How Dubai real estate attracts cryptocurrency investors

Despite the global economic slowdown and general political instability, Dubai real estate continues to be one of the best assets for preserving and growing wealth. The UAE government's initiative to attract international investors has heightened its appeal among cryptocurrency investors.

Content

Cryptocurrency in the Dubai property market
Government support
Results of government initiatives

Forecasts
As a recap

Cryptocurrency in the Dubai property market

The use of cryptocurrency transactions in the Dubai property market is gaining popularity. Major construction companies in the Emirate have begun accepting these payments in recent years. For example, developer Nakheel Properties started accepting Bitcoin and Ethereum for property payments in 2022, through its partnership with the Hayvn service. Damac Properties, which launched over 20 new projects in 2023 alone, also accepts these cryptocurrencies. Ellington Properties has partnered with the Bitcoin Suisse platform to accept Bitcoin payments, while MAG Developers, in collaboration with CoinMENA, handles transactions using stablecoins, including USDT and USDC.

Nikolay Kuznetsov

Head of Investor Relations at

Empire Heights

‘As per our calculations, fewer than 10% of property developers and agencies in the Emirate currently accept cryptocurrency payments. In the next 2–3 years, we expect this number to grow to almost 30%, meaning about one-third of the market will use cryptocurrency. This is inevitable, given the growing popularity of digital currencies and government support. Cryptocurrencies are a very convenient tool. For the government, it’s important to learn how to regulate their use to make it as safe as possible,’ the specialist explained

In addition to direct payments, crypto investors have other options. Some buyers use intermediary companies to purchase property from developers who do not accept cryptocurrency. The intermediary receives the crypto transfer and forwards the payment in traditional currency to the developer for a fee.

When concluding a transaction involving secondary property, the owner decides whether to cryptocurrency as a payment. If they agree, there are no complications. If either party lacks a cryptocurrency wallet, the intermediary company can assist in setting one up.

A bill is currently being drafted in Dubai that would allow real estate agencies to open escrow accounts for transactions in the secondary market. Once all the paperwork is signed, they’ll receive a commission and the seller will receive payment. This will further reduce risks. If agencies are permitted to use intermediary companies for such transactions, they’ll be able to receive cryptocurrency payments immediately in UAE dirhams. Thus, there’ll be no risks for anyone,’ Kuznetsov said.

Government support

Dubai Blockchain Strategy

The Dubai government began developing blockchain technology in 2016. The project was initiated by Sheikh Mohammed bin Rashid Al Maktoum, Vice President of the UAE and Ruler of the Emirate. It included the Dubai Blockchain Strategy, which aimed to move 50% of all financial transactions to a blockchain platform developed in collaboration with IBM.

Real Estate Blockchain Initiative

In 2017, the Emirate's Land Department launched the Dubai Real Estate Blockchain Initiative platform to convert property rights into digital tokens with shared ownership. This has enabled investors to seamlessly buy and sell stakes in residential and commercial projects.

To use the platform, you need to:

Identify the asset;
Conduct a due diligence check to determine if the asset is suitable for token generation;
Document the rights and obligations of token holders;
Generate tokens representing real estate shares;
Distribute the tokens among investors.

Experts believe that such an approach has many advantages:

Lowering the market entry threshold;
Increasing transparency of transactions;
Providing the opportunity to diversify the portfolio by investing small amounts in shares of different properties;
Accelerating operational processes;
Reducing costs.

Thanks to blockchain technology, several independent computers record the details of each transaction. This ensures the security of transactions, as no random person can alter the records. As a result, the Land Department has opened new opportunities for crypto investors, making property purchases more accessible, secure and efficient.

Virtual Asset Regulation Law

In 2022, the Dubai Virtual Asset Regulation Law came into force in the Emirate to protect the interests of investors. The Virtual Assets Regulatory Authority (VARA) was established to monitor cryptocurrency transactions and safeguard users' personal data. With the digital transformation of local banks, handling cryptocurrency transactions has become more efficient.

These initiatives have created a safe environment for blockchain development in Dubai, whereas many other countries, in their attempts to regulate crypto investors, often create additional obstacles.

The Dubai government is committed to innovation. They aim for the Emirate to become a global technology leader and promote blockchain technology. Dubai even hosts one of the world's first blockchain academies, dedicated to studying these technologies in detail and developing ways to utilise them. Therefore, over the next five years, the use of blockchain is expected to increase significantly across various industries, including finance and public administration. Additionally, it's an economic imperative: attracting investment and enhancing the business environment,’ Nikolay Kuznetsov explained.

He also noted that the blockchain technology development strategy is long-term, so crypto investors need not fear that the Dubai government will abruptly change its supportive stance on the subject.

Results of government initiatives

As per data from the analytics company Chainalysis, UAE crypto investors generated revenues of USD 204 million in 2023, with Bitcoin being the most popular. Experts from the Statista platform predict that this figure will reach USD 292.1 million in 2024.

The UAE-based blockchain system Crypto Oasis grew 13.3% in Q1 2024. It now hosts over 2,040 companies concentrated, primarily concentrated in the Middle East, with 9.5% of the corporate sector consisting of organisations specialising in real estate.

Today in Dubai, there are developers' projects worth billions of dirhams, some of which have their funds placed on blockchain platforms. In turn, the real estate sector tokenisation contributes to a more transparent and efficient transaction environment.

Forecasts

As for the future of crypto-payments in the property market, experts are quite optimistic, highlighting several key prospects:

Technology improvement: Advancements in blockchain development will significantly simplify cryptocurrency transactions and make them more accessible;
Improved regulation and increased transparency: New regulatory frameworks will clarify the use of cryptocurrencies, attract more conservative investors, help combat money laundering and identify parties to transactions;
Transforming priorities: An increasing number of buyers, particularly younger individuals, are actively using cryptocurrencies, which could establish them as a significant investment tool;
Spreading innovation: More developers and agencies are expected to accept cryptocurrency payments to attract tech-savvy investors.

The popularity of crypto projects in Dubai and the UAE is rising amid tightening regulations in other countries. As per Kaden Stadelmann, the CTO of blockchain platform Komodo, the Emirates has become a more favourable environment for crypto investors than the US. He relocated to the UAE from the Netherlands due to Amsterdam's increasing distrust of cryptocurrencies. Komodo is one of many companies drawn to the Arab state's favourable environment.

Dubai's main advantage for crypto investors today is its favourable legal environment. The government supports digital currencies and the city boasts innovative infrastructure. Moreover, Dubai has high economic growth rates and significant potential for return on investment. Compared to other major cities, such as New York, London and Singapore, the conditions for crypto-investors in Dubai are more flexible and comfortable. In Europe, the United States and many Asian countries, state control and reporting systems are stricter. In the Emirate, no one is subjecting crypto projects to excessive pressure. On the contrary, authorities are creating conditions for their growth and development,’ Nikolay Kuznetsov said.

As a recap

The Dubai government is actively implementing blockchain technology in various sectors of the Emirate's economy, including the property market. They have launched an innovative Real Estate Blockchain Initiative platform and developed the Dubai Blockchain Strategy to regulate transactions using digital assets. Participants in the Crypto project consider the Emirates one of the most attractive destinations for work, thanks to the liberal policy of the authorities.

More and more developers are now allowing property purchases using cryptocurrency, with Bitcoin and Ethereum being the most common types. Investors who wish to transact with a developer who does not accept digital currency can turn to an intermediary organisation. This intermediary will receive the crypto payment and transfer the equivalent in conventional funds to the developer's account for a small fee.