Due to clear leadership and blockchain strategies going forward. UAE also exhibits a wide variety of use cases. Much like other jurisdictions in this report, the UAE has strong ambitions to become the go-to destination for blockchain-related businesses going forward. Already a hub for financial and technological innovation, the latest policies implemented in the region suggest strong support for blockchain.
Emirates Blockchain Strategy 2021
In April 2018, the UAE Government launched the Emirates Blockchain Strategy 2021. The strategy aims to capitalise on the blockchain technology to transform 50% of government transactions into the blockchain platform by 2021. By adopting this technology, the UAE government expects to save:
• AED 11 billion in transactions and documents processed routinely
• Reduce 398 million printed documents annually
• 77 million work hours annually
The UAE will use blockchain for digital transactions, giving each customer a unique identification number that points to their information on the secure chain. Information and data on the blockchain cannot be hacked or changed, which will ensure the digital security of national documents and transactions and eventually reduce operational cost and accelerate decision-making.
AI and Blockchain Guide initiative & National Programme for AI and Blockchain Capacity Building
In November 2018, at the second UAE Government Annual Meetings, the AI and Blockchain Joint Working Group announced the launch of two government initiatives. The AI and Blockchain Guide initiative aims to provide a standardised definition of Artificial Intelligence and blockchain at the federal level. It also targets acquainting relevant entities with the concepts of Artificial Intelligence and its multiple uses. The guide will be provided to all smart local entities nationwide. The National Programme for AI and Blockchain Capacity Building aims at providing educational university programmes and scholarships in the field of artificial intelligence and blockchain, in cooperation with the Ministry of Higher Education. It further offers specialised one-day or one-week training programmes to train Emirati staff across all professional levels, and seeks to integrate Artificial Intelligence in the different stages of education.
Global Blockchain Council
In Dubai, the lack of legal certainty around blockchain technology formerly made it difficult for businesses to form a clear strategy for its development and use. There is a need for a platform that opens the way for knowledge sharing and best practices. As a result, in February 2016, the Dubai Future Foundation launched the Global Blockchain Council, where both private firms and public stakeholders can understand the technology better, its implications and impacts, and the way forward in terms of experimentation, institutional support, and drafting the future of regulation. This forum aims to facilitate the development of public-private partnerships (PPPs) while creating a stable ecosystem around blockchain. As a result of this initiative, 15 pilot projects have already been supported by the Dubai Future Foundation in the past 18 months.
Dubai Blockchain Strategy
In 2017, the Smart Dubai Office in collaboration with the Dubai Future Foundation, launched the Dubai Blockchain Strategy, a government strategy to make Dubai the first city fully powered by blockchain by 2020. The strategy is based on 3 pillars: government efficiency, industry creation, and international leadership. As part of this strategy, the Smart Dubai Office is working with IBM and Consensys to conduct workshops with key government, semi-government and private organisations in Dubai to identify and prioritise the services that can be most enhanced by the application of blockchain technology.
In October 2018, following this Strategy, the Smart Dubai Office announced the launch of the Dubai Blockchain Platform, the first government-endorsed blockchain platform as-a-service in the UAE. Delivered through an IBM Cloud environment and built locally in the UAE, the enterprise-ready platform will serve as a stepping stone for organisations in the UAE and globally to transition their blockchain testing and development into full-production. It will transfer and digitise applicable government processes and citizen services.
Interview with Muhammad Salman Anjum, Director Operations, Avantas Technology Accelerator
Which specific use cases/applications are being implemented in Dubai’s public sector? What benefits have been seen so far, if any?
I will start from the very beginning of the journey for Dubai and the United Arab Emirates (UAE). Dubai is one of the seven Emirates States which form the UAE. In 2016, Dubai’s policymakers saw the opportunities of blockchain to improve the efficiency of governance and automation. Using a top down approach, they established a benchmark that, by 2020, Dubai will be a blockchain-powered city. The technology will be used in the backend operations of the entire Dubai Government. In April 2018, the UAE established its own benchmark, aiming for 50% of all Government transactions at the federal level to be processed on a blockchain network by 2021. Now both the Dubai and UAE government-level strategies are moving forward in parallel and complement each other as they share experiences.
