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Monday, May 29, 2023

Dubai establishes a virtual asset regulator and announces a new crypto law

Sheikh Mohammed bin Rashid Al Maktoum, ruler of the United Arab Emirates, announced a new law on virtual assets and the establishment of a crypto regulator.

In a statement issued Wednesday, Sheikh Al Maktoum said he had issued a law creating a legal framework for crypto in the Emirate of Dubai aimed at protecting investors and “designing much-warranted international standards” for industry governance. Moreover, the ruler said the newly formed Dubai Virtual Asset Regulatory Authority (VARA) would have enforcement powers in the Emirate’s special development zones and free zones except for the Dubai International Financial Centre.

“The approval of the virtual asset law and establishment of the Dubai Virtual Asset Regulatory Authority is one of the most important steps that will help the sector grow and protect investors,” said the Sheikh.

Sheikh Al Maktoum said that the crypto law will require Dubai residents to register with VARA before engaging in crypto-related activities. The law will also require virtual asset businesses to establish a presence in Dubai. The activities described here include operating a crypto exchange, transferring cryptocurrencies, and offering and trading tokens.

It was not stated which cryptocurrencies would be covered under the law, but it was noted that VARA would classify and specify the types of virtual assets in addition to setting rules and controls. Violations of the new law could result in fines or suspension or revocation of business permits. The board of directors of Dubai World Trade Centre determines the course of action when violations occur.

Currently, it’s unclear how the legal framework will affect free zones like Dubai World Trade Centre, which announced in December that it would become a comprehensive zone and regulator of crypto, products, operators, and exchanges. Binance CEO Changpeng Zhao lauded the creation of Dubai’s VARA, saying regulatory clarity for cryptocurrencies was important — the crypto exec purchased an apartment in the city in October 2021.

Dubai operates several “free zones” where people can incorporate companies and obtain trade licenses as a part of its status as an Emirate within the UAE. For example, the Dubai Financial Services Authority acts as the financial regulator for the Dubai International Financial Centre and introduced its own framework on crypto.

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