Cryptocurrency Law in UAE | UAE Blockchain Laws and Regulations
In the field of financial and capital markets, the United Arab Emirates Central Bank and the Securities and Commodities Authority (SCA) are the federal regulators.
The legal regulations that we should bear in mind in the United Arab Emirates is the different regulatory positions that are being adopted by the UAE federal regulators the Central Bank, SCA and free zone regulators the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA). With the use of virtual coins and tokens becoming more popular in the Middle East, and the aspiration of the UAE to be at the forefront of new business regulations, the UAE will seek to carve a dominant space in the field of blockchain and DLT and for that purpose adopt pro-business regulatory measures. By introducing its virtual asset framework early, the Abu Dhabi Global Market (ADGM) has garnered wide international attention and attracted several centralized crypto exchanges to operate out of the ADGM.
Regulation of cryptocurrency and blockchain projects in UAE is performed by the FSRA regarding ADGM. This authority publishes guidance on cryptocurrencies. It also monitors blockchain businesses to ensure transparency as well as prevent money laundering and financing terrorism. Other authorities that might contribute to crypto regulations in UAE in the future are the SCA and the DFSA.
The DFSA is the independent regulator of financial services conducted in or from the DIFC, a purpose-built financial free zone in Dubai, UAE.
The DFSA’s regulatory mandate includes asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange, and an international commodities derivatives exchange. In addition to regulating financial and ancillary services, the DFSA is responsible for supervising and enforcing anti-money laundering (AML) and counter-terrorist financing (CTF) requirements applicable in the DIFC.
The Dubai Multi Commodities Centre Free Zone (DMCC) is a place worth considering for working with cryptocurrencies in UAE. The DMCC crypto license will guarantee the legality of your business.
The first company to receive this license was Regal Assets, which offered cold storage of cryptocurrencies for its customers. In February 2018 Regal RA DMCC, subsidiary of Regal Assets Inc., an internationally renowned gold investment company, and the Middle East’s first company to have been issued a Crypto trading license, launched today a “deep cold storage” solution for investors and traders. For the first time, crypto-commodities owners can now store their Bitcoin, Ethereum and other altcoins in a vault located in Almas Tower, Dubai – the headquarters of DMCC, the world’s most interconnected Free Zone, and the leading trade and enterprise hub for commodities.
However, according to the Library of Congress “Under article D. 7.3 of the Regulatory Framework for Stored Values and an Electronic Payment System, issued by the Central Bank of the UAE in January 2017, all transactions in “virtual currencies” (encompassing cryptocurrencies in Arabic) are prohibited.” and companies only allowed to trade on their own behalf.
As of today, there is no crypto law in UAE. «Regulation of Crypto Asset Activities in ADGM» by the FSRA is the most detailed guide of cryptocurrencies in United Arab Emirates. According to it, there are regulatory requirements for operating crypto asset business including allowed crypto assets, holding equivalent capital resources, KYC and others.
With this The SCA aims to complete the legislative infrastructure for the crypto assets in relation to financial markets and instruments, in addition to commodities from one side as well as the licensing of financial activities related to crypto assets especially when it comes to exchanges, and crowd funding platforms while ensuring security, encouraging innovations and competition in the alternative finance sector. The SCA will endeavor to ensure the protection of investors dealing in crypto assets, and ensure there is no money laundering activities or financing of terrorism.
The market has been waiting for the final regulations concerning crypto assets in the UAE. The SCA had announced the draft crypto asset regulation in October of 2019, a year later it seems, that the law will be approved. This will create a huge boost when it comes to crypto trading, crypto assets as an alternative investment tool, and the implementation of digital currencies in general.
In October 2020 the UAE SCA during its recent Board of Directors virtual meeting headed by H.E. Abdulla Bin Touq, Minister of Economy and President of Board of Director, has approved the crypto assets legislation. The law will be published soon on UAE SCA’s website.
In April 2018, the UAE Government launched the Emirates Blockchain Strategy 2021. The UAE will use blockchain for digital transactions, giving each customer a unique identification number that points to their information on the secure chain. Information and data on the blockchain cannot be hacked or changed, which will ensure the digital security of national documents and transactions and eventually reduce operational cost and accelerate decision-making, which will affect the vision, rules and regulations of crypto currency, including cryptocurrency.