The United Arab Emirates (UAE) finally opens up licensing applications for firms that intend to provide virtual assets services in the country. In December 2022, the UAE presented resolution number 111 of 2022 which will regulate virtual assets. Additionally, it will attract investments and boost economic growth in the UAE by bringing global companies that are currently flourishing in the virtual assets sector.
On 17 April, the Securities and Commodities Authority (SCA) of UAE released a statement and announced that they’re ready to start receiving applications for licensing companies wishing to provide virtual assets services in the country. According to reports, all companies except those who are already licensed under the financial free zones will be eligible for the applications.
The SCA has provided a detailed description of virtual assets in its statement released in February 2023. It is interesting to note that the Cabinet’s resolution described virtual assets as “a digital representation of the value that can be digitally traded or transferred, can be used for investment purposes, and does not include digital representations of paper currencies, securities, or other funds.” The step to initiate the licensing process aims to protect investors and other stakeholders from any unforeseen potential mishaps.
According to the press release, the companies currently operating in the Emirate of Dubai must acquire a license from the Virtual Asset Regulatory Authority (VARA). For those who are not aware, the formation of VARA to regulate crypto was announced in March 2022. It would have enforcement powers in Emirates’ special development and free zones except for the Dubai International Financial Centre.
Additionally, the Securities and Commodities Authority clarified that its licensing provisions do not apply to virtual assets that are used to make payment purposes as they come under the regulation of the Central bank. The VARA also provides guidelines on the issuance of virtual assets and the issuance of private coins. According to the reports, traders with capital over $250 million need to register themselves with VARA. People who break these rules will pay fines ranging from $5,500 to $55,000, and repeat offenders might pay up to $135,000 in penalties.
Dubai has been actively embracing blockchain technology and inviting companies globally for investment. In March, Dubai Multi Commodities Centre (DMCC) announced partnerships with leading South Korean blockchain and Metaverse businesses to develop itself as a global fintech hub.
According to reports, if anyone violates the regulations mentioned in the licensing process will face a heavy fine worth up to 10 million AED ($2.7 million). The step to launch a licensing regime is a commendable step by the UAE, but we need to wait and see how effective the guidelines will prove in managing the virtual assets sector.