Dubai’s Khaleej Times reported on September 16th that authorities in the United Arab Emirates (UAE) are currently investigating a 300 million Dirhams ($81.68 million) cryptocurrency scam. Although the local news outlet did not provide any specific details regarding the digital currency fraud case, it said that police officials in Dubai, UAE’s economic hub, had issued a warning about crypto-related scams.

The warning noted that people should be aware of the significant risks associated with “unmonitored large-scale transactions” involving cryptocurrencies as they can potentially “expose users to fraud, piracy, and money laundering.”

Crypto Regulations “In Line” With Blockchain Strategy

“Lack of community awareness” about the risks involved in cryptocurrency transactions can expose users to various cybercrimes, according to Dubai’s criminal investigation department (CID) assistant commander, Major-General Khalil Ibrahim Al Mansouri.

In order to monitor and regulate the use of cryptocurrencies, local cybersecurity experts recommended establishing a supreme national committee. UAE’s internet security advisors also suggested that the laws and legal framework pertaining to digital assets should support the Emirates Blockchain Strategy.

As covered on CryptoGlobe, the UAE’s blockchain initiative is aimed at conducting at least half of all banking transactions in the Middle Eastern country on a blockchain-based system by 2021.

Additionally, the panel of security consultants advised that the UAE consider issuing a state-backed digital currency, which should be developed using distributed ledger technology (DLT).

No “Guarantees” For Protection Against Fraud

The group of cybersecurity professionals also recommended updating the nation’s Anti-Money Laundering (AML) / Know-Your-Customer (KYC) and Counterterrorism laws in order to (explicitly) prohibit the use cryptocurrencies in financing illicit activities.

While the government cannot give any “guarantees” that local investors will be protected from crypto-related fraud, it aims to increase public awareness about the increasing number of scams associated with digital assets, the head of general security in Dubai, Lt-Gen Dhahi Khalfan Tamim said.

Commenting on the substantial growth and adoption of cryptocurrencies, Tamim noted that authorities throughout the world had issued multiple warnings regarding the risks involved in their loosely regulated market.

The security head noted:

Investigations show that gangs can use digital currency in suspicious financial transactions like money laundering, drug trafficking and funding of terrorist operations.

Lt-Gen Dhahi Khalfan Tamim

Electronic Money To Replace Cash

Tamim added that electronic money transfers, or payments, would eventually reduce the number cash transactions, however, trust issues with digital currencies will remain until there is an effective way to track and accurately identify their senders and recipients.

Dr. Saeed Al Dhaheri, chairman of the Dubai SmartWorld, a digital smart service provider focusing on digital economic growth, called on the city’s regulators to prioritize the drafting of cryptocurrency regulations.

Al Dhaheri emphasized that UAE’s authorities should be among the first in the world to establish a regulatory framework for cryptos, as the nation is recognized as a leading global economic hub. He also pointed out that 56% of crypto firms had shut down just four months after starting their operations.

The SmartWorld chairman went on to note that most of these new so-called blockchain startups were fake, or a fraud. Al Dhaheri revealed:

For every one successful digital transaction, there are five failed currencies.

Dr. Saeed Al Dhaheri

Even though there may be serious risks involved with trading digital assets, there appears to be a lot of interest and demand for them in the UAE. As CryptoGlobe reported, the First Islamic Cryptocurrency Exchange (FICE) was launched recently by ADAB Solutions, a UAE-registered financial firm.