UAE Tried To Avoid The Inevitable
Just like many countries that have tried to avoid the emergence of the proliferating trade of virtual money (also known as cryptocurrency), UAE was among them. However, they realized that they were backing the wrong horse. As of January 2017, the United Arab Emirates had imposed an absolute ban on transactions and trade via “virtual currencies” which includes anything related to cryptocurrencies and blockchain. This is as per the statement in the Regulatory Framework for Stored Values and an Electronic Payment System, new crypto regulations are issued by the Central Bank of the United Arab Emirates.
Blockchain-based projects and cryptocurrencies were flourishing and diversifying across the globe, and to neglect such a technological enhancement will certainly put the country in the top-notch ranks. The United Arab Emirates prepared to improve its technological domain. Dubai gold trader Regal RA DMCC became the first company in the entire Middle East to open a free zone for crypto-based ventures, on 13th February 2018.
Now, Dubai is the leading country to establish businesses and ventures regarding cryptocurrencies or commodities. However, to get any of these services the respective venture must seek a license from DMCC. It has been made so easy; all one needs to do is fill an application to DMCC. This license will surely provide legality to the business but it won’t allow certain activities, such as, register any new crypto exchange or deliver initial coin offerings (IOC). Although these aren’t termed illegal here.
Provisions And Authorities Backing The Procedure
Dubai Multi Commodity Centre (DMCC) is the pioneering Free Zone and ‘government of authority of commodity trading’, it established and signed a memorandum with the Security Commodity Authority (SAC). Post partnership of DMCC with SAC, offering, issuance, operation, funding, customer service &c. Will be hereby provided to any project on crypto or blockchain aspiring to establish a business.
The license issued by DMCC has few prerequisites:
- The company must be well funded to function productively for a minimum of six months.
- Only selective crypto assets will be permitted to be traded, provided certain factors such as security, market capitalization, volatility &c.
- Disclosure documents of government approvals, VAT &c. to ensure risk management.
- Must follow Know Your Customer/Client (KYC) rules.
- All financial information, cybersecurity, and other mentioned documents.
“Through this agreement with the SCA, DMCC is expanding its current range of crypto assets licenses, which perfectly complement the existing business license options. In early 2020, we signed an agreement with CV VC and CV Labs, a Swiss Government-supported initiative that will bring the world’s leading blockchain and cryptographic technologies ecosystem to Dubai. This agreement also builds the foundation for our future partnerships in the crypto space and is a major step in the launch of the DMCC Crypto Centre, which we will bring to the market shortly.” said Ahmed bin Sulayem, he is the Executive Chairman and Chief Executive Officer of DMCC [this dialogue is quoted from the official site of DMCC]. This ensures that the country is moving forward with its regulatory policies launched from direct partnerships of private and governmental authorities. The Regal Assets are said to be the first company that Dubai’s crypto centre has provided legality to function on their premises with A-class service. This particular company offers cold storage of cryptocurrency.
UAE’s crypto laws are followed at Abu Dhabi Global Market (ABGM), the regulations of cryptocurrency and blockchain projects here are looked after by Financial Service Regulatory Authority (FSRA). Its “Regulation of Crypto Asset Activities in ADGM” is hitherto the most elaborate and detailed list of provisions. The FSRA is responsible for publishing and amending the crypto and blockchain guidance, monitors the respective, ensures complete transparency and security to avoid any finance-related terrorism or laundering of funds.
Other players in this field are SAC (already mentioned in the article), and Dubai Financial Service Authority (DFSA).
Points Covered Under This Domain
- Although there is constant effort to establish a full-proof ecosystem for blockchain ventures and crypto projects along with commodity trade. However, it is not yet fully regulated. It is constituted with the help of practice and guidance laid by the different authoritative sectors.
- Crypto Bull Exchange is the first crypto exchange firm registered in Dubai.
- There is no income tax on cryptocurrency projects or salaries received in cryptocurrency here. However, in 2018, the UAE government added a Value-Added-Tax (VAT) of about 5% on these. There can still be firms exempted from VAT.
- ICO trading can cause legal problems here but, if it is consulted to and reviewed by FSRA there is a chance to hold ICO.
In October 2020 crypto regulations were announced with a better framework.