Navigating the future of digital assets with PwC

Virtual Asset Service Providers (VASPs)

Publication
January 09, 2024

The dynamic fintech landscape offers unique challenges and opportunities for Virtual Asset Service Providers (VASPs). We understand both and our expertise lies in guiding VASPs through the complexities of regulatory compliance, market entry strategies, and growth optimisation. Here, we explore the global and regional trends shaping the world of virtual assets, delve into targeted customer segmentation, and showcase how PwC’s integrated team support can be your cornerstone in the evolving digital asset ecosystem.

Global, regional and local trends in virtual assets

Global trends

In spite of recent market turbulence and regulatory pressure, virtual asset adoption is moving from the fringes of finance to the largest institutions in the world, driven by macro factors:

Regional trends

A subset of regional factors are creating the ‘pull’ for adoption of virtual assets and associated business models.

Expansive virtual assets ecosystem

Government investments, clear strategies, ease of doing business and favourable tax regimes, have attracted more than 1,400 virtual assets and Web3 companies to the UAE.

Regulatory clarity

The UAE has a comparatively clear regulatory regime and welcoming stance. Companies from hostile jurisdictions are migrating here to establish regional/global headquarters.

Institutional investors and FIs entering the market

Traditional financial institutions and banks are exploring opportunities to enter the virtual assets space with multiple services, such as accounts opening for VASPs, brokerage and custody services.

Currency devaluation in some MENA countries

Currency devaluation in Turkey and Egypt has strengthened the appeal of virtual assets (stablecoins) to preserve savings.

Local market trends

While the global market prepares for its cyclical resurgence, the local virtual assets market is strategically positioned to capitalise on growth. The crypto asset market has historically exhibited a four-year cyclical pattern – one year of a bear market, followed by three years of market recovery and growth – fuelled by technological and regulatory developments and accelerated by halving events.

Local trends signal that the UAE is strategically positioned to capture market growth

The UAE continues to lead in terms of regulatory clarity surrounding virtual assets service provision.

1,400+ VASPs are setting up local operations in the UAE.
(Source: CryptoOasis)

Local banks now look to commence virtual assets service provision in the UAE

While Virtual Asset Service Providers in the GCC are supported by a vibrant ecosystem, they also face challenges in operating and growing

Challenges

Virtual Asset Service Providers performing regulated activities will need to be licensed and comply with regulatory requirements.
Due to the high-risk profile of virtual assets activities, institutions and financial institutions are concerned about the potential risks of partnering with Virtual Asset Service Providers .
Virtual Asset Service Providers with inadequate controls are perceived as high risk and are far less likely to have their product applications accepted.
Virtual Asset Service Providers, like many other start-ups and tech companies, continue to face challenges in raising capital.

PwC offers a uniquely integrated team of cross-functional virtual assets specialists to support Virtual Assets Service Providers in entering the market, meeting compliance requirements and achieving growth targets

Positioning and blueprint development based on an in-depth market analysis.
Development of a scalable business model aligned with the global virtual asset environment.
Roadmaps for entry into new markets/product development, aligned with local regulations and market conditions.
Target operating models (processes, technologies, capabilities, governance and education) and execution.

Integration and product deployment support.

Technology strategy, resilience, security, governance and implementation support including selection, quality assurance and partnering with vendors.

Regulatory framework navigation across jurisdictions of interest in the GCC.
Regulatory compliance gap assessment, recommendations, and implementation support.
Risk assessment framework and risk scoring engine.
Financial crime controls enhancements – assessing, reporting and implementation support.
Regulatory compliance and financial crime compliance framework maturity assessment.
Support to meet regulatory and compliance obligations for licence applications.

Partnership and alliance strategies to build a robust presence and foster growth.
Identifying opportunities for scalability and product development.
Defining capital strategies and funding opportunities to enable expansion and scalability.
Technical due diligence and partner selection support for third-party strategic partnerships.
Identification and assessment of market expansion opportunities by white-labelling infrastructure.