By implementing Blockchain, UAE is expecting to save time, effort and resources and facilitate people to process their transactions at the time and place that suit their lifestyle and work. They are doing it on the basis of estimated ROI (return on investment) and they are are expecting to save:
- AED 11 billion in transactions and documents processed routinely;
- 398 million printed documents annually; and
- 77 million work hours annually.
On the use cases at the government level, it is important to note that cryptocurrencies are not encouraged here and that blockchain technology is rather being used as an automation tool. Some use cases include:
- Dubai Pay — a reconciliation application for all Dubai government entities and authorities;
- Dubai Vehicle Chain — would manage the entire lifecycle of vehicles being used in Dubai;
- The Dubai Land Department is using blockchain for multiple purposes, such as land registries, e-mortgage systems etc;
- The Dubai Immigration Department is aiming for everyone coming in and out of Dubai to be recorded on a blockchain; and
- The KHDA (Knowledge & Human Resource Authority) in Dubai is also putting educational records & certificates on blockchain.
Most of these applications are currently at the pilot stage. As things are progressing, by the end of 2020 or into 2021, they are expected to go live in production.
The blockchain ecosystem is being deployed very systematically. The Departments mentioned above are supported by the Smart Dubai Office and Dubai Future Foundation, which provide aid to these digital initiatives and transformative solutions. These two bodies have founded the Global Blockchain Council, which promotes the ecosystem and coordinate actions between the various departments, preventing developments in silos.
Do you expect most pilot tests to progress to the next stage?
There are always lessons learned. It is an evolution, not a revolution. We have been fortunate enough that there has been no true failures yet from all the blockchain projects initiated by Dubai’s government. All projects are still live and look positive to go live at the production standard. The Government is not just coming up with applications for the technology but effectively dealing with other aspects too, such as the formulation of a National Blockchain Strategy and Policy Framework for governance.
What do you consider to be key factors in successfully implementing widespread blockchain/DLT adoption?
- Top Down Approach — Dubai is promoting blockchain adoption through a top bottom approach. Dubai’s policymakers knew they had to do something with this particular technology and established the goals, action plans, strategy and policies.
- Education & Ecosystem Creation — It is important to get educated and promote awareness in this technology. From 2017 to till now, Dubai hosted more than a hundred different events and conferences on blockchain. These events have created a massive awareness and harnessed the ecosystem of people and projects in blockchain space. I doubt there is any other city in the world with this number of blockchain-related conferences held in the last two years. The annual Future Blockchain Summit in Dubai is major event in blockchain calendar.
- Readiness for the Digital Transformation — For the last five years, Dubai has been looking at digital transformation solutions very aggressively. Many government initiatives like Accelerator & Incubation programs have been established. So they are not only focusing on blockchain as they are equally giving importance to AI, data analytics and IoT. Blockchain is no doubt high on the list.
Has Dubai introduced any specific regulations or initiatives to deal with blockchain/DLT? Could you expand on what you think the right level of regulation should be? Have you seen this reflected in the institutions’ actual approach to regulation? Do you find Dubai’s regulatory framework is ready for blockchain technology, or do you need to amend existing reg or make specific one?
First of all, we must understand who are the legal entities that take care of the regulatory side. There are three, mainly the: Central Bank of the UAE, Abu Dhabi Global Market (ADGM), Dubai International Financial Centre (DIFC).
The Central Bank is very unclear on how to deal with cryptocurrencies. At the moment there is sort of a ban on any kind of sale and purchase of cryptocurrencies through banking accounts. All banking institutions are instructed not to do accept any crypto through their channels.
However, at the OTC level, i.e. crypto-assets business in general, these are governed by a set of regulation recently published by the ADGM. These entities are considered Operating Crypto-asset Business (OCAB) and must follow the guidelines and be licensed by the authority.
The DIFC is currently working on its own crypto regulations for Dubai. A Report is expected to be published in mid-October, in partnership with Smart Dubai Office.
