In order to establish the United Arab Emirates (UAE) as an international hub for virtual assets (VAs), a new regulation law was issued on March 11, 2022. Specifically in Dubai, new rules and a regulating authority has been set up to promote business growth in the virtual asset history. Here’s our guide to the latest law.
First off, what is a virtual asset (VA)?
Virtual assets are a representation of a value that is often digital and can be traded, transferred, utilized as a form of currency, or as an investment. Often called a digital asset, fiat currencies’ digital representations do not fall under the VA category.
What are popular VAs?
The most popular types of virtual assets include:
- Cryptocurrencies (e.g., Bitcoin)
- Non-fungible tokens (NFTs)
What does the Virtual Assets Regulatory Authority (VARA) do?
This year’s Law No. 4, also known as the emirate of Dubai’s Regulation of Virtual Assets or Virtual Assets Law, has been set up to create an advanced legal framework that will protect investors, virtual asset providers, and establish standards for the VA industry. Under this law, the Dubai Virtual Assets Regulatory Authority was established in line with promoting the UAE’s position in the VA industry and attracting market leaders. VARA sits in the Dubai World Trade Centre (DWTC) and covers all economic free zones except for the Dubai International Financial Centre (DIFC.)
The regulatory authority tasked with promoting Dubai’s VA sector, VARA prepares the necessary rules, regulations, and standards in order to supervise and control all virtual asset-related matters. In general, VARA is tasked with:
- Organising the trading and issuance of VAs and virtual tokens
- Organising and authorizing virtual asset service providers (VASPs)
- Establishing investors’ personal data protection
- Organising VA platform and portfolio operations
- Monitoring transactions
- VA price manipulation prevention
What activities require authorization from VARA?
Activities subject to authorization from the Virtual Assets Regulatory Authority based on the regulation law include:
- Operations and management of virtual assets platforms services
- Exchanges services (both national or foreign) between currencies and virtual assets
- Exchange services between a form or various virtual asset forms
- Virtual asset’s custody, management, and transfer services
- Services regarding virtual assets’ portfolio
- Services regarding the offering and trading of virtual tokens
How to obtain a license from VARA
The Virtual Assets Law requires that applicants do the following to obtain a virtual currency service provider license:
- Establish Dubai as their business headquarters
- Obtain a commercial business license
What happens to violations and what are the penalties?
It is prohibited for those in the Emirate to engage in activities without the authorisation of VARA. In the case that the VA law is violated, VARA is permitted to:
- Suspending authorisation issuance
- Suspending VA service provider activities and VA dealings
- Suspend granted authorisation for up to 6 months or entirely revoke the authorisation
The Future of VARA
With the VA Law and VARA the first of their kind, Dubai has the potential of becoming a leader in the industry by being an early adopter of digital innovation and technology. Dubai has recently granted VA licenses to the largest cryptocurrency exchange in the world, Binance, as well as FTX Europe, a subsidiary of FTX.
Global exchanges that are also due to establish regional offices and carry out operations in Dubai include Crypto.com, originally based in Singapore, and Bybit. As for a Middle East-focused cryptocurrency exchange, BitOasis has applied for a full license and has been granted approval to continue operations in the city while fulfilling VARA requirements.
BitOasis, the first VASP that operates from Dubai is set to collaborate with VARA. BitOasis will share its experience-based insights, anti-money laundering (AML), and combating financial terrorism (CFT) practices with VARA to develop the new VASP regulatory framework.