The digital era is emerging at a rapid pace globally, which is synonymous with the success across the United Arab Emirates, and in particular Dubai, who is ensuring that it remains up to speed with its digital advancement.
From the issuance of the first of its kind Law No. 4 of 2022 on the Regulation of Virtual Assets (the “Virtual Assets Law”), to the establishment of the Virtual Asset Regulatory Authority (the “VARA”) that would regulate and oversee the sector, Dubai is working towards “shaping this new ever-evolving sector” as tweeted by the Vice President and Ruler of Dubai, his Highness Sheikh Mohammed bin Rashid.
Virtual Assets are defined under the Virtual Assets Law as a digital representation of the value that can be digitally traded or transferred, or can be used as an instrument for exchange, payment, or investment purposes, including virtual tokens, and any digital representation of any other value specified by the VARA in this regard.
VARA is an independent authority, established under the Dubai World Trade Center Authority, to oversee the Virtual Assets Law, licensing and governance of virtual assets, non-fungible tokens (NFTs), and cryptocurrencies. The Virtual Assets Law specified VARA’s main responsibilities, which include, but are not limited to the following:
- Regulating and licensing the issuance of virtual assets and virtual tokens;
- Regulating and licensing virtual asset service providers, in addition to controlling and supervising their activities to ensure their compliance with the provisions of the Law;
- Organizing and controlling the operation and management of virtual asset platforms, distributed ledger technology, and virtual asset portfolios;
- Monitoring digital trades and transactions; and
- Preventing manipulation of virtual asset trading prices.
The provisions of the Virtual Assets Law apply to virtual asset services provided all over the Emirate, including special development zones and free zones, with the exception of the Dubai International Financial Centre (“DIFC”); the Dubai Financial Services Authority, which regulates all the companies in the DIFC, who is preparing its own regulations for the virtual asset sector.
According to the Virtual Assets Law, it is prohibited for any person to carry out any of the below listed activities in Dubai, or any of the freezones therein, unless they are duly permitted to do so by the VARA.
Furthermore, they must obtain the necessary prior approvals and permits from the VARA before commencing the procedures for licensing it from the competent commercial licensing authority. The following activities are subject to the VARA’s permits and controls in accordance with the provisions of the Virtual Assets Law:
- Provision of virtual asset platform operation and management services;
- Provision of services of exchange between virtual assets and currencies, whether national or foreign;
- Provision of services of exchange between one or more form(s) of virtual assets;
- Provision of virtual asset transfer services;
- Provision of virtual asset custody, management or control services;
- Provision of services related to virtual asset portfolios; and
- Provision of services related to offering and trading in virtual tokens.
Additionally, a person wishing to carry out any of the above activities must have the headquarters of their business in Dubai, provided that they take one of the legal forms approved by the competent commercial licensing authority in the Emirate.
Following the issuance of the Virtual Assets Law, crypto firms are rushing to launch in Dubai. Notably, FTX, a global crypto derivatives exchange, and Binance, the world’s largest cryptocurrency exchange set up operations in Dubai after they secured approvals from the VARA. Similarly, BitOasis, the region’s leading virtual assets provider, based in the United Arab Emirates, has received provisional approval from the VARA, to continue its business operations in Dubai, while applying for a license in accordance with the VARA’s requirements.
Moreover, Dubai exceeded its digital advancement efforts, with the recent announcement by the VARA on the establishment of its Metaverse HQ, making it the first regulatory authority to have presence in the emerging digital space.