Cryptocurrency firms in the UAE are receiving a flood of requests to monetize billions of dollars in cryptocurrency, executives and financial sources said, as Russians search for a safe haven for their wealth.
The sources said - according to what was reported by Reuters - that some customers use digital currencies to invest in real estate in the UAE, while others want to use it to convert their virtual wealth into hard currency and hide it.
An executive said that one of the companies working in the field of digital currencies received many inquiries in the past ten days from Swiss brokers, to monetize amounts of bitcoin equivalent to billions of dollars, because their customers fear that Switzerland will freeze their assets, adding that each of these requests was no less than Two billion dollars.
"We have received about 5 or 6 requests in the last two weeks. None of them have been implemented yet, as it seems that they were received in the last moments, which is not rare. But we have never seen this much interest," he said, adding that his institution usually receives an inquiry. One a month great deal.
He continued, "We have a client, I don't know who he is, but he came through an intermediary and said what it means: "We want to sell 125 thousand bitcoins." My response was: "How much?
You guys are talking about $6 billion.” Their response was, “Yes, we will send it to a company in Australia.”
Switzerland's Financial Markets Supervisory Authority declined to comment on cryptocurrency transaction volumes.
The country's Economic Affairs Secretariat said - in an e-mail statement - that digital currency balances are subject to the sanctions and measures imposed by Switzerland on ordinary Russian assets and Russian individuals, and that if a person is subject to sanctions, his digital currency balances will also be frozen in Switzerland.
For a long time, Dubai - the financial and business center in the Gulf region and one of the emerging centers of digital currencies - has attracted the world's richest people, and the UAE's refusal to take sides at the expense of the other from Western allies and Moscow, instructed the Russians that their money is safe in it.
“We have seen a lot of people from Russia and Belarus, coming to Dubai and bringing with them whatever they can bring, even digital currencies,” said a real estate broker whose company has partnered with a crypto services unit to help those looking to buy property.
Is it a way to circumvent sanctions?
A financial source in the UAE confirmed - according to Reuters - that Russians are buying real estate in Dubai using digital currencies, as a way to withdraw their money from other centers and deposit it in the Gulf state.
Without elaborating, cryptocurrency exchanges said they were blocking the accounts of Russians who are subject to sanctions imposed by the West on Moscow over its war on Ukraine, which Russia describes as a "special operation".
Major exchanges such as Coinbase Global and Binance say they are taking steps to ensure that cryptocurrencies are not used as a way to circumvent sanctions, and are cooperating with law enforcement in this regard.
Nevertheless, given that digital currencies provide their users with a high degree of anonymity, European countries such as Germany and Estonia called last week to tighten control to fill any loopholes that might allow to evade sanctions.
Three Western diplomats said they were increasingly alarmed by the number of Russians who in recent weeks had sought to find a haven for their wealth in the UAE, including real estate, and that they feared some were acting on behalf of those under sanctions.
Two diplomats said that they had doubts about the UAE imposing strict measures on the Russian wealth in it, which they said is mainly concentrated in Dubai, noting in this regard the neutral stance adopted by the state in the conflict.
A third said that diplomats hoped that the UAE - which is also a hub for the gold trade - would understand the potential repercussions on its reputation and take the necessary measures.
This month, the Financial Action Task Force (FATF), which monitors financial crime and money laundering globally, put the UAE on a "grey list" of jurisdictions subject to tighter surveillance.
The FATF relied on risks in certain areas, including real estate agents and precious metals dealers.
Last week, Dubai passed a law on virtual assets and set up a regulatory body for them.
Regulatory authorities in the UAE said they are on the verge of issuing regulations, and that they have consulted experts on money laundering risks in this sector.
Neither the Dubai government media office nor the UAE central bank responded to Reuters requests for comment.
The UAE Foreign Ministry said it had no comment, other than previous statements that confirmed the government had a "strong commitment" to working with the FATF in areas where it could be improved in relation to combating money laundering and terrorist financing.
Marina and Downtown
Some experts say the relative transparency of cryptocurrency transactions recorded on blockchain ledgers supporting Bitcoin and other cryptocurrencies makes it difficult to circumvent sanctions on a large scale.
On Monday, the US Treasury said that evading sanctions with cryptocurrency "is not necessarily practical" and called on companies involved in the field to remain vigilant.
Two sources familiar with the matter said that companies in the UAE had concerns about their reputation in dealing with the Russians, but they saw a sign that they should not impose restrictions on the Russians in the UAE abstaining from voting in the United Nations Security Council, when Russia vetoed the project Resolution condemning its war on Ukraine.
The UAE, which has strengthened its relations with Russia over the years, has not imposed sanctions similar to those imposed by Western countries, and its central bank has not issued any directives regarding Western sanctions.
For a long time, Dubai became a popular destination for Russians who were among the most prominent visitors to the emirate and one of the most prominent buyers of real estate in it, even before the outbreak of the war and the subsequent sanctions that plunged the Russian economy into a state of turmoil.
Apurv Trivedi of Heli Consultants, which advises on setting up businesses and crypto companies, confirmed that his company has received increased interest from Russian clients.
"They are basically trying to protect themselves from the inflationary pressures that put pressure on the Russian currency. Therefore, digital currencies are a very convincing way out for them to manage the risks they face. It is a good way to provide them with liquidity," he added.
Sami Fadlallah of Healy Company said that a lot of money coming from Russia is moving to Dubai real estate, based on what is going on in the sector and the company's experience.
"People are hiding their money in dozens of apartments in the Marina area and downtown," Fadlallah added.
"We have seen a large number of Russians hedge against ruble depreciation by moving many assets into cryptocurrencies. The UAE is relatively lax in terms of cryptocurrency exchange regulations and authorities here," he added.