Dubai’s ruler and vice president Sheikh Mohammed bin Rashid Al Maktoum announced the adoption of a new law that aims to regulate virtual assets such as cryptocurrencies and NFTs.
The UAE has been at the forefront of crypto and blockchain adoption for a number of years now and is looking to solidify its position as a leading global financial hub. Under the law, Dubai intends to create an advanced legal framework that will protect investors and establish international standards to govern the virtual asset industry.
VARA
As a first step, the Emirate will set up a new regulator — the Virtual Asset Regulatory Authority, or VARA — to oversee the virtual asset sector throughout Dubai. It will have full legal and financial autonomy and will be linked to the Dubai World Trade Centre Authority, or DWTCA.
“The Dubai Virtual Asset Regulatory Authority will provide a full range of VA [virtual asset] services in co-ordination with the Central Bank of the UAE and the Securities and Commodities Authority,”
DWTCA’s Director General Helal Al-Marri said.
VARA will have full authority to license, regulate and govern the virtual asset industry. It’s jurisdiction will include special development zones, as well as free zones, but exclude the Dubai International Financial Centre, which is working on its own set of regulation for virtual assets.
VARA will also be tasked with establishing and organizing the rules and controls that will govern the sector. This will include classification and specification of virtual assets; how virtual asset activities will be carried out; how virtual assets will be managed; as well as how clearing and settlement will take place.
Late to the party?
The UAE has been courting the virtual assets industry for a number of years and its banks now have a history of experimenting with blockchain technology but this is the first time the country has officially made a move to regulate the sector on a broad scale.
The Dubai Financial Centre has been looking into virtual asset regulation since mid-2021 but is still in the consultation stage. Binance, the world’s biggest crypto exchange, is not licensed in the UA but it is in Bahrain.
The small Island nation in the middle of two seas is giving the UAE a run for its money when it comes to becoming a global hub for virtual assets. Bahrain established banking regulation for crypto and licensed the first crypto-firm in 2019.
Meanwhile, in contrast to the UAE’s central bank, the Bahraini central bank accepts cryptocurrencies as an official method of payment.
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