UAE crypto bet is a new twist on AI infrastructure
LONDON, March 13 (Reuters Breakingviews) - Abu Dhabi's burgeoning obsession with artificial intelligence just took something of a detour. The richest of the United Arab Emirates said on Wednesday that its MGX investment vehicle was paying, opens new tab $2 billion to acquire a minority stake in cryptocurrency exchange Binance. That puts quite a new twist on MGX's prior focus on AI infrastructure, even if in pragmatic geopolitical terms it might qualify as a logical move.
Since launching last year MGX, an offshoot of Abu Dhabi's $330 billion sovereign wealth fund Mubadala and chaired by the powerful Sheikh Tahnoon bin Zayed al-Nahyan, had seemed squarely focused on AI. That took in investments in SoftBank Group and OpenAI's $500 billion AI data centre project in the United States, plus Elon Musk's xAI. MGX's potential horizons are admittedly quite broad – taking in spending on semiconductors and applications such as data, life sciences and robotics. Even so, betting on Binance due to what the Abu Dhabi group describes as a 'commitment to advancing blockchain's transformative potential for digital finance' still seems a new direction.
Binance has a colourful backstory. It pled guilty in November 2023, opens new tab to money-laundering control lapses and was fined $4 billion, and founder Changpeng Zhao served time in a U.S. prison. The part MGX is now backing is a separate entity to the U.S. exchange, and Binance has a new CEO who previously served as CEO of the Abu Dhabi Financial Services Regulatory Authority. Yet the nature of the investment is itself unusual. It's being done via stablecoins - digital currency pegged to a sovereign currency like the dollar – with the counterparties refusing to disclose which type of stablecoins were used.
Abu Dhabi's punt may make sense on its own terms: blockchain, the technology behind cryptocurrencies, can securely store data crucial to powering AI. But a clearer logic for the move is two sorts of pragmatism. One is that the UAE has long wanted to be a crypto hub, opens new tab. In December, the state introduced its first UAE dirham-backed stablecoin – AE Coin, approved by its own central bank. The Middle East & North Africa region made up 7.5% of the world's total crypto transaction volume between July 2023 and June 2024, according to Chainalysis, opens new tab. And a fifth of Binance's 5,000 staff are based in the UAE.
Meanwhile, Abu Dhabi's strong links with the U.S. have guided its strategy before. Last year, a Washington-brokered deal between MGX, Microsoft and BlackRock aimed to raise up to $100 billion to invest in AI infrastructure. Under U.S. President Donald Trump the U.S. is newly enthusiastic about crypto, and a Securities and Exchange Commission civil lawsuit against Binance has been put on hold. Even if it looks odd, Abu Dhabi's punt is in tune with the times.
Follow @karenkkwok, opens new tab on X
CONTEXT NEWS
Abu Dhabi-backed investment group MGX has made a $2 billion cryptocurrency investment in Binance, the companies said on March 12.
The deal, which Binance called its first institutional investment, is one of the largest ever in the crypto industry. It will see MGX become a minority shareholder after making the investment in stablecoin - a type of cryptocurrency pegged to a fiat currency such as the dollar.
A Binance spokesperson declined to comment on "the agreed governance rights" or the size of MGX's stake, or on which stablecoin was used for the investment.
MGX also declined to comment.
Binance, founded in 2017 in China by billionaire Changpeng Zhao, grew into the world's biggest crypto exchange after tapping into soaring demand for trading bitcoin and other cryptocurrencies.
Zhao, known as "CZ", pleaded guilty to violating U.S. laws against money laundering at Binance, and spent months in jail last year.
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