The United Arab Emirates (UAE) is laying the final pieces of its grand plan to regulate its local digital currency industry by urging companies nationwide to seek registration with its regulators.
The Securities and Commodities Authority (SCA) announced that all virtual asset service providers (VASPs) in the UAE are expected to submit applications for licensing with the body following the approval of the Authority’s Board of Directors. New rules passed by the government saddle the SCA with the burden of regulating digital currencies in the country.
VASPs operating out of the UAE’s free trade zones, like the Abu Dhabi Global Market (ADGM), are not expected to comply with the new requirement. Furthermore, firms based in Dubai are not required to apply to the SCA for licensing. Rather they are expected to seek the consent of the city’s Virtual Assets Regulatory Authority (VARA).
According to the provisions of the UAE resolution 111 of 2022, activities that require SCA licensing include the provision of virtual asset platform operation services and all brokerage services involving digital currencies. Others include providing digital currency transfer, custody, and management services, with the central bank having the authority to amend the activities.
The SCA noted in the press release that its activities are primarily concerned with transactions to be used for investments rather than payments. Failure to adhere to the new provisions could lead to a criminal investigation, disgorgement of profit, and fines of up to $2.7 million.
“Its provisions do not apply to virtual assets that are used for payment purposes, as they are subject to the jurisdiction of the Central Bank. They also do not apply to financial free zones,” the SCA said.
The SCA added that firms applying under the business model of operating a virtual assets platform are precluded from trading digital currencies unless the asset has been included in the official list by the securities regulator or a competent authority.
A future hinged on digital assets
The UAE has been nursing ambitions to explore digital currencies for international trade as it plots its shift away from the U.S. dollar. The country’s Minister of State for Foreign Trade, Thani Al-Zeyoudi, disclosed at the World Economic Forum that “crypto will play a major role for UAE trade going forward.”
In line with its objectives for digital assets, the country added a new free trade zone for Web3 firms in the emirate of Ras Al-Khaimah. Christened the RAK Digital Assets Oasis, the zone has been touted to promote innovation in the UAE’s fledgling digital currency ecosystem.
Saeed Mohammed: Developing strategies for blockchain technology in the UAE
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.