- UAE implements laws to regulate virtual assets.
- How this could help Abu Dhabi’s intentions of being a crypto hub.
- The advantage this law holds.
The UAE has been vocal about making the country a crypto hub. Now, the government has gone even further by passing a new law that will govern virtual assets, which will help set up their initial regulatory regime for the cryptocurrency industry at a federal level.
This differs from the UAE’s first move on cryptocurrency as they have already introduced several governing initiatives to trade digital assets in economically free zones like the Abu Dhabi Global Market (ADGM). Last year, Dubai also established its crypto regulator, Virtual Asset Regulatory Authority (VARA).
The legal experts on the new law spoke to the crypto news site, Cointelegraph, about the significant changes introduced via the new law. One of them is that the new law ensures that all entities enhancing crypto activities have to secure a license and approval from the new regulator. Any case of Non-compliance could warrant a heavy fine, which could amount to up to 10 million AED ($2.7 million), an investigation by the public prosecutor, and disgorgement of profits.
The law was already put into force on January 14 with expectations of it requiring crypto entrepreneurs operating in the UAE to cooperate. Web 3 and crypto projects currently used in the UAE would have to structure a way to comply with the new federal law and all of their country’s other laws on crypto.
The CEO of the Dubai blockchain center also explained that the new legislation would include a comprehensive technical requirements list inclusive of cybersecurity controls and custodial measures that will ensure the safekeeping of digital assets, like the utilization of cold wallets. To ensure that the potential abuse of customers’ funds by their custodians isn’t an occurrence, there are additional measures that include financial credit guarantee requirements.
However, the new regulations do not apply to Virtual Asset Service Providers operating within the financial-free zones of the United Arab Emirates but apply to all other entities operating in the country. The government expects that despite the minimum requirements attached to the Virtual Asset Service Providers being attainable, some firms may still need help navigating the new regulations, which may prove that most crypto companies are falling short of the basic requirements necessary.
The lawyers also highlighted another minimum requirement for VASPs. Depending on the nature of the VASP’s operation, there may be various new technologies and compliance requirements like “Know Your Customer and Anti-Money Laundering Regulations.” The Regulators would also be granted the authority to implement inspection programs and control procedures. The new law will have an adaptation time of three months for all legal entities that fall into the VASP category.
One of the significant purposes of the new law is to protect consumers from catastrophic occurrences in the crypto market. While, given the collapse of FTX, it might be impossible to do that, ultimately, it would go a long way in ensuring that more crypto entities in the UAE are adequately supervised and can be put to order or investigated if there are any suspicious activities.
Abu Dhabi already announced its plans to make itself a crypto and blockchain hub for the Middle East, and with these new laws that the UAE has passed, not only will the crypto companies that spring up in Abu Dhabi be supervised appropriately under the law, their consumers will be protected by the laws and regulations surrounding virtual assets in the UAE. Moreover, the UAE also published regulatory guidelines for the crypto space late last year under the purview of the ADGM. Currently, 1,500 web three businesses and organizations are operating in the UAE.
Conclusion
Implementing this law will go a long way to protect those who are too afraid to invest or be associated with crypto companies for fear of fraud but legalized. Government-controlled entities would be a safer alternative for consumers and Investors alike, who will feel safer knowing there is a law backing their activities and monitoring the crypto firms they engage with within the UAE.
The law also has minimum requirements, so it would motivate many to follow through with it, and the crypto firms that don’t would be seen to fall short of the most basic requirements.
