Block reward mining activity remains legal in UAE but not on farm lands

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Nearly two years after establishing itself as a haven for digital currency miners, the United Arab Emirates has fired the first shot against the industry by banning mining activity on farms.

The Abu Dhabi Agriculture and Food Safety Authority (Adafsa) has issued a blanket ban on mining activity on lands designated for farming following a spike in electricity prices. The advisory noted that farmers must refrain from using farms for ancillary services in the digital asset space other than cultivating crops or rearing livestock.

“This activity is considered a misuse of the farm for purposes other than its intended use,” read Adafsa’s report.

To emphasize the point, Adafsa prescribes a steep fine of Dh10,000 (US$2,722) for defaulters, with serial defaulters facing the grim option of jail time. The agricultural authority has been tracking a spike in mining outfits on lands allocated to farming activities, which is affecting the UAE’s food security and revenue from exports.

Despite the advisory’s content, block reward mining is considered legal if miners adhere to the regulatory playbook. Miners are expected to seek licensing from relevant regional authorities and pay appropriate taxes on mining profits.

Following China’s blanket ban on block reward mining, miners settled in the UAE, drawn by the promise of cheap electricity and a friendly government stance. By the tail end of 2021, UAE miners contributed 4% of BTC’s hash rates and seemed set to increase the size of its mining capacity.

While the UAE has been receptive toward miners, its neighbors have taken a hawkish stance toward digital asset activities. Kuwait followed China in issuing a blanket ban on all digital asset-related activities, while others are stifling mining with hikes in electricity tariffs and heavy taxation.

“It is not linked to any asset or issuer, and the prices of these assets are always driven by speculation that exposes them to a sharp decline,” said Kuwaiti authorities on the ban on virtual currencies.

UAE’s embrace of blockchain

The UAE is moving toward becoming the leading hub for all things Web3 in the Middle East, leaving Saudi Arabia and Israel in the dust with forward-thinking government policies. Dubai’s regulatory framework is considered the shining light for the rest of the region, accentuated by a streak of high-profile firms setting up shop in the emirate.

Aside from blockchain, the UAE is advancing its position in artificial intelligence (AI) through several initiatives. The country is banking on a newly minted AI council and an investment company to achieve its lofty investment ambitions, while a national educational drive is billed to deepen the talent pool.

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