Dubai Government has for a number of years embraced the use of innovative technology to maintain its position regionally and internationally as an advanced jurisdiction. The government has been successful in early adoption of new technologies such as blockchain and artificial intelligence to boost growth and development prospects.
During the last quarter of 2021, announcements were made on an MOU signed between the Securities and Commodities Authority (“SCA”). The SCA is the UAE's federal regulator for securities and commodities and this MOU was signed between SCA and Dubai World Trade Centre Authority. Further updates towards the end of the year were announced with Dubai World Trade Centre (“DWTC”) set to become the comprehensive free zone and regulator for the full spectrum of virtual assets including crypto related assets and NFTs. The vision is for Dubai to become a leading jurisdiction with an established framework for businesses offering, issuing, listing and trading of crypto related assets.
On 28 February 2022, Sheikh Mohammed bin Rashid Al Maktoum issued Law No. 4 of 2022 on the Regulation of Virtual Assets (“VA Law”) in the Emirate of Dubai. We have provided below key take-aways from our preliminary review of the VA Law which is applicable to all free zones and special zones in Dubai excluding Dubai International Finance Centre which has its own regulatory framework for such assets. The following list is a short summary of this landmark law for those who wish to appreciate implications of the VA Law on the fast-developing digital innovation sector in Dubai:
- The law came into effect on 11 March 2022, when it was published in the Government of Dubai Official Legal Gazette;
- The Dubai Virtual Assets Regulatory Authority (“VARA”) will be established in DWTC;
- The VARA shall be a legal entity with independent and juridical capacity, affiliated to the DWTC Authority;
- The VA Law defines virtual assets as a digital representation of value that can be digitally traded, transferred or used as an exchange or payment tool or for investment purposes, including Virtual Tokens, and any digital representation of any other value as determined by VARA (the “Virtual Asset”);
- Any natural person or legal entity wishing to conduct Virtual Asset activity shall be prohibited from doing so unless licensed by the VARA to do so;
- The VARA's mandate will be to regulate Virtual Assets in the Emirate of Dubai and protect and regulate the stakeholders for this key sector in the Emirate of Dubai;
- The mandate will include, among other activities, to coordinate with UAE federal institutions such as the Central Bank and to issue a code of ethics, suspend and impose penalties on Virtual Asset Service Providers.
We expect implementing regulations to be issued in due course, the exact time frame is not prescribed in the law but the VA Law does grant the VARA with the power to issue further regulation without the need to publish such regulation in the Official Legal Gazette.
The VA Law is certainly a unique and a first of its kind which is a boost to Dubai's reputation as an early adopter of digitally innovative technology.
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