Dubai issues First Law Regulating Virtual Assets

Over the last few years, the UAE has taken strides to further its commitment towards creating an ecosystem that will generate long-term economic growth through digital innovation. In September 2021, the Securities and Commodities Authority (SCA) and the Dubai World Trade Centre Authority (DWTCA) entered into a Memorandum of Understanding to support the regulation, offering, issuance, listing and trading of crypto assets and related financial activities within DWTCA’s free zone. Separately, DWTCA and Binance announced plans to establish a new industry hub for global virtual assets in Dubai. Additionally, last week, the Dubai Financial Services Authority issued its Consultation Paper No. 143 for the Regulation of Crypto Tokens.

In furtherance of this commitment and in a relatively short span of time, the Emirate of Dubai has issued Dubai Law No. 4 of 2022 dated 28 February 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (“Dubai Virtual Assets Law” or the “DVAL”).

Here’s what you need to know:

• The DVAL will become effective on its publication in the Official Gazette.
• The  scope is limited to authorising the conduct of activities relating to virtual assets in the Emirate of Dubai only (including free zones and special development zones but excluding the Dubai International Financial Centre).
• The DVAL does not regulate services related to virtual assets on a federal level.
• The law establishes a separate authority called the “Dubai Virtual Assets Regulatory Authority” (the “VARA”) to oversee the regulation and authorisation of virtual asset related activities in Dubai.
• VARA will report into the Dubai World Trade Centre (“DWTC”)
• The DVAL defines virtual assets as “digital representation of value which can be digitally traded or transferred or used as an exchange or payment tool or for investment purposes.”
• The DVAL defines virtual tokens as “digital representation of a group of rights which can be issued and traded digitally through a virtual asset platform (a platform operated by a virtual asset provider licenced by VARA)”.
• Any person who requires an “authorisation” from VARA to conduct virtual asset services, must operate in the Emirate of Dubai and must obtain a trade licence from the relevant commercial authority in Dubai.
• Article 16 of the DVAL sets out various activities which are subject to the licensing and regulation by VARA.
• Some of VARA’s responsibilities include ensuring the data protection of beneficiaries, AML support, raising public awareness of dealing in virtual assets, their associated risks and coordinating with the UAE Central Bank.
• Breach of the DVAL will be subject to certain penalties and fines, including withdrawal of the authorisation for six months.
• Separate implementing decisions are expected to be issued by the VARA on the implementation of the DVAL, which would include description of the activities, exempted virtual assets, procedures for licensing and associated fees and charges

Get in touch with our team who can answer your questions and provide insight into the new law.