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Cryptocurrency Regulation in the UAE

Published On : September 1, 2022

Adv. Viditi Bhatia

Every morning I surf through the podcast app on my Iphone and hunt down a podcast that spares me the time to wade through a 23 page newspaper. Today morning I came across the Financial Times news briefing by Marc Filippino and the term he used Generation Moonshot Investor was instantly stuck in my head Marc described this generation to be fearless when it comes to investing in cryptocurrencies, are willing to take more risks and have the drive to be really rich really quick. With the rise of a whole new generation vested in cryptocurrencies in tangent comes stricter policies and regulation by governments. This blog sheds light on the approach the UAE government has taken towards regulating the global phenomenon of cryptocurrencies within their nation.

UAE Approach To Regulation

The UAE being home to major tourist attractions,with the recent relaxation of Islamic laws allowing unmarried couples to live together and having a generally low tax rate makes it an ideal destination for foreigners and expats. This is evidenced with the recent steps PwC s Crypto head, Henri Arslanian has taken. Henri recently has quit Pwc and set up a digital assets fund in Dubai over Hong Kong or singapore because of Dubais crypto opennes compared to the latter. Crypto openness translates to the ease of getting a crypto trading license and opening up a firm.

The Legal Framework

Starting off with the basics, google defines Cryptocurrency as a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography,rather than by a centralized authority.The purpose of crypto regulation is to protect investors prevent fraud, and reduce speculation among crypto assets encouraging higher confidence among potential investors . The UAE regulatory framework is divided in three area segments; the Central bank, Dubai and Abu Dhabi and these are explained followingly The Central Bank of the United Arab Emirates issued the Stored Value Facilities Regulation on 30 September 2020. This regulation mainly deals with Stored value facilities but also recognizes cryptocurrency and that they may be used as a stored value when purchasing other goods and services. Additionally, in Dubai there is an establishment of Dubai Virtual Assets Regulatory Authority (VARA) under Law No. (4) . Law No. (4) is applicable throughout the emirate, including special development zones and free zones, but not Dubai International Financial Centre.VARA was set up to fulfill the aims of Law No.4 and does so by Organizing issuance and trading of virtual assets and virtual tokens , Ensuring the highest standards of protection for beneficiaries’ personal data , Monitoring transactions and preventing price manipulation of the virtual assets and much more.

Finally, in Abu Dhabi, The UAE s Securities and Commodities Authority has published The Authoritys Chairman of the Board of Directors Decision No. (21/R.M) of 2020 Concerning the Regulation of Crypto Assets The SCA s Decision explains the SCA s licensing regime for anyone who wishes to offer crypto assets within the UAE.The regulations application extends to “any other financial activity” in the UAE relating to cryptoassets and has the potential to capture cross-border activity involving persons within the UAE