Dubai passed UAE's first Virtual Asset Regulation Law on March 11, 2022. This comes in the wake of the rapid rise of digital assets such as cryptocurrencies worldwide, including in the UAE, which has become a center of innovation.
According to Khaleej Times, the UAE Digital Economy Strategy was set in motion by the cabinet to double the digital economy's GDP contribution from 9.7% to 19.4% in the next decade. This means more companies and individual investors are putting significant resources into growing their digital assets investments.
Through the new law, investors are assured of protecting their investments and operating under a legal framework that sets global standards in governing virtual assets.
It's also expected that digital assets will continue to evolve the financial systems in the UAE, as well as how business is done in the coming ten years.
What is a Virtual Asset?
A virtual asset is a technology with a tradable economic value or is used as a mode of payment, such as cryptocurrencies and non-fungible tokens (NFT).
Regulation of Virtual Assets in the UAE
Unlike traditional financial institutions, the virtual asset industry is generally volatile and lacks a strong watchdog overseeing its operations. In this regard, the Virtual Asset Regulation Law shows the UAE's government's commitment to assuring startups, companies, and investors that their digital investments will be in safe custody. In addition, the law establishes Dubai's Virtual Assets Regulatory Authority (VARA), tasked with regulating, licensing, and governing the global digital assets industry in the emirates. This, in turn, supports the growth of a robust digital economy in the UAE that will benefit all.
However, before that, Abu Dhabi had set a precedent by unveiling one of the first comprehensive regulatory frameworks that promoted the regulation of virtual assets.
What VARA Does
VARA is responsible for regulating and licensing the digital asset industry in all emirates, including free zones except the Dubai International Financial Centre.
It has oversight over all virtual assets activities such as classifying and specifying, issuing, and trading of assets, as well as suspension and cancellation of virtual assets platforms in the emirates.
It oversees virtual asset services transactions to protect personal data and prevent price manipulation.
It will work with the UAE Central Bank and Securities and Commodities Authority to avail a broad range of virtual asset services.
The Activities VARA Oversees
Exchange services between virtual assets and currencies(local or foreign)
Virtual asset custody and management services
Administering virtual assets platforms
Exchanging services between one or more forms of virtual assets
VA transfer services
Offering and trading of virtual tokens
VA portfolio services
Virtual Asset Trading Requirements in Dubai
Any individual or entity looking to carry out virtual asset services in Dubai must seek the authority of VARA under the Virtual Asset Regulation Law. Further, an individual must legally be incorporated in Dubai to participate in virtual asset activities.
In general, all laws stipulated under the Dubai Virtual Asset Regulatory Laws must be followed, or one risks being in violation. If this happens, this leads to a fine, including a suspension and cancellation of permits and licenses.
Setting Up a Virtual Asset Business in Dubai
According to the FinTech News Founder, Loredana Matei, both the new law in Dubai and the USA executive order were passed concurrently on the same day, signifying the advancement of the UAE and USA as global leaders in the uptake and regulation of virtual assets.
This means operating and managing a virtual asset services platform in Dubai will be a smoother transition if the laws are followed. Fortunately, VARA has the authority to provide a comprehensive list of services alongside the UAE Central Bank and Securities and Commodities Authority, which instills confidence in investors that their investment portfolios will grow and be secured.
For any individual or company looking to start virtual asset-related activities in Dubai, Sentinel Business Centres offers a wide range of services, including licensing, serviced workspaces, and a team ready to assist you in getting your business running as soon as possible. Contact us today to get started.