Dubai Virtual Asset Regulation Law: Everything You Need to Know

In recent years, the UAE has made strides toward reaffirming its dedication to creating a digital ecosystem that promotes long-term economic growth through technological innovation. In a similar vein, the UAE recently passed the first legislation governing digital assets and formed a regulatory agency to oversee the sector. The adoption of the Dubai Virtual Asset Regulation Law elevates Dubai to the forefront of new technologies such as cryptocurrency and blockchain.

In addition to this, the Dubai Virtual Assets Regulatory Authority is also established by the emirate. This body will collaborate with all other relevant authorities to ensure crypto investors’ safety and transparency.

The Essential Components of The New Dubai Virtual Asset Regulation Law, As Well As The Ramifications For Virtual Assets & Associated Activities in Dubai, Are Outlined Here.

Formation of a New Regulatory Authority

The Dubai Virtual Assets Regulatory Authority (VARA), an institution linked with the authority of the Dubai World Trade Centre (DWTC), is designated as Dubai’s main virtual assets regulator under the Dubai Virtual Asset Regulation Law.

VARA intends to:

• Enhance Dubai’s prominence as a domestic and global destination for virtual assets.
• Grow Dubai’s digital infrastructure under the Virtual Assets Law.
• Raise investor knowledge of the virtual assets sector.
• Stimulate growth and encourage entrepreneurs working in the virtual assets industry for business set up in Dubai.
• Develop the regulations, norms, and standards needed to govern, monitor, and manage all aspects of virtual assets.

The Law is Now In Force

The Virtual Assets Law became effective on March 11, 2022, when it was published in the Official Gazette. Any sections of other laws that are in contradiction with or contradict the Virtual Assets Law are essentially repealed. However, as the law is new, more clarity and specificity are needed. The Director General of the DWTC Authority is in charge of making the decisions required to implement the new law, albeit the Virtual Assets Law does not provide any particular timeline for the issue of such decisions.

The Definition of Virtual Assets and Legal Framework

The Virtual Assets Law is broad in scope, defining “virtual assets” as “a digital representation of value which can be digitally traded, transferred, or used as an exchange or payment instrument or for investment purposes.” This implies that the definition includes cryptocurrencies, NFTs (Non-Fungible Tokens), and any other virtual asset that VARA deems appropriate.

Authorization Required For Specific Activities

Except DIFC (Dubai International Finance Centre), the Virtual Assets Law applies across the Emirate of Dubai as well as other special development and free zones.

However, one must note that the law does not govern services relating to virtual assets on a federal level. Businesses operating in Dubai that are subject to the Virtual Assets Law are forbidden from dealing in specific regulated activities in Dubai except allowed by VARA. Any permissible operations must be carried out within the extent of the permission provided.

The law further states that VARA has the authority to create rules and restrictions for the conduct relating to regulated activities, as well as to widen the scope of activities that are pursuant to VARA’s authorization and regulation.

Activities that are subject to the VARA’s authorization and control include:

• Managing and maintaining virtual assets platforms.
• Service exchange between one or more types of virtual assets.
• Services for transferring virtual assets.
• Services for virtual asset custody and management.
• Services for virtual asset management.
• Services for exchanging virtual assets and currencies.

Licensing Requirements

The Virtual Assets Law requires the applicants to establish Dubai as their business’s headquarters and get a commercial business license (including the cryptocurrency license) from the competent licensing body in Dubai to receive a license under the Virtual Assets Law.

The rules and judgments augmenting the Virtual Assets Law are intended to lay out the precise licensing process as well as additional continuing obligations for anti-money laundering, transparency, disclosure, and KYC (know-your-client) requirements.

Measure To Stabilize The Financial System

It is expected that VARA will coordinate and work with the UAE Central Bank to put in place an appropriate system to make sure the financial system’s security and stability, which could result in a rise in the sum total of bank transactions relating to virtual assets as well as the regulatory frameworks of DeFi (Decentralized Finance) application domains and virtual asset lending, which have both grown in popularity in recent times.

Responsibilities Of VARA

• Virtual asset and virtual token management, issuance, and trading.
• Regulating and licensing virtual asset service providers.
• Ensuring that the personal data of beneficiaries are protected to the most significant degree possible.
• Managing the platforms and portfolios of virtual assets.
• Surveillance of trades and monitoring manipulation of parent virtual asset prices.

Punitive Measures

VARA is authorized to take a variety of measures and steps under the Virtual Assets Law. It includes:

• Suspending the issuing of authorizations,
• Halting the operations of any virtual asset service provider, and
• Suspending transactions with certain virtual assets under specific instances.

The activities that constitute a breach of the requirements of the Virtual Assets Law, as well as the related sanctions, will be laid forth in due course by a decision of the DWTC Authority’s Board of Directors.

The Virtual Assets Law specifies that, in addition to any penalties imposed, VARA may suspend an authorization issued for up to 6 months or may revoke it completely.

Therefore, the possible penalties for violating the Virtual Assets Law might be severe and have far-reaching consequences.

Wrapping Up

Several recent advancements in the regulation of virtual assets have been made in accordance with the UAE’s goal to enable the business while providing sufficient investor security. The recent enactment, coupled with other developments, demonstrates the UAE’s ever-increasing curiosity about virtual assets.

If you have any other queries relating to Dubai Virtual Asset Regulation Law or related company registration in Dubai, feel free to contact our expert consultants at makemyfirm.ae.

Our specialists will assist you in understanding the new law and will walk you through the complete process, from business registration and licensing and regulatory requirements to gaining approvals from the appropriate authorities.

So, don’t wait up, give us a call on +971 52 673 9777/ +971 04 584 7025 and book a free consultation today.