Rachel Pether, Head of MENA at 3iQ, joins CNBC Arabia to discuss the growing role of UAE sovereign wealth funds in crypto, the country's evolving stablecoin ecosystem, and how single-token ETFs are opening doors to broader investor participation.
Sovereign Wealth Funds in the UAE Are Moving into Crypto
Sovereign wealth funds across the Middle East are beginning to engage more actively with digital assets, and the UAE is taking a leading role. In a recent interview with CNBC Arabia, Rachel Pether, Head of MENA at 3iQ, outlined how key sovereign entities are already making meaningful moves into the crypto sector.
"If you look at the three biggest sovereign wealth funds here, so, the Mubadala, ADQ, and ADIA, Mubadala has actually been active in the crypto space for more than five years. So, they did an investment on the venture side into MidChains, which was ADGM's first regulated crypto exchange. And then they had the $500 million last year into a Bitcoin ETF.”
ADQ has taken a different route, as they invested indirectly, through Further Ventures, which was a spin-off of ADQ. According to Pether, “In my opinion, they've been one of the most impressive digital asset investment firms on the venture side in terms of investment and incubation”.
However, not all sovereign funds have made the leap. Pether noted that entities like ADIA, despite years of exploration, are still navigating internal categorization challenges. “Is it in the commodities bucket, currencies bucket, equities, or hedge funds?” she asked. Until those questions are resolved, adoption may remain uneven.
Another factor holding some funds back is regulatory risk. Sovereign funds are experienced at managing investment risk, but “it’s the headline risk that they are concerned about,” Pether explained, referencing pension funds in Canada that faced backlash after investing in now-defunct companies like FTX and Celsius.
Clear Regulation Is Strengthening the UAE’s Crypto Position
While regulatory risk is a concern in some jurisdictions, the UAE is moving in the opposite direction. Pether emphasized that regulatory clarity in the region is rapidly becoming a catalyst for institutional participation.
“The UAE now has arguably some of the best regulatory regimes that there is out there,” she said, pointing to ADGM and Dubai’s VARA, as well as the growing role of the DFSA and RAK DAO. The combination of top-down support from regulators and bottom-up momentum from startups and companies relocating to the region is fueling an ecosystem-wide shift.
Pether also highlighted the Central Bank’s efforts in issuing stablecoin regulation, saying this dual approach is setting the UAE apart from regions still struggling with regulatory uncertainty.
Stablecoins Backed by Trust and Utility
The UAE’s push into stablecoins reflects both a maturing market and an expanding regulatory vision. Pether pointed to the AE Coin, launched last year and backed by the Central Bank, as a key example.
“With full on-chain transparency and full backing by reserves, that’s going to give a lot of investors comfort in the space,” she said. She stressed that the true value of stablecoins lies in their utility and how widely they are used and accepted.
Corporate adoption is already underway, and more initiatives are on the horizon. A recent announcement revealed that ADQ, IHC, and FAB are preparing to launch their own stablecoin, regulated by the Central Bank. Pether acknowledged this move introduces a complex debate around whether sovereign wealth funds should be issuing stablecoins.
“There are many advantages,” she noted. “It’s like classical liquidity management... you issue a portion of your liabilities at interest-free, invest that at the risk-free rate, and increase your return on equity.”
Sovereign entities in the UAE also have high credit ratings and are trusted by the public, making them credible issuers. Their direct line to the Central Bank offers further stability in terms of managing capital flows and protecting currency pegs.
Still, fragmentation remains a risk. Pether warned that without interoperability between stablecoins, liquidity will suffer. “Fragmented networks don’t work in any situation, especially stablecoins,” she said.
The collaboration between ADQ, IHC, and FAB may help mitigate that risk. “FAB is one of the UAE’s largest banks,” Pether said, suggesting the involvement of a credible financial institution may boost both adoption and cohesion.
Balancing Sovereign and Private Sector Innovation
One tension that emerged in the conversation is the potential for government-linked entities to crowd out private innovation.
“When you have this consortium of government-linked entities which control $900 billion US dollars of assets, what’s that going to do for private sector innovation?” Pether asked. She referenced similar concerns in the mining sector, where state-level entrants like Bhutan and El Salvador now compete with the private sector under vastly different cost structures.
As the UAE becomes a crypto leader, Pether emphasized the need to maintain space for private actors, especially in light of the global divergence in regulatory attitudes. “The US with the GENIUS Act is now really encouraging private sector innovation,” she said, while Europe follows a more centralized, sovereign-led approach.
“This opens the door for local and regional champions,” Pether added, expressing optimism that the UAE will continue to be one of them.
ETFs: Expanding Access for Traditional Investors
In closing, the conversation turned to 3iQ’s own efforts to bring more investors into digital assets through regulated ETFs. The company has launched single-token ETFs for XRP, Solana, and others.
“The key thing about ETFs is it is bringing more investors into the space that might have been sitting on the sidelines,” Pether said. Many investors are not comfortable managing their own keys, custody, or navigating crypto exchanges, but a regulated ETF can offer them an easier path in.
Pether pointed to the XRP ETF as an example of demand. “Within the first month, it’s over 50 million US, which shows there was a lot of demand sitting on the sidelines,” she said.
As ETFs continue to evolve and regulatory approval expands, these instruments could bridge the gap between traditional finance and crypto-native assets.
Conclusion
With regulatory clarity, sovereign fund engagement, and innovation in stablecoins and ETFs, the UAE is positioning itself as a global leader in digital assets. As Rachel Pether of 3iQ made clear, the region’s unique combination of top-down policy and bottom-up innovation offers a model that other countries may soon follow. The challenge now is to ensure the public and private sectors continue to grow in harmony, preserving space for innovation while building a secure and regulated future for crypto.
Watch the full interview.