The Virtual Asset Regulation Law in Dubai: A few things you should know
According to reports, the UAE has passed the first law governing digital assets and established a regulatory body to oversee the industry. The introduction of the Virtual Asset Regulation Law in Dubai effectively takes this emirate to the forefront of emerging technologies such as cryptocurrency and blockchain. The emirate has established the Dubai Virtual Assets Regulatory Authority. This authority will collaborate with all entities to implement security and transparency for cryptocurrency investors. In this article, you will learn everything about the Virtual Asset Regulation Law and the use of cryptocurrency in Dubai. Let us observe the following: 1. What exactly is a virtual asset (VA)? A virtual asset can be any digitized token of value that people can trade, transfer, or use to make payments. It excludes digital representations of fiat currencies. 2. Dubai Virtual Asset Authority This authority must ensure that virtual assets and virtual tokens are organized, issued, and traded. Also, it must authorize providers of virtual asset services. In addition, they ensure the highest levels of data protection for beneficiaries’ personal information. This authority has to manage the operation of virtual assistant platforms and portfolios. Another task worth mentioning is that they keep an eye out for transactions and parent VA price manipulation. 3. Activities subject to authorization and control Platforms for operating and managing virtual assets. Exchange of services between one or more types of virtual assets and services for virtual asset custody and management. Exchanging virtual assets and currencies. Transferring virtual assets. Finally, services for managing virtual assets. 4. What does this legislation mean for the UAE? For the time being, virtual asset legislation has only been implemented in the emirate of Dubai. This rule will apply to nearly all free zones. Hence, they include non-financial free zones such as the Dubai Multi Commodities Centre (DMCC). This rule, however, does not apply to the Dubai International Financial Centre (DIFC). This is because it is a distinct free zone with its own set of rules. It is also governed by the Dubai Financial Services Authority (DFSA). Additionally, the DFSA has stated that shortly, it will adopt its own set of rules and regulations for DIFC in the case of cryptocurrencies. The Securities and Commodities Authority (SCA), on the other hand, has announced that it is currently developing its regulatory framework for cryptocurrencies. 4.1. More details With the introduction of the new UAE crypto law, there is now an opportunity for the offering and trading of cryptocurrencies such as Bitcoin and Litecoin. Furthermore, the new Dubai rule will establish a sophisticated legal framework to protect investors and develop international standards to govern crypto, virtual assets, and non-traditional financial instruments (NFTs). They have designed the VARA regime to foster collaboration, encourage innovation, and prioritize public safety. 5. Free Zones where you can obtain a crypto license 5.1. Dubai World Trade Centre (DWTC) DWTC is a free zone dedicated to emerging industries such as virtual assets, cryptocurrency, blockchain, and others. Additionally, they established the jurisdiction in 2015, and it is centrally located in Dubai. The free zone is currently collaborating and coordinating with VARA to establish a new dedicated zone for regulated Virtual Asset businesses. In addition, the DWTC Authority is working closely with VARA to launch the application process for Regulated Virtual Asset business licenses. Furthermore, the DWTC Authority is well-equipped to accommodate the expansion of Dubai’s Virtual Assets ecosystem. Much new technology and tech-powered companies are setting up in this free zone. As a result, it is not surprising that the jurisdiction was among the first to establish a comprehensive zone and regulator for virtual assets and cryptocurrency. 6. Dubai passes new legislation In line with this, the Emirate of Dubai has passed Law No. 4 of 2022 (Dubai Virtual Asset Regulation Law), which aims to regulate the global virtual asset industry in the Emirate of Dubai. Therefore, the law strikes a balance between the need for business growth and the need for regulating virtual assets. Note that this law does not apply to the Dubai International Financial Centre, but it does apply to free zones and special development zones. This law went into effect on March 11, 2022. 7. What does the Dubai Virtual Asset Regulation Law consist of? Article No. 2 of the Dubai Virtual Asset Regulation Law defines virtual assets as follows: A digital representation of value that people can trade, transfer or use as an exchange or payment tool, as well as for investment. This includes Virtual Tokens as well as any other digital representation of value as determined by VARA. Also, it includes a separate definition for virtual tokens in Article No. 2. A digital representation of a group of rights that can be offered and traded digitally via a Virtual Asset Platform. The “Dubai Virtual Assets Regulatory Authority” (VARA) was established in Dubai by the Dubai Virtual Assets Law. The VARA is a key figure in the virtual asset industry because it regulates, supervises, and oversees virtual asset services in Dubai. It has the authority to classify and determine virtual assets, as well as to set the standards and rules for trading in them. 7.1. More details VARA would require prior permission to provide services related to the operation and management of virtual asset platforms. They also require VARA permits for any services related to the safekeeping, management, or control of virtual assets, virtual asset wallets, and trading in virtual tokens. In addition, VARA has oversight over all of these services and has the authority to suspend or terminate transactions in virtual assets in the Emirate of Dubai. In addition to the VARA permit, these activities necessitate the individual to establish a business in Dubai and obtain an appropriate license from the Emirates’ commercial licensing authority. Given the newness of these laws, their effective implementation remains to be seen. 8. Virtual assets in Abu Dhabi The Abu Dhabi Global Market (ADGM) regulates virtual asset activities through a comprehensive virtual asset regulatory framework. ADGM’s virtual asset policy governs virtual asset intermediaries
