New Dubai law: All you need to know about virtual assets and regulations

Dubai issues new virtual asset regulatory law; what you need to know.

Published: Thu 10 Mar 2022, 1:27 PM

Updated: Thu 10 Mar 2022, 8:16 PM

By
Waheed Abbas

Reuters file

Dubai on Wednesday issued Virtual Asset Regulation Law to govern this new-age industry which has been growing at an exponential pace.

As this new industry evolves, the local market has seen many entrepreneurs and investors – both local and foreign – launching digital assets over the past couple of years. Since this sector is not fully regulated across the globe, here are some guidelines for local investors and residents need to know before they invest in it.

>>What is a virtual asset (VA)?

A virtual asset can take the form of any digitised token of value that could be traded, transferred or used for payment. It does not include the digital representation of fiat currencies.

>>What are the popular virtual or digital assets?

The most popular digital assets are cryptocurrencies and non-fungible tokens (NFTs).

>>Are virtual assets regulated in the UAE?

Abu Dhabi Global Market was the first to offer a comprehensive regulatory framework in December last year. In Dubai, Virtual Asset Regulatory Authority (VARA) was established on March 9, 2022, to govern the new sector.

>> What is the role of Dubai’s VARA?

The Authority will be responsible for licensing and regulating the sector across mainland and free zone territories, excluding the Dubai International Financial Centre (DIFC). The authority is mandated with organising and setting the rules and controls that govern the conduct of VA activities, including management services, clearing and settlement services, in addition to classifying and specifying types of virtual assets. VARA will provide a full range of services in coordination with the UAE Central Bank and the Securities and Commodities Authority.

>>Which virtual assets will VARA’s domain cover?

VARA has authority over operating and managing virtual assets platforms services; exchange services between virtual assets and currencies, whether national or foreign; exchange services between one or more forms of virtual assets; virtual asset transfer services; VA custody and management services; services related to VA portfolio; and services related to the offering and trading of virtual tokens.

>>Is it illegal to trade virtual assets without VARA’s permission in Dubai?

Yes. It is prohibited for any person in the Emirate to engage in activities without VARA’s authorisation. The person wishing to practice any of the virtual asset activities must establish a presence in Dubai to conduct business.

>> What is the penalty for violators of Dubai virtual asset regulatory laws?

The acts that constitute a violation of the provisions of Dubai Virtual Asset Regulatory Laws and its related decisions, and the fines imposed on a violator, shall be determined by the board of directors of the Dubai World Trade Centre. In addition to the penalty of a fine, the VARA can suspend the permit for up to six months, cancel the permit, and coordinate with the competent commercial licensing authority in the Emirate to cancel the commercial licence.

>> Where can we buy and sell virtual assets?

Virtual assets can be bought and sold on different digital platforms such as DEX Crypto Exchange, Matrix, Saxo Bank, Binance, Coinbase and others.

>> What are the most expensive virtual assets ever sold?

Some of the most virtual assets sold include the purchase of NFT land for over $913,000, a virtual nightclub for $635,000, a controversial traditional videogame, Second-Life, sold for $50,000 and a popular game Dota 2 went for $38,000.

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>> What are the risks involved in trading virtual assets?

Virtual assets are going to be regulated like other sectors. Since this sector is relatively new in most of the countries, buying and selling VAs involve multiple risks including very high volatility and use for money-laundering, crime and terror financing. Many virtual asset service providers are perceived as ