The United Arab Emirates has introduced a virtual asset regulation to promote security and transparency among investors. It’ll attract new models of industries like banking, cybersecurity, supply chain management, governance, healthcare, etc. The Dubai Virtual Asset Regulation- Law No. 4 of 2022 has been approved by Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of the Emirate of Dubai. It is aimed to establish Dubai and the UAE as regional and worldwide destinations for the virtual asset industry.
Dubai has already been a favoured destination for crypto and blockchain-based companies in the region. According to the Ruler, the law has been designed to make Dubai the most advanced virtual asset ecosystem in terms of organization, governance and security.
THE DUBAI VIRTUAL ASSET REGULATION LAW
The law establishes the Dubai Virtual Assets and Regulatory Authority (VARA) under Dubai World Trade Centre Authority. It is dedicated to serve as a regulator to oversee crypto transactions and crypto exchanges. Engaging in crypto-related transactions, such as transfer of virtual digital assets, exchange between virtual assets and fiat currencies, exchange service between different cryptocurrencies, crypto custody and management services, without VARA authorization is prohibited.
The main responsibilities of VARA are-
- Organizing issuance and trading of virtual assets and tokens,
- Authorizing virtual asset service providers,
- Ensuring the highest standards of protection for beneficiaries’ personal data,
- Organizing the operation of virtual asset platforms and portfolios, and
- Monitoring transactions and preventing virtual assets price manipulation.
The permit which is issued upon authorisation by VARA may be suspended for a period up to 6 months along with a fine for non-compliance. In extreme cases, VARA may coordinate with the competent commercial licensing authority to cancel the license of the Crypto Exchange.
The law is applicable to special development zones and free zones throughout the Emirate except Dubai International Finance Centre (Centre). The Centre is a special economic zone under the ambit of the Dubai Financial Services Authority (DFSA). The DFSA is set to come up with its own set of rules to regulate crypto. Similarly, the Securities and Commodities Authority (SCA), the securities regulator in UAE is also going to come up with its own regulations for crypto-related transactions.
UKRAINE CRYPTO DONATIONS
While Dubai has implemented its law to foster the sector’s growth, on March 17, Ukraine announced a law “On virtual digital assets” to bolster donations and aid in crypto in continued attacks from Russia. The finances are being used to facilitate its defence efforts and to secure the civilians.
The law establishes a legal framework to safeguard the crypto industry while regulating its players. As per Ukraine’s Ministry of Digital Transformation, Foreign and Ukrainian cryptocurrencies can operate legally and banks can open accounts for crypto companies.
The law primarily-
- Allows government, private players and companies to trade, hold and list all forms of tokens and NFTs
- Establishes a legal framework and licensing regime for crypto exchanges, custodians and other digital-asset businesses.
- Introduces financial monitoring measures for virtual assets.
The law also sets Ukraine’s National Securities and Stock Market Commission to act as a regulatory authority. The body will work on shaping the crypto policy related to tax and civil codes to fully implement the law in Ukraine.
Dubai and Ukraine have joined the fleet of Singapore, the USA, the UK and El Salvador where cryptocurrency regulations have been issued previously. India has recently announced the taxation of virtual digital assets and is roped to launch its CBDC in the upcoming financial year.
The UK has made it mandatory for crypto exchanges and other digital asset companies to register with the Financial Conduct Authority and have to follow the money laundering rules.
Though the regulations acknowledge and authorize the cryptocurrencies, businesses and services provided thereby, the monitoring and tracing of the transactions could be a task for these authorities due to the anonymous nature of Blockchain. The regulations may hold the regulating bodies accountable to provide the investors and other stakeholders security in the crypto space as they provide licenses and oversee the activities in the industry. The regulations would relax an investor and foster healthy adoption of virtual assets and blockchain technology through various businesses across sectors. Protection against criminal activity, fraud and scams should be an important aspect of the legal framework on virtual digital assets. It is also pertinent that countries include environmental impact control as a part of crypto regulation. It remains to be seen how regulators factor in all the key aspects in the framework before adoption of the law.
This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.
Sources: CNBC TV18, BusinessToday.In, TechCrunch, Business Insider, Times of India, Firstpost, Bloomberg, Outlook and Statista