Dubai’s New Virtual Assets Law boosts attractiveness of the UAE’s Crypto Market
Dubai is well poised to attract new investments and launches in the burgeoning Cryptocurrency and Blockchain sector with the launch of its latest law that aims to provide a regulatory framework for entities dealing with Virtual Assets.
Dubai Law No. 4 of 2022 Regulating Virtual Assets in the Emirate of Dubai (the “New Law”), issued on February 28, 2022, is a progressive step to facilitate the emerging needs of the Cryptocurrency market in the Emirate.
It has broad-ranging implications for any person(s) or business entities that express interest in carrying out activities pertaining to Virtual Assets in the Emirate of Dubai. The New Law, in essence, not only defines the category of Virtual Assets, but also outlines rules and regulations for setting up and conducting any business or operation dealing with such activities.
What is Virtual Asset defined by the New Law?
The New Law identifies ‘Virtual Asset’ as a representation of a value that can be digitally traded, transferred, or used as an instrument for exchange, payment or investment.
The New Law is applicable to all entities dealing with Virtual Assets that are set up in the Mainland as well as Free Zones, including Special Development Zones. However, it does not apply to the Dubai International Financial Center (DIFC), which will have its own set of rules and regulations governing all Virtual Assets entities registered with the DIFC.
Regulation of Virtual Assets in Dubai
One of the important aspects of the New Law is the establishment of an independent legal entity, called the Dubai Virtual Asset Regulatory Authority (”VARA”). The aim of VARA is to regulate the activities pertaining to Virtual Assets in the Emirate. Interestingly, VARA will be associated and affiliated with the Dubai World Trade Centre (DWTC).
VARA’s main objectives are as follows:
- Developing Dubai’s digital economy make it a global destination for Virtual Assets;
- Encouraging and promoting innovations in the Crypto and Blockchain sectors;
- Attracting foreign investments to the region;
- Monitoring the Virtual Asset industry and preventing any illegal activities;
- Protecting the interests of investors and dealers in Virtual Assets. Crypto and Blockchain sectors;
In the near future, VARA is expected to issue new rules, regulations and by-laws to further formalize the process of trading Virtual Assets.
Carrying out Virtual Assets Activities
Article 16 of the New Law for Virtual Assets defines which activities are subject to VARA’s permit and control. VARA has identified and formulated the following activities:
- Virtual Asset Platform operation and management services;
- Exchange between Virtual Assets and currencies, whether national or foreign;
- Exchange between one or more form(s) of Virtual Assets;
- Virtual Asset transfer services;
- Virtual Asset custody, management or control services;
- Creating Virtual Asset Portfolios; and
- Offering and trading in Virtual Tokens.
A person or an entity wishing to carry out any of these activities in the Emirate must seek VARA’s approval when they apply for a license from the Department of Economic Development (DED). One thing that potential investors and entrepreneurs in the market need to be aware of is that any entity that deals with Virtual Assets in Dubai must mandatorily have it’s headquarters located in the Emirate. A company cannot conduct activities dealing with such assets if it does not have it’s headquarters here in the Emirate.
Accordingly, world’s two major Cryptocurrency platforms, Crypto.com and Bybit have already set up their global headquarters in Dubai and it will just be the beginning.
Further, VARA has the requisite powers to cancel or suspend the license (up to 6 months) and impose penalties on defaulters who do not abide by the New Law for Virtual Assets or any other applicable regulation.
Opening up the Market for Crypto
The New Law and the establishment of a regulatory authority, VARA with a robust framework for governing the sector marks a commendable move to make the Emirate more attractive for investors and companies.
We are certain that, in the coming months, we will see increased interest from various entities from across the world looking to make Dubai their base, establishing the Emirate as a fast-growing international hub for the digital future.
If you would like to know more on this topic or want to set up your own Crypto Business in the UAE, do get in touch with Maha Bin Hendi, Managing Partner at Maha Bin Hendi Law Firm and we will be delighted to assist you with your queries.