When we talk about regulations for blockchain, I think it’s important to stress that we are talking about one application of blockchain, which are crypto-assets. You can’t regulate technology as you won’t hear regulations for operating systems or database systems. Similarly, regulation should not be meant for the technology side, but rather to deal with the crypto-asset side (including custody, buying and selling and issuance such as ICOs).
The upcoming Report will clarify Dubai’s position in regards to crypto-assets. It is expected to open up a lot of opportunities. Dubai does not want to miss out while other jurisdictions, such as Switzerland and Singapore, move forward with their crypto regulations.
Is there one particular Department appointed to lead on this issue? Would that be a good idea?
Smart Dubai Office is sort of the backbone of the various Government Departments’ blockchain initiatives. These are also supported by the Dubai Future Foundation. The two bodies created a consul, which help the harmonisation of initiatives and policies. They are working together in the lead up to three upcoming Reports:
- The already mentioned DFIC Report on crypto-assets in mid-October;
- Report on the policy framework for the implementation of blockchain, which is expected this November;
- Report on the future of blockchain initiatives in Dubai.
Do you see any major political challenges preventing wider adoption?
Dubai is a very stable country when it comes to the political scenario. It is one of the main reasons this country is able to move very fast in decision making and in implementation. So we are unlikely to see a sudden political change that would disrupt blockchain growth in the UAE in general.
His highness, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, is pushing for blockchain developments in Government. This motivates other policymakers to stay on schedule or even be one step ahead to be in implementation.
Are there ethical concerns or friction with Sharia law around the use of blockchain?
The adaption rate has not reached a sufficiently advanced stage yet to warrant ethical concerns, as most project remain at their pilot stage. Ethical issue may rise when some private banks or retail giants start to use blockchain, which would mean dealing with consumers’ personal data. But it is hard to see such concerns when looking at intra-governmental transactions. Within the Government, they are simply using it as an automation tool.
In terms of sharia compliance with crypto-assets, Dubai adoption of these assets remain small for now so we have not come across any friction. One could argue however that if we use blockchain as an automation tool for the Islamic banking sector, this may be even more beneficial for sharia-compliance than conventional banking. There is in fact a strong case for applying blockchain to Islamic financial systems. Why? Because Islamic finance requires double compliance: compliance with traditional financial regulation and sharia law. Blockchain helps to get to comply with both through its network. So I do not think there will be a big problem. The only regulatory struggle I see may be with the anti-money laundering aspects as the UAE, and the region at large, has been grappling with this issue for many years.
What is the plan in the short to medium term (next 5 years)? How do you see the space evolving in the next 5 years? How would you like the space to evolve?
I expect that both the Dubai and UAE blockchain strategies will at best achieve about 70% of their strategies in the given timeline. We are already reaching the fourth quarter of 2019, so this gives Dubai less than a year to complete its blockchain-related projects. However, the promise is there. In the first quarter of 2020, we are expecting the first ever blockchain-powered KYC Consortium, which will allow banks to input data that will be secured on the blockchain consortium.
Do you consider Dubai to be a global leader in public sector implementation of blockchain/DLT and, if so, why do you think that has been possible?
No doubt Dubai is leading the blockchain scene, especially in Government adoption for the last three years. However, some smaller size countries may have acted with faster pace in recent times. Another challenge for Dubai is that blockchain as a technology is still maturing and, according to research, it is expected that, by 2021, 90% of existing blockchain enterprise applications will require some kind of reconsideration in their infrastructure and strategy. So Dubai is investing heavily in blockchain at a critical stage when the technology is not that mature. This makes it a perfect breeding ground for blockchain ecosystem but also means other jurisdictions may wait and look at the implementation challenges in Dubai over the coming years and then leapfrog very quickly.
What is Dubai’s relation with other countries in the region in blockchain development?
ISO has a technical Committee, ISO/TC 307, which is working on the standardisation of blockchain technology. UAE is one of the most active members and provides the most input. Further, Smart Dubai Office is helping authorities of other countries in smart cities initiatives. So there is a lot of coordination with other governments and international bodies, including the European Union.
The World Economic Forum also has an office in Dubai, and they are working on a Report on blockchain initiatives, in partnership with Dubai.