Awatif Mohammad Shoqi Advocates & Legal Consultancy | View firm profile
Introduction:
In recent years, the global economy has witnessed the popularity and adoption of cryptocurrencies, with Dubai emerging as a notable player in this digital financial landscape.As the market for virtual assets continues to evolve, regulatory frameworks have become imperative to ensure investor protection, promote innovation, and maintain financial stability. In this article, we delve into the regulatory landscape governing cryptocurrencies in Dubai, focusing on key legislative developments and regulatory bodies.
Cabinet Decision No. 111/2022: Regulation of Virtual Assets and Their Service Providers:
Under Cabinet Decision No. 111/2022, the UAE establishes a comprehensive regulatory framework for virtual assets and their service providers. Article 1 of this decision provides comprehensive definitions for terms such as virtual assets, virtual asset service providers, and the authority, which refers to the Securities and Commodities Authority (SCA) of the UAE. Licensing requirements, as outlined in Article 4, mandate entities engaging in virtual asset activities to obtain approval and a license from the SCA or local licensing authorities. These activities include operating platforms, exchanging, transferring, trading, and custody of virtual assets. The authority’s competencies, detailed in Article 6, include overseeing virtual asset activities, issuing regulatory decisions, ensuring data protection, and coordinating Anti-Money Laundering (AML) measures. Compliance requirements, described in Articles 8-10, stipulate that service providers must comply with UAE AML laws and international standards, including those of the Financial Action Task Force (FATF). Additionally, Article 11 addresses fees for licensing and services, while Article 12 outlines penalties for violations, ranging from warnings to fines up to AED 10 million.
Cabinet Decision No. 112/2022: Delegating Regulatory Competencies:
Complementing Decision No. 111/2022, Cabinet Decision No. 112/2022 delegates certain regulatory competencies related to virtual assets to the Dubai Virtual Assets Regulatory Authority (VARA). Article 2 of this decision authorises VARA to license and supervise virtual asset activities within Dubai and its free zones. It mandates VARA to issue regulatory decisions, ensure compliance with data protection laws, apply AML mechanisms, and educate investors about virtual asset investments and associated risks. VARA is also tasked with developing mechanisms for service providers to report security risks and breaches, collecting fees and commissions, imposing penalties for violations, and handling grievances related to administrative penalties. Article 3 underlines the importance of coordination between VARA and the SCA to establish unified supervision and control mechanisms and share fees, commissions, and fines.
Dubai Administrative Decision No. 1/2023: Establishment of VARA Grievance Committee:
Dubai Administrative Decision No. 1/2023 establishes the Dubai Virtual Assets Regulatory Authority (VARA) Grievance Committee, serving as a key component of the regulatory body. The committee is formed to address grievances related to actions, penalties, or sanctions imposed under applicable legislation, covering grievances against inspections conducted by VARA-authorized inspectors or based on relevant regulations.
Conclusion:
The regulatory landscape governing cryptocurrencies in Dubai reflects a proactive approach aimed at ensuring investor protection, promoting innovation, and maintaining financial stability. Through comprehensive legislative frameworks and the establishment of regulatory bodies such as VARA and its Grievance Committee, promoting a beneficial environment for the growth and development of the cryptocurrency industry.