Crime of Trading Virtual Assets (e.g., Cryptocurrencies) Without a License from the Competent Authority
On November 20, 2024, BSA Law obtained a ruling in a criminal cassation from the Dubai Court of Cassation (452/2024 Criminal Cassation), overturning acontested judgment and referring the case back to the Court of Appeal to be reviewed by a different panel. The case concerns the handling and trading of virtual assets (cryptocurrencies) by natural persons without obtaining the requisite license from the competent authorities, which, under the Law on Combating Money Laundering, Terrorism Financing, and the Financing of Unlawful Organizations, constitutes a punishable offense.
The cassation ruling stated:
"If the defendants conducted cryptocurrency exchanges for their own accounts, this action is not criminalized. Meaning that there is no penalty for this act."
This establishes a new legal principle introduced by the Dubai Court of Cassation regarding such offenses. The reasoning behind the judgment stated:
"As evidenced in Cabinet Resolution No. (24) of 2022 amending certain provisions of Cabinet Resolution No. (10) of 2019 regarding the aforementioned Executive Regulation, the legislator broadly prohibited engaging in this activity. The prohibition encompasses exchanging virtual assets for fiat currencies, selling virtual assets, or participating in them without a license if the activity or related operations are conducted as a commercial enterprise. However, the legislator stipulated that this activity must be carried out for the benefit of another natural or legal person or on their behalf."
Given the above, and as evidenced in the challenged judgment's records, it failed to clarify whether the appellants exchanged cryptocurrencies for their own accounts (which is not criminalized) or for the benefit of or on behalf of another natural or legal person. This omission establishes the grounds for the offense of engaging in virtual asset service provider activities or any financial activities without a license, which constitutes the more serious offense. Moreover, the judgment did not ascertain whether the acts committed fell under the financial activities explicitly listed in Article Two of the Executive Regulation of the Anti-Money Laundering Law. Consequently, the judgment failed to adequately define the facts requiring punishment in a manner that satisfies the elements of the offense with which the appellants were charged and the circumstances in which it occurred. This deficiency prevents this Court, in this case the Court of Cassation, from verifying the proper application of the law to the facts as established in the judgment and forming an opinion on the appellants' grounds for appeal, necessitating its overturning and referral for all appellants.
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