Despite Dubai’s popularity as a trading epicenter, the UAE government has sought to transform the city into a global hub for digital asset trading. According to Bloomberg, the Dubai Multi Commodities Centre (DMCC), the UAE’s largest deregulation zone, had built up an administrative structure for crypto companies in March 2021 and had already recognized 22 crypto-blockchain entities.
The UAE has made significant progress in recent years in furthering its commitment to building an environment that can promote long-term economic development through digital innovation. The Securities and Commodities Authority (SCA) and the Dubai World Trade Centre Authority (DWTCA) signed a memorandum of understanding in September 2021 to support the regulation, offering, issuance, listing, and trading of crypto assets and related financial activities within the Dubai World Trade Centre Authority’s free zone. Separately, DWTCA and Binance announced plans to build a new global virtual asset business hub in Dubai. The Dubai Financial Services Authority also released its Consultation Paper on the Regulation of Crypto Tokens.
With growing prominence as the Middle East’s capital for crypto and Web3.0 communities, the emirate may have done the digital asset industry a significant favor.
In February this year, Dubai rolled out the Regulation of Virtual Assets law (or VAL), and formed the Dubai Virtual Assets Regulatory Authority (VARA) to enhance the Emirate’s commitment to creating a digital asset-friendly ecosystem. This groundbreaking regulation represents Dubai’s goal to become one of the leading jurisdictions for entrepreneurs and investors in blockchain technology by creating a legal framework for enterprises linked to virtual assets.
The scope of applicability of VAL does not include actions involving virtual assets in the Dubai International Finance Centre (DIFC). The Dubai Financial Services Authority (DFSA) oversees the regulatory framework for virtual assets in the DIFC, a notable free zone in the UAE.
VAL defines a virtual asset as a “digital representation of value that can be traded, transferred, used as an exchange or payment tool, or for investment purposes”, and a virtual token as a “digital representation of a group of rights that can be issued and traded digitally through a virtual asset platform (a platform operated by a virtual asset provider licensed by VARA).
On March 9, the city approved and established its first virtual assets law to regulate the operations of digital assets.
Under the law, the UAE proposes establishing a Dubai VARA, which would be in charge of regulating virtual assets. The VARA will also serve as an autonomous authority under the Dubai World Trade Center Authority, regulating, and licensing cryptocurrencies, non-fiat currencies, and other virtual assets.
The VARA’s primary responsibilities include regulating the issuance of new crypto tokens, overseeing and administering virtual asset trading, maintaining high-security requirements, and monitoring transactions, among others. The VARA is also in charge of virtual asset transfers, management services, exchange services, virtual asset platform administration, and virtual asset custody.
According to the UAE Government Portal:
VARA are tasked with the following accountabilities:
Activities subject to authorization from VARA:
As the UAE gears up to issue federal licenses for virtual asset service providers, it aims to encourage some crypto giants from across the world. For example, Binance and the Dubai World Trade Centre Authority (DWTCA), which is building an international virtual asset ecosystem, reached an agreement in late December 2021. Binance is one of the first cryptocurrency exchanges to join the DWTCA’s new crypto hub as a result of the deal.
In March, Singapore-based exchange Bybit said that it would relocate its headquarters to Dubai and begin operations in April. The same day, Crypto.com announced the opening of a regional hub office. The two announcements coincide with the passage of new laws in Dubai to establish the emirate as a global center for crypto-assets and related industries like the metaverse. According to a statement from Bybit, the company has gained in-principle authorization to perform a “full-spectrum” of virtual asset enterprises in Dubai.
“Bybit looks forward to contributing to the virtual assets innovations of the emirate’s vibrant economy and having our global headquarters in Dubai,” said Ben Zhou, co-founder and CEO of Bybit. “This in-principle approval is an extraordinary opportunity for Bybit to support the United Arab Emirates and the wider region’s ambition to become a global virtual assets technology hub.”
At present, the UAE ranks third in the Middle East, after Turkey and Lebanon, as one of the world’s fastest-growing crypto marketplaces.
The UAE government is taking tangible actions to build a robust digital economy and take advantage of digital transformation’s advantages and benefits. The UAE is regarded as one of the most technologically sophisticated countries in the world, with a high rate of adoption of current technologies.
For virtual asset companies, Dubai appears to offer a better platform and optimism. The rules allowing crypto transactions are also a major motivation for virtual asset companies to move to Dubai.
Irrefutably, Dubai is one of the top places in the world right now for virtual assets as it’s a very business-friendly environment. Due to a lack of education globally, crypto is looked at from afar by mainstream bystanders as leading financial mega heads caution against it. Dubai has rules and regulations that are very exacting for digital assets companies and digital assets generally. That encourages companies in the sector and is one of the reasons why FLUID is located in Dubai. There’s been a lot of positive signs showing the rapid development of blockchain-based technology, and a lot of digital asset firms are also moving to Dubai because of its regulatory framework and ease of business setup.
To learn more about Dubai’s digital economy, click here.
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