Binance joins hands with the UAE royal family: Sovereign fund MGX invests $2 billion to enter the crypto market, is Binance "making friends" with a low valuation?

Author: Nancy, PANews

After several acquisition rumors, Binance officially announced on the evening of March 12 that it had received a $2 billion investment from Abu Dhabi investment institution MGX (Mubadala G42 X). This is the first time in Binance's history that it has introduced institutional investment, and it also set a record for the highest single investment amount in the crypto industry to date. This transaction not only injected ample funds into Binance, but also brought strategic endorsement, resource support and policy protection from the UAE's sovereign capital.

Binance welcomes the strongest capital from the UAE, MGX invests $2 billion to enter the crypto market

On March 12, Binance officially announced a $2 billion investment deal with MGX, an Abu Dhabi-based investment institution. MGX acquired a minority stake in Binance, making its first foray into the cryptocurrency and blockchain space. This is also the largest single investment in crypto history, and it is said that the investment was made through stablecoins, which will also provide Binance with ample financial support.

Compared with the investment amount itself, the background of MGX, a technology investment company, has attracted widespread attention and heated discussions in the market. Abu Dhabi MGX was jointly established in 2024 by Abu Dhabi sovereign fund Mubadala Investment Company and artificial intelligence giant G42 (Group 42), which is a model of strong cooperation.

Mubadala is a heavyweight player in the global sovereign wealth fund. Its predecessor, Mubadala Development Company, was established in 2002 and is wholly owned by the Abu Dhabi government. In 2017, the Abu Dhabi government formally established Mubadala Investment Company by merging Mubadala Development Company with the International Petroleum Investment Company (IPIC). By the end of 2023, Mubadala's assets under management exceeded US$300 billion, ranking among the top ten sovereign wealth funds in the world, and has established deep cooperation with international giants such as Microsoft, BlackRock, and SoftBank.

G42 is an artificial intelligence and cloud computing pioneer supported by the Abu Dhabi government and the main promoter of AI technology innovation in the UAE. G42 has heavyweight investors such as Mubadala, US private equity giant Silver Lake and Microsoft, and has formed strategic alliances with leading technology companies such as OpenAI, Nvidia, Dell and Cisco.

In addition to the strength of the investment institution, the person behind it is more worthy of attention. Tahnoun bin Zayed Al Nahyan, chairman of the board of directors of MGX, is one of the core power figures in the UAE. He is the sixth son of Zayed bin Sultan Al Nahyan, the first president of the UAE, and the younger brother of Mohamed bin Zayed Al Nahyan, the current president of the UAE.

As a key member of the Abu Dhabi royal family, Tahnoun not only serves as the deputy ruler of Abu Dhabi and national security adviser, but is also responsible for managing key institutions such as G42, Mubadala, ADQ, International Holding Company IHC, and First Abu Dhabi Bank (FAB). His business empire spans AI, energy, finance, cryptocurrency and other fields, driving Abu Dhabi's transformation from an oil economy to a technological power. According to Bloomberg's 2023 estimate, the total assets under his control will reach $1.5 trillion.

Tahnoun is known for his low profile and mystery. He often wears sunglasses and rarely accepts media interviews. The outside world knows little about his private life. The Financial Times described him as a "secret player in the desert" and The Economist once called him "the brains behind the UAE."

Tahnoun sees AI technology as the core driving force for the country's future. Since its establishment in March 2024, MGX has invested in AI companies such as OpenAI, xAI, Databricks, and participated in large-scale AI-related projects such as Stargate and GAIIP. In January this year, MGX planned to contribute approximately US$7 billion to the "Stargate Project" (an AI project involving OpenAI, SoftBank and Oracle).

