The COVID-19 pandemic has revealed the necessity for sustainable digitization of the financial system, and the UAE is accepting the problem.
The United Arab Emirates is the world’s sixth-largest oil producer and one of many richest nations on the planet, with a gross home product per capita of above $43,000 as of 2019, in response to the World Financial institution. As per its “Imaginative and prescient 2021,” Iis petroleum- and natural-gas-reliant financial system is dedicated to sustainable growth with the intention to emerge because the Gulf Cooperation Council’s, or GCC’s, most diversified financial system. This consists of the digitization of the financial system, which has change into a precedence in the course of the COVID-19 pandemic.
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A inexperienced financial system for sustainable digitization
The primary digital Abu Dhabi Sustainability Week Summit 2021 was broadcast dwell all over the world in English and Arabic on YouTube, receiving over 100,000 views in the course of the occasion from individuals hailing from over 175 nations, and it featured over 500 influential international leaders from authorities, enterprise and know-how who explored the social, financial and technological alternatives supporting a sustainable inexperienced restoration from the pandemic.
On the summit, GCC leaders reconfirmed their decarbonization pledges “to save lots of the equal of 354 million barrels of oil by way of the deployment” of renewable energies. This represents a 23% discount in oil consumption to cut back the ability sector’s carbon dioxide emissions by 22%, in response to the most recent figures from the Worldwide Renewable Vitality Affiliation.
In his opening handle, Sultan Ahmed Al Jaber — the UAE’s minister of business and superior know-how, particular envoy for local weather change, and chairman of unpolluted vitality firm Masdar — identified that with the COVID-19 pandemic, society is now witnessing the implementation of synthetic intelligence, machine studying and the digitization of various spheres of life all around the world. Accordingly, electrification, decarbonization and digitization initiatives have change into more and more necessary throughout all industries.
Masdar’s photo voltaic vitality initiatives
New digital applied sciences require a excessive consumption of electrical energy, which within the UAE is at the moment produced predominantly utilizing fossil fuels that adversely impression the setting. Given the UAE’s huge hydrocarbon sources, Masdar is aiming to change into a significant blue hydrogen producer and contribute to the nation’s efforts to chop polluting carbon emissions by practically 1 / 4. Masdar just lately reached an settlement with Abu Dhabi’s Division of Vitality and 5 extra establishments to develop clear hydrogen gas options.
However the UAE’s Paris Settlement dedication to zero emissions by 2050 is closely reliant on photo voltaic vitality to diversify Abu Dhabi’s vitality sector into renewable sources. Photo voltaic vitality is seen as an anchor to Masdar’s renewable methods from many views. In Abu Dhabi, it’s constructing the world’s largest solar energy plant, as deserts are a few of the finest locations to reap solar energy. They’re by no means wanting daylight and are wealthy in silicon — the uncooked materials for the semiconductors from which photo voltaic cells are made. One other profit to putting in photo voltaic panels within the desert, in response to a 2018 research, is that it could create a extra humid setting that causes vegetation to unfold to fight desertification.
Masdar Metropolis: The UAE’s aerospace and inexperienced know-how zone
Developed by Masdar, Abu Dhabi’s Masdar Metropolis is without doubt one of the world’s most sustainable city communities, providing a strategic base by way of which firms can construct their networks regionally and globally and might discover a number of funding alternatives and take a look at modern new applied sciences from inception by way of to implementation to assist the UAE diversify its financial system.
Housing a free zone space, the town has greater than 900 organizations, from worldwide conglomerates to startups, growing modern applied sciences within the areas of vitality, water effectivity, mobility, area, blockchain know-how and synthetic intelligence to deal with the world’s most important sustainability challenges in additional than 30 nations.
UAE Area Company
Based mostly in Masdar Metropolis, the UAE Area Company contributes to supporting a sustainable nationwide financial system by growing satellites utilized in pure useful resource mapping, environmental monitoring, land-use planning and safety, and it has additionally launched a probe to Mars.
Digital financial system
The UAE authorities has made the digitization of its financial system a precedence with the intention to deliver effectivity to authorities, creativity to business, and construct worldwide management. To perform this objective, the UAE has established in Masdar Metropolis the world’s first graduate-level, research-based synthetic intelligence college, Mohamed bin Zayed College of Synthetic Intelligence, which welcomed its first college students in January 2021.
The UAE additionally adopted the Emirates Blockchain Technique 2021 and The Dubai Blockchain Technique, which have undertaken a number of blockchain tasks. SustVest is a crowd-investing blockchain-based platform that lets folks spend money on photo voltaic tasks and earn returns from shoppers who use their funding to put in photo voltaic panels. The corporate is predicated within the Dubai Silicon Oasis Authority and has constructed its answer on the Nem blockchain. Its founder, Hardik Bhatia, defined:
“The worldwide rooftop photo voltaic phase is booming with alternatives, and is valued at over $66 billion. Rising economies want to transition to photo voltaic because it provides a inexperienced and low cost various to standard vitality sources. SustVest allows this transition in rising economies by crowdfunding rooftop photo voltaic tasks in rising economies on its platform. We tokenize photo voltaic tasks granular to the extent of particular person photo voltaic cells, and buyers buying these tokens can earn dividends generated by the sale of electrical energy from these particular person photo voltaic cells. We’re opening the gates for retail funding into photo voltaic area, and we achieve this by tokenizing the tasks to cut back the barrier of entry and making a secondary market for offering liquidity to buyers.”
The Central Financial institution of the United Arab Emirates, together with the Saudi Central Financial institution, is growing a state-backed bilateral central financial institution digital forex, “Aber.” Aber is initially set to assist the UAE and Saudi Arabia make more cost effective bank-to-bank, cross-border funds and monetary settlements utilizing blockchain know-how on a probationary foundation, and in response to official statements, it will likely be completely obtainable to a restricted variety of banks. Ultimately, Aber can be used globally on China’s blockchain-based service community, or BSN, which is able to help future CBDCs from varied nations such because the UAE.
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Crypto-asset laws within the UAE
The UAE prioritizes blockchain and distributed ledger know-how and has launched varied associated ventures, particularly for the reason that COVID-19 pandemic. Nonetheless, cryptocurrency regulation within the nation stays restricted.
Towards the top of 2020, the UAE’s Securities and Commodities Authority, or SCA, printed “The Authority’s Chairman of the Board of Administrators Choice No. (21/R.M) of 2020 In regards to the Regulation of Crypto Property.” The SCA’s resolution lays out its licensing regime for anybody who needs to supply crypto property inside the UAE, together with exchanges, crowdfunding platforms, preliminary coin choices, custodians, and different providers that use crypto property.
The Monetary Providers Regulatory Authority, or FSRA, of the Abu Dhabi World Market considers crypto property to have traits like these of shares, which means they’re to be handled as securities and are topic to info disclosure necessities associated to threat and transactions. Alternatively, utility tokens and non-fiat cryptocurrencies are thought-about commodities and usually are not topic to market laws. Legislation No. 20 of 2018 on Anti-Cash Laundering defines laundered funds to be property in no matter kind, together with digital currencies. Article 3 of Legislation No. 8 of 2017 on value-added tax imposes a 5% tax on imported and exported commodities. This tax could apply to utility tokens and non-fiat cryptocurrencies, because the FSRA considers them to be commodities.
The UAE doesn’t have a signed tax treaty settlement with america. Nevertheless, in response to the Conduct of Enterprise Rulebook, crypto-asset companies are obligated to declare worldwide earnings for tax functions in response to the necessities of the intergovernmental International Account Tax Compliance Act settlement between the UAE and america.
A inexperienced restoration is an absolute crucial for a sustainable social and financial future within the post-pandemic world, as identified by Alok Sharma, president of the twenty sixth United Nations Local weather Change Convention of the Events — higher often known as COP26 — who praised Masdar’s undertakings in growing inexperienced vitality applied sciences.
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Discovering financing for this inexperienced transition will probably not be too difficult, in response to Khaldoon Khalifa Al Mubarak, managing director and group CEO of Mubadala Funding Company. As a result of a tectonic paradigm shift has occurred for the reason that COVID-19 pandemic, with the markets pricing local weather threat into the worth of securities, there’s a elementary reallocation of capital towards sustainable investing to make sure a inexperienced restoration in a post-COVID-19 world. As Laurence Fink, chairman and CEO of BlackRock — the world’s largest asset supervisor — identified:
“I imagine that the pandemic has introduced such an existential disaster — such a stark reminder of our fragility — that it has pushed us to confront the worldwide risk of local weather change extra forcefully and to think about how, just like the pandemic, it would alter our lives. It has reminded us how the most important crises, whether or not medical or environmental, demand a world and bold response.”
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