services practice of Pinsent Masons based in the firm’s Dubai office. Tom has worked in the Middle East and Africa (MENA) region for six years and has over twelve years’ experience in corporate insurance and financial services. Tom works with (re)insurers, coverholders, Lloyd’s syndicates, brokers and TPAs in respect of their business throughout the GCC. He also routinely advises investment and pension product issuers, international financial institutions, wealth managers, financial advisers as well as online platform operators and fintech start-ups. His experience includes licensing and establishment instructions throughout the GCC, ongoing licensing and regulatory advice, corporate structuring of regulated entities including acquisitions and joint ventures, product structuring and onshore/offshore distribution strategies.
For our global audience, can you explain what the digital and fintech landscape across the GCC currently looks like (focusing mainly on digital currencies and the legal landscape)?
The GCC is making headway as a significant incubator of technology startups, with 9 regulatory sandboxes and RegLab initiatives launched across the region. However, despite these initiatives, there is no uniform position in terms of the GCC markets.
The UAE arguably represents the leading market in the region, with government led initiatives supporting the establishment and development of digital adoption and FinTech start-ups and the UAE’s financial free zones, the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), are market leaders in terms of their respective ‘regulatory sandbox’ initiatives allowing for start-ups to grow and develop their offering in a controlled environment with light-touch compliance obligations.
Both markets have taken considerable strides in developing digital asset (i.e. crypto currency) and payments frameworks, and the DIFC’s new payments regime introduces most of the leading concepts seen across Europe’s payments regime.
The UAE has also announced a stimulus program to drive the digitalisation of the UAE economy with a particular focus on digital delivery of financial services.
How does this alter in the UAE?
As a relatively new jurisdiction for technology, regulations in the UAE are currently quite light, which provides a degree of freedom for companies wishing to launch a product in the UAE, and the country is often praised for its decision not to ‘over-regulate’ in order to enable a spirit of entrepreneurialism to flourish in the country.
Taking into account initiatives of the UAE’s federal regulators and free zone authorities, the UAE has or is introducing:
(i) a digital asset business licence framework (from the Securities and Commodities Authority) covering digital asset promotion, arranging, exchange operation, custodianship etc,
(ii) a digital payments regime and licensing framework (from the UAE Central Bank),
(iii) online/digital insurance distribution rules (from the UAE Insurance Authority),
(iv) a payments and open banking framework (DIFC) and
(v) a largely GDPR equivalent data protection framework (DIFC).
How have you developed your subject matter expertise and helped to share it across both in your home country and your current base of Dubai?
Pinsent Masons has global fintech, blockchain and payments working groups. This allows us to share experiences, market knowledge and expertise on a global basis from our fintech hubs in London, Frankfurt, Dublin, Madrid, Dubai, Singapore and Hong Kong. We engage in a number of cross-jurisdictional mandates in the digital assets and payments area.
My team is made up of fintech specialists that come from working in the UK and European market. We present and write on various areas of fintech and ensure we are well informed on all global developments.
What are future trends and predictions you see happening in the region? And specifically, with your company?
There will be ever more focus on the efficiencies gained from digitisation. For example, the UAE government is requiring over half of its public sector organisations to become fully digital in terms of their user gateway, thereby doing away with costly bricks and mortar centers.
There will be cooperation between GCC states, however this will not lead to any ‘passporting’ of licensing/authorisation. Instead, we expect the UAE and KSA to lead the GCC in terms of market opportunity and government/regulatory environments conducive to fintech innovation.
Whilst the GCC market is of a reasonable size, the general perception is that the opportunity for scalability of GCC based fintech businesses is to use the GCC as a hub for the wider MEA region. Safe and stable government and ever developing fintech regulatory regimes make the UAE in particular the go to spot for new fintechs to establish in order to service the wider region (it is also the most popular spot for expats to want to move to and settle in).
Any advice or recommendations you would give to other future finech companies and entrepreneurs based in the Middle East & Africa (MEA) region? Particularly with respect to fintech and the wider digital sector?
The right market entry is key. Do not rush into the MEA region until you have done your homework on what the opportunity is and what is the best form of presence. For example, certain cross border activities are allowed which could facilitate some degree of market research vis a vis the opportunity before committing to the cost of establishment. From there, we recommend finding the best market for set up from a licensing and ownership perspective that allows for you to grow your business in the most efficient and unencumbered manner.