"I Bought a New Apartment with Bitcoin"... Dubai Attracts Global Companies and Capital with Convenience and Low Taxes [Regulation-Free City, Mega Sandbox] ⑨

The Government Actively Conducts Regulatory Easing Experiments
Blockchain and Virtual Assets Viewed as New Growth Tools
"Free Zones" as Economic Hubs Offering Various Benefits to Companies

In Dubai, United Arab Emirates (UAE), it is possible to purchase an apartment using Bitcoin. Government-approved intermediary platforms convert cryptocurrency into the local currency, the dirham (AED), to settle payments. Recently, there has also been a growing trend of fractional investments, where high-value real estate is divided into blockchain-based tokens, allowing multiple investors to share ownership stakes.

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Active Embrace of Virtual Assets and New Industries... Capital Flows into Dubai

The Dubai Land Department is currently promoting a tokenization project as a sandbox initiative, enabling real estate to be divided and traded as blockchain-based "digital tokens." The strategy aims to reduce transaction costs, enhance transparency, and attract private capital scattered around the world.

Various public service fees, such as city hall civil petitions and court document issuance, can also be paid using virtual assets. This became possible after Dubai's Department of Finance signed an agreement with the cryptocurrency exchange Crypto.com in May and officially introduced the payment system. The difference in approach to blockchain and virtual asset policies between Dubai and South Korea is stark.

The Dubai government views blockchain and virtual assets not as "dangerous technologies," but as "new growth tools." With the Department of Finance and Land Department leading the way by choosing experimentation over regulation, it is expected that the tokenized real estate market will reach $16 billion by 2033.

Dubai, one of the seven emirates of the UAE, continues its relentless drive to ease regulations. As its nickname, "Miracle of the Desert," suggests, Dubai has long pursued pro-business policies that encourage foreign investment and foster growth under the stable leadership of a monarchy. The creation of the world's first Minister of Artificial Intelligence (AI) in 2017 is an extension of this approach.

Ahmad Bin Sulayman (second from left), Chairman of the Dubai Multi Commodities Centre (DMCC), is answering questions from the press after signing a memorandum of understanding with the National IT Industry Promotion Agency (NIPA) at COEX, Seoul on the 10th of last month. Photo by Kim Bokyung

The recent relaxation of Bitcoin regulations by Dubai's Department of Finance demonstrates a clear understanding of the benefits of regulatory easing. The influx of advanced technology and foreign capital has led to not only job creation but also population growth, signifying an expanding market. The main reason why South Korean businesses have called for a "mega sandbox" is the expectation that jobs will be created where businesses cluster, and as jobs increase, more people will be attracted, resulting in a virtuous cycle. Dubai exemplifies the effects of a mega sandbox. In August, Dubai's population surpassed 4 million. Notably, 6 out of 10 residents are young people aged 25 to 44. The city is home to 81,200 millionaires and has been recognized as the city with the fastest-growing population of wealthy individuals.

Active Attraction of Companies to Industry-Specific Free Zones... "Operated with a Long-Term Vision"

The core of Dubai's deregulated economy is its more than 30 free zones. Companies from around the world cluster in these zones, which are divided by major industries such as digital economy, finance, and trade, serving as innovation laboratories and gateways for attracting global enterprises. Free zones are special economic areas where foreign companies can conduct business freely without tax burdens. They are categorized by sector-ports, airports, finance, IT, and more-and operate as independent districts with their own laws and administrative systems.

In 2015, the Dubai government established the Free Zone Committee to adjust strategies and licensing standards. Companies within free zones can be 100% foreign-owned and are allowed to remit all profits and capital abroad. Exemptions from customs duties and corporate taxes, English-based administrative procedures, and one-stop licensing services provided by free zone authorities are also guaranteed.

Dubai's free zones are also arenas for competition among royal family members. Royals and influential families in charge of each free zone directly attract foreign companies and design industrial ecosystems, as free zones serve as platforms to demonstrate governance and influence. While their creation was led by the royal family and government, their survival depends on their own competitiveness. Free zones specializing in ports, airports, finance, and information technology compete by offering investment incentives and administrative efficiency.

Free zones have expanded beyond port-based models to include various industries. The Dubai International Financial Centre (DIFC), a financial hub, applies the British common law system, allows 100% foreign ownership, and exempts companies from corporate taxes, attracting global financial institutions, law firms, and accounting firms. The Dubai Airport Free Zone (DAFZ), adjacent to the airport, has become a base for electronics and aviation logistics companies. Established in 2002, the Dubai Multi Commodities Centre (DMCC) has grown to become the largest free zone, housing 26,000 companies.

The International Free Zone Authority (IFZA) is a recently incorporated free zone in Dubai. It was initially established in 2018 in Fujairah, another emirate of the UAE, but relocated its headquarters to Dubai in 2020 in cooperation with the Dubai Silicon Oasis (DSO) Free Zone.

Ahmad Bin Sulayman, Chairman of the Dubai Multi Commodities Centre (DMCC), a representative free zone in Dubai, stated, "Free zones are operated with a long-term vision, looking 10 or 20 years ahead." DMCC is rapidly transitioning from traditional gold and diamond trading to new industrial ecosystems such as blockchain, gaming, and Web3 industries.

In the first half of this year, 1,081 companies newly registered at the DIFC, now home to over 7,700 firms, including financial institutions, law firms, accounting firms, and consulting companies. This is the fastest growth rate since the establishment of the DIFC. Dubai has chosen autonomy over regulation and decentralized experimentation over centralization.

Construction of high-rise buildings continues in downtown Dubai. New landmarks for other free zones are rising among the already dense skyscrapers. Dubai is relentlessly pursuing its "economic experiment" to attract global businesses and capital.