The United Arab Emirates has seen considerable growth of its cryptocurrency and blockchain industry driven in part by the pro-active steps taken to introduce regulatory regimes for the sector.
On 12 December 2022, the UAE Government issued Cabinet Resolution No.111 of 2022 on the regulation of Virtual Assets and Service Providers which came into force on 15th January 2023.
The regulation builds on similar measures introduced last year with Dubai's Law No. 4 of 2022 (Dubai Virtual Assets Law), aiming to regulate the virtual asset industry in the Emirate of Dubai and introduce a new regulatory body, Dubai Virtual Asset Regulatory Authority (VARA).
How is this different?
This latest resolution establishes a unified regulatory framework at the federal level, which applies to all of the Emirates and not just Dubai.
This resolution affects both companies located within the mainland and those located in designated free trade zones, with the exceptions of the Dubai International Finance Centre (DIFC) and the Abu Dhabi General Market (ADGM), which have their own regulatory bodies and rules.
Crypto companies that fall under the definition of Virtual Asset Service Provider (VASP) will be required to obtain a license from the Securities and Commodities Authority, which is the designated licensing authority, or from local regulatory bodies, such as the Dubai Virtual Asset Regulatory Authority (VARA).
What does the regime cover?
The regulatory framework is similar to the one that was established in Dubai, as well as in other key crypto jurisdictions like the Cayman Islands and the British Virgin Islands. It is based on guidance provided by the Financial Action Task Force (FATF) for virtual assets and VASPs.
Crypto projects that involve exchange of crypto, providing crypto brokerage, crypto payment services or holding and controlling tokens will need to evaluate how these changes will affect their operations and corporate structure.
As a web 3 expert business consultant and specialist corporate services provider, Cavenwell 3.0 can assist new and existing crypto businesses in understanding and operating in the UAE market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.