According to company executives and financial sources, crypto firms in the United Arab Emirates (UAE) are being inundated with requests for liquidating billions of dollars of virtual currency as Russians seek a haven for their fortunes.
According to the sources, some clients are utilizing cryptocurrency for investing in real estate in the UAE, while others want to utilize firms in the UAE for converting their virtual money into hard currency and stashing it elsewhere.
One crypto firm has received numerous queries in the last 10 days from Swiss brokers seeking to liquidate billions of dollars in bitcoin since their clients are scared Switzerland will suspend their assets, according to one executive, who also added that none of the pleas were for less than $2 billion.
We have had about five or six in the last two weeks. None of them have yet come off – they’ve all fallen over at the last minute, which is not uncommon – but we’ve never had this much interest before according to the executive. He went on to add that his firm receives an inquiry for a large transaction once a month usually.
We have one guy – I’m not sure who he is, but he came through a broker – who says, ‘We want to sell 125,000 bitcoin.’ And I’m like, ‘Wait, what?’ Guys, that’s $6 billion. And they’re like, yeah, we’re going to send it to an Australian company,’ said the executive.
The Swiss financial market supervisor refused to comment on cryptocurrency transaction volumes.
In an emailed statement, the country’s economic affairs secretariat (SECO) stated that cryptocurrency resources are subject to the same sanctions and procedures that Switzerland has inflicted on “normal” Russian assets and individuals and that if a person is sanctioned, their crypto resources must also be suspended in Switzerland.
Dubai, the Gulf’s financial and business center and a developing crypto hub have long attracted the world’s ultra-rich, and the UAE’s denial to take sides between Western allies and Moscow has indicated to Russians that their money is secure there.
We’ve been witnessing a lot of Russians and even Belarusians arriving in Dubai and bringing whatever they can bring, even in crypto, said one real estate broker whose company has partnered with a cryptocurrency service to assist people to purchase a property.
Ways to escape Sanctions?
A financial source in the UAE confirmed that Russians were purchasing property in Dubai, utilizing cryptocurrency as a means to get their funds out of other jurisdictions to the Gulf state.
While providing few details, cryptocurrency exchanges have stated that they are blocking the accounts of Russians sanctioned by the West due to Moscow’s invasion of Ukraine, which Russia refers to as a “special operation.”
Major exchanges like Coinbase Global Inc and Binance have stated that they are taking steps for ensuring that cryptocurrency is not used to circumvent sanctions and that they are working with law enforcement on the issue.
Nonetheless, because cryptocurrency provides users with a high level of anonymity, European countries like Germany and Estonia have this week called for tighter oversight to close any loopholes that could allow sanctions evasion.
Three Western diplomats said they were increasingly concerned by the number of Russians seeking refuge in the UAE for their fortunes, including property, in recent weeks, and were concerned that some may be acting on behalf of those subject to sanctions.
Two of the diplomats expressed skepticism that the UAE would crack down on Russian wealth in the Gulf state, claiming that it was primarily held in Dubai, citing the country’s neutral stance in the conflict.
A third expressed hope that the UAE, which is also a gold trading hub, would recognize the risks to its reputation and take appropriate action.
The UAE was placed on the Financial Action Task Force’s (FATF) “grey list” this month for increased monitoring of financial crime and money laundering.
The FATF identified risks in specific industries, such as real estate agents and precious metals dealers. This week, a virtual assets law was adopted by Dubai and a regulator was established. The UAE’s regulator stated that regulations were close to being issued and that it had consulted on money laundering risks in the sector.
The media office of the Dubai government and the UAE central bank did not immediately acknowledge requests for comment.
The UAE’s Foreign Ministry stated that it had no further comment apart from previous statements that the government is strongly committed to working with FATF on areas for enhancement in its anti-money laundering as well as counter-terrorism financing regime.
Marina and Downtown
According to some experts, the relative transparency of cryptocurrency transactions, which are registered on the blockchain ledger that supports bitcoin and other tokens, makes large-scale sanctions evasion arduous.
The US Treasury said on Monday that using cryptocurrency to circumvent sanctions was “not necessarily practicable,” and it urged companies in the industry to be cautious.
According to two sources familiar with the situation, UAE firms had reputational concerns about doing business with Russians, but believed the state’s abstention at the UN Security Council, when Russia vetoed a decision condemning its invasion of Ukraine, was a signal that they should not inflict restrictions on Russians.
The UAE, which has grown closer to Russia over the years, has not matched Western sanctions, and its central bank has not issued any guidance on the measures.
Dubai, a popular tourist destination, has long been popular with Russians, who were among the top visitors and buyers of real estate even before the war and subsequent sanctions shook the Russian economy.
According to Apurv Trivedi of Healy Consultants, which advises on the formation of businesses, including crypto companies, they have seen an increase in interest from Russian clients.
They are attempting to protect themselves from the inflationary pressures that are being applied to the Russian currency. So crypto has been a very good exit strategy for them in managing the risks that they are facing Mr. Trivedi stated. It’s a good source of liquidity for them.
According to Healy’s Sami Fadlallah, a large amount of money from Russia has been moving into Dubai’s real estate, mentioning both industry talk and their company’s experience.
People are putting their money in dozens of apartments in the Marina and Downtown, Mr. Fadlallah explained.
We’ve seen a lot of Russians hedge their bets against the rouble’s depreciation by moving a lot of assets into crypto. And the UAE is relatively lax in terms of regulation and authority when it comes to transferring cryptocurrency here.
