Abu Dhabi’s sovereign wealth fund Mubadala Investment Capital is dipping its toes in crypto waters with an investment in MidChains – a cryptocurrency exchange scheduled to launch later this year. The deal is Mubadala’s first investment in a cryptocurrency startup and comes in the middle of “challenging market conditions” for the firm.
MidChains plans to offer trading and custody services for cryptocurrencies. It received regulatory approval from authorities the Abu Dhabi Global Market’s (ADGM) Financial Services Regulatory Authority in May of this year and will be a fully-regulated exchange when it launches later this year. MidChains plans to raise more capital later this year but has not disclosed future investors.
MidChains is not the first cryptocurrency exchange in the UAE or the Gulf region. BitOasis, a Dubai-based exchange, has been operating in the region since 2015. Another exchange, Rain Financial, was launched last year to specifically cater to institutional investors in the region.
Regulation of cryptocurrencies, which was notably absent earlier in discussions about cryptocurrencies, is also changing in the region.
Earlier this year, the UAE government announced its intention to clarify their status and encourage investment and growth of the asset class. The country is already emerging as a center for coin offerings. In Q1 2019, about a quarter of all funds raised via ICOs, which is about $210.5 million, came from the UAE.
“If I bring this (crypto uptake) down to the GCC, I think that there is a hesitation and there is a lot of white space still available. I think if investor concerns are addressed, and the chief concern being oversight…then appetite will increase in the region,” Basil Al-Askari, CEO of MidChains, told Gulf News. Al-Askari also underwrites private equity investments for the Mubadala fund in addition to his duties at MidChains.
“At the end of the day, people are comfortable with existing investment asset classes because adequate oversight is there, and we’re starting to see that adequate oversight come into the crypto space,” he said.