It is worth mentioning that the market generally speculates that Binance CEO Richard Teng played a role in this investment. In Binance's investment statement on GMX, it was also emphasized that Richard Teng had served as the head of the Financial Services Regulatory Authority of the Abu Dhabi Global Market (ADGM) and played a key role in promoting the world's first crypto regulatory framework. His leadership is crucial in Binance's compliance strategy. Before officially taking over as Binance CEO, Richard Teng was promoted four times by the company in less than two years, and his promotion speed can be described as a rocket-like leap.

In addition, Binance's previously announced reserve proves that most of its own crypto assets are allocated as stablecoins, and Binance's investment arm Binance Labs was spun off into an independent family office YZi Labs at the end of last year. The community also speculates that these two previous actions may be to facilitate MGX's investment valuation confirmation.

Refusing financial investment, is the UAE Binance’s new “shelter”?

Although the announcement did not disclose Binance's investment valuation, considering that CZ said he was considering financing with a single-digit equity ratio, the market speculated that if the investment ratio was between 5% and 10%, Binance's valuation of MGX would be between US$20 billion and US$40 billion, which was far from the valuation when it was rumored to seek investment from Singapore's sovereign fund at US$200 billion to US$300 billion in 2021. The UAE "picked up a bargain", while Binance "made a friend" to seek protection from a sovereign state.

As one of the world's largest cryptocurrency exchanges, Binance has long moved to many regions around the world due to regulatory pressure, and the ownership of its headquarters has been unresolved. However, in recent years, the UAE has gradually become an important operational and strategic center for Binance.

 MGX organized a gathering of CZ and OpenAI founders in Abu Dhabi (Picture from the Internet)

According to official disclosure, Binance has about 1,000 employees in the UAE, accounting for 20% of the global team, and has opened offices in Dubai and Abu Dhabi. At the same time, in terms of regulatory compliance, Binance has also obtained the Virtual Asset Service Provider (VASP) license issued by the Dubai Virtual Asset Regulatory Authority (VARA) and the "In-Principle Approval" (IPA) of the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM), providing legal protection and expansion basis for Binance's business in the UAE.

Binance founder Zhao Changpeng is now also a UAE citizen and owns property in Dubai. He has repeatedly expressed his optimism about the UAE's crypto ecosystem. At the same time, Richard Teng also revealed in an interview at the end of last year that the UAE is "very attractive" as the headquarters base of Binance, but when asked whether Abu Dhabi and Dubai, the two largest cities in the UAE, are major competitors, he declined to comment.

The UAE's positive crypto policy is considered one of the important reasons why Binance is deeply involved in the market. Since 2021, the UAE has been committed to building a global digital asset center through a series of forward-looking policies, such as Dubai's "Virtual Asset Strategy" and the Financial Innovation Framework of the Abu Dhabi Global Market. This regulatory-friendly environment provides Binance with a "shelter", and the market generally believes that this GMX investment can be regarded as an endorsement by the UAE.

In fact, as the world's largest trading volume, Binance has strong profitability. PANews also mentioned in the report that Zhao Changpeng had disclosed earlier that Binance's net profit (US$1 billion) and revenue (US$5.5 billion) in 2022 accounted for about 18.18%. If calculated in this way, Binance has made at least US$8.87 billion in considerable profits from 2021 to 2023. As early as 2018, Binance also rejected Sequoia Capital's investment, and the two sides once went to court. Zhao Changpeng made it clear that Binance does not need external funds. He is only interested in cooperating with venture capital companies that can help exchanges cooperate with regulators and obtain operating licenses.

After many years, Binance co-founder He Yi recently reiterated that "sovereign funds are welcome, but financial investors are fine." This statement also implies that Binance is seeking not only funds in the UAE, but also policy protection and the possibility of market growth. After the UAE, whether there are other sovereign foundations of nation-states participating in Binance's investment, there are many speculations in the community, and there are even rumors that other Middle Eastern sovereign funds and the US BlackRock have had contact with Binance.

Will Binance have the next strategic investor? And will it open up new markets with the endorsement of new investments? It is worth looking forward to it.