Cryptocurrencies should be regarded as high-risk investments, Dubai financial regulator says

Bitcoin is a digital currency that enables individuals to transfer value to each other and pay for goods and services, bypassing banks and the mainstream financial system. (Reuters)
Updated 14 September 2017
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Cryptocurrencies should be regarded as high-risk investments, Dubai financial regulator says

DUBAI: Dubai’s financial regulator on Wednesday cautioned potential investors the risks associated with online products involving cryptocurrencies, which it described as “high-risk investments.”
“The DFSA would like to make it clear that it does not currently regulate these types of product offerings or license firms in the Dubai International Financial Center, DIFC, to undertake such activities,” the Dubai Financial Services Authority said in a statement.
“Before engaging with any persons promoting such offerings in the DIFC, or making any financial contribution toward such offerings, the DFSA urges potential investors to exercise caution and undertake due diligence to understand the risks involved.”
The regulator said that these products usually involve the issuance of some form of virtual coin, token or other symbol of virtual currency in return for payment of a subscription price, and are offered to the public through fundraising events referred to as ‘Initial Coin Offering,’ ‘Initial Token Offering’ or ‘Token Sale’.
“The DFSA wishes to highlight that these types of product offerings, and the systems and technology that support them, are complex. They have their own unique risks, which may not be easy to identify or understand,” DFSA said.
“Such risks may increase where offerings are made on a cross-border basis. These offerings should be regarded as high-risk investments.”
Earlier this week Jamie Dimon, the chief executive of JPMorgan Chase & Co, described bitcoin as a ‘fraud’ and was ‘worse than tulips bulbs,’ referring to a famous market bubble from the 1600s.
“The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” Dimon said at a banking investor conference in New York.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.