Not only does the UAE legalize Cryptocurrency, but it is also set to become a global hub in cryptocurrency with its top blockchain technology. Most Dubai-based companies have already started accepting Crypto for most services, which will help with the growth of the cryptocurrency market. The government of UAE is introducing laws and regulations to support the country’s economy and give new opportunities for further development. These measures help bring Crypto into the mainstream transactions of the UAE by aligning it with modern technology.
Cryptocurrency trading, such as Pi coin, Bitcoin, and Ethereum, is legal in Dubai under the Securities & Commodities Authority (SCA) and Dubai Financial Services Authority (DFSA) regulations. Let us look at how the UAE plans for a practical and modern digital economy with its blockchain strategy.
Cryptocurrency Laws by State – UAE Legalize Cryptocurrency
A top-notch AML/KYC standard represents the legal structure of cryptocurrency in the UAE market. With the help of these regulations, it becomes easy to deal with the minor issues of illegal Bitcoin dealings, such as money laundering and illegal financing.
Here are the key aspects of these cryptocurrency standards.
AML & KYC Standards – UAE Legalize Crptocurrency
Companies offering services in the UAE’s cryptocurrency context must follow strict AML & KYC standards. The investors and traders involved in crypto trades must provide their identification details and financial position to ensure these digital assets are not used for illegal purposes.
Legal Framework for VASPs – UAE Legalize Crptocurrency
The UAE has announced that the systems under Cabinet Resolution Number (111) of 2022 for Virtual Asset Service Providers (VASP) will be in effect from 13 January 2023. These regulations involve virtual asset activities and management operations, virtual asset transfer services, exchange services custody, brokerage, and financial services. AML guidelines mandate VASPs to follow the provisions and regulations of Federal Decree-Law number (20) of 2018 and the policies of FATF on virtual asset trade.
Compliance & Risk Control – UAE Legalize Crptocurrency
The Virtual Assets Regulatory Authority (VARA) has standardized VASP compliance and risk control rulebooks. These standards are responsible for implementing AML/CFT compliance for VASPs. These are the employment of a Money Laundering Reporting Officer (MLRO) with two years of experience in AML/CFT compliance, setting up AML/CFT policies, monitoring transactions, checking and reporting suspicious transactions, FATF Travel Rule compliance, client due diligence and keeping records of suspicious behavior for about 8 years.
FATF Travel Rule requires VASPs to provide necessary information about the beneficiary and the sender. Moreover, the recipient WM for more than AED 3,500 transactions is also required to provide this information, which helps maintain transparency in virtual asset transactions.
These actions show the UAE’s intentions to develop a secure and transparent platform for crypto operations according to International standards. Therefore, efficient KYC and AML guidelines are necessary to protect the country’s financial system. It also helps increase the integrity of investors and businesses involved in crypto trade in the UAE.
Current Developments in UAE’s Crypto Regulations – UAE Legalize Cryptocurrency
Here are some of the recent developments in cryptocurrency regulations.
Strategic Measures & Legal Framework
Emirates Blockchain Strategy 2021 aims to have 50% of the government’s Blockchain technology transactions, which can help transform the digital world. The Central Bank of UAE and SCA play an essential role in supervising and regulating cryptocurrency in the UAE. Recently, SCA took full responsibility for overseeing the crypto market and started applications from enterprises that traded in Crypto.
Establishing the Virtual Assets Regulatory Authority in Dubai and introducing the Virtual Assets Law also shows the UAE’s interest in the development of virtual asset rules such as NFTs and Cryptos.
Licensing & Compliance
Virtual Assets Service Providers (VASPs) must get their license from SCA to meet the regulatory standards and increase credibility.
The Virtual Assets Law mandates all Virtual asset operations, which include trading and management of the platform, getting prior authorization from VARA, and setting the legal framework for crypto service providers. The development of Full Market Product (FMP) regulations by the VARA authority includes a wide range of rules that apply to virtual asset service providers, licensing, and business operations, focusing on market conduct, and cyber security.
Inventions & International Marketing
The UAE has a designated free zone for virtual assets-related companies, which is known as the RAK Digital Assets Oasis free zone. These free zones are dedicated to making the UAE a global hub of crypto-related companies. Hence, friendly tax policies and no tax on capital gains attract many investors from all over the globe to Dubai.
Introducing new laws in the financial free zones such as DIFC and ADGM shows the UAE’s interest in maintaining economic stability and supporting innovation. These changes were only possible due to the UAE’s strategy in managing all digital currencies, which involves invention while keeping security in mind. All these strategies have helped the country become a global leader in the digital economy.
Regulatory Authorities of Cryptocurrency in UAE – UAE Legalize Cryptocurrency
Several regulatory authorities are responsible for managing the cryptocurrency market in the UAE. They regulate new areas, such as initial coin offerings (IICOs), and extend their jurisdiction to virtual assets. The Securities and Commodities Authority (SCA) controls and regulates cryptocurrency in the UAE. All the cryptocurrency market community members must understand these legal persons’ fundamental tasks and regulations. Let’s discuss the role of these authorities in detail.
The Central Bank of the UAE (CBUAE)
The Central Bank plays an important role in regulating the UAE’s financial activities such as banking services and cryptocurrency transactions. The bank aims to provide financial stability and protect its customers.
Abu Dhabi Global Markets (ADGM)
Through its regulatory framework, ADGM regulates a diverse range of business activities and products related to Digital Securities, Virtual Assets, Funds of digital assets and Derivatives.
Financial Services Regulatory Authority (FSRA)
FSRA is the legal authority that regulates financial services in the Abu Dhabi Global Market (ADGM) area.
- Fintech & Cryptocurrency Framework. The Financial Services Regulatory Authority (FSRA) is continuously working to introduce the appropriate regulations for fintech services such as cryptocurrencies. This framework comprises AML and CFT requirements, license requirements, and market analysis expectations.
- Invention & Stability. The FSRA has set precise standards for compliance with the laws and creates favorable conditions for security and innovation in the market of digital assets.
Securities & Commodities Authority (SCA)
The SCA has the following regulations in the UAE,
- ICOs Regulation. The Securities and Commodities Authority has classified Initial Coin Offerings (ICOs) as a security. There are specific rules applied to the companies involved in ICOs, some of which include transparency regulations and laws for maintaining investor’s interests.
- License for Crypto Businesses. The business activities of wallet services and exchanges in the UAE need an SCA license if the company is involved in cryptocurrency services. This process ensures the companies implement the authority’s requirements to administer their business operations.
Virtual Assets Regulatory Authority (VARA) Dubai
Given below are the regulations of VARA,
- Regulation of Virtual Assets. VARA’s regulatory authority manages trading, utilizing, and offering virtual assets in Dubai. It is responsible for a wide range of VA operations to prevent non-adherence to local and international standards by the involved companies.
- VASPs Regulation. VARA is an all-inclusive asset service provider in Dubai, in addition to the DIFC, which makes it essential to monitor and ensure unity in the market.
Dubai Financial Services Authority (DFSA) and Dubai International Financial Centre (DIFC)
DFSA is responsible for introducing innovative regulations to protect investors and innovation of digital assets. On the other hand, DIFC has introduced new policies regarding digital assets and securities, which will help strengthen Dubai’s position as a global leader in virtual assets.
License Requirements & Compliance
The requirements for getting a VA license and its compliance are given below.
SCA License for Crypto Companies
Here are essential things to consider,
- Business Activities. These include wallet services, exchanges, and all trading platforms.
- Licensing Regime. The SCA, which was issued in 2020, set up a comprehensive license regime for all crypt-related trades and services.
- Recognizing Specific Cryptocurrencies as Securities. These are subject to securities laws and regulations.
VARA License of VASPs
VARA licesne of VASPs include the following,
- Compliance with Rulebooks. Licenses must fulfill four compulsory rulebooks involving company operations, technology information, compliance and risk management, and market analysis.
- Application Requirements. VASPs involved in regulatory activities must get a license by applying through an application and submitting the fees, extension, and annual supervision fees.
Benefits of Regulatory Framework of Cryptocurrency – UAE Legalize Cryptocurrency
The regulatory framework provides the following benefits,
- Protecting Investors. The main purpose of regulatory oversight by the VARA, CBUAE and SCA is to protect the investors from fraudulence and securing their investments.
- Market Stability. A clear and comprehensive framework minimizes financial risks and enhances the integrity and stability of the financial markets.
Growth & Innovation. A well regulated market ensures growth and innovation and attracts global fintech companies making UAE a hub for digital financial services.
Summary
The UAE legalizes Crypto as it strives to become a global hub for cryptocurrency. These milestones are supported by the UAE’s Blockchain strategy, the establishment of VARA, and other regulatory authorities. To learn more about the crypto market, its regulations, and other compliance, contact Al Riyady today. Our team has years of experience in the competitive UAE market and can help you with tailored solutions that meet your business requirements. Our other services are Golden Visa, Corporate Tax, Bookkeeping and more.