Dubai's First Crypto Regulation Laws
In January of 2022, Dubai’s Chamber of Digital Economy organized the city’s first one of a kind summit to attract venture capitalists for financing start-ups. This summit was created to expand and double the amount of digital companies run out of Dubai. Soon after, Dubai is now adopting its first law that regulates virtual assets.
The purpose of the Dubai Virtual Asset Regulation Law is to create a legal framework to protect investors and provide international standards for virtual asset industry governance that will promote business growth according to Sheikh Mohammad bin Rashid the Vice President and Ruler of Dubai. This announcement was made via Twitter, where Sheikh Mohammad exclaimed the “future belongs to whoever designs it… and today, through the virtual assets law, we seek to participate in the design of this new and rapidly growing global sector.”
Dubai Virtual Assets Regulatory Authority (DVAR) will establish the UAE’s position in the virtual assets sector while providing maximum transparency and security for investors. Virtual assets in the law are defined as Bitcoin, cryptocurrencies, and non-fungible tokens (NFTs). Currently, the digital economy contributes approximately 4.3 percent to UAE’s gross domestic product.
In addition to the regulations that will be made throughout the emirate, the law makes way for special development zones and free zones. These zones exclude the Dubai International Financial Centre. Licensing will be regulated by the DVAR so that any person in the emirate will prohibited from engaging in activities unless they have authorization from VARA. Any person wishing to practice virtual asset activities must also establish a presence within Dubai to conduct business.
The law defines the following activities subject to VARA authorization: operating and managing virtual assets platforms services, exchange services between virtual assets, currencies, exchange of currencies, and transfer services, whether national or foreign, virtual asset custody and management services, and portfolio services including offering and trading of virtual tokens. If regulations are unmet, fines will be imposed on the violator and the extent of the fine will be determined by the DWTC. In addition to fines, VARA has the authority to suspend or cancel permits, or coordinate with the competent commercial licensing authority in Dubai to cancel the commercial license of the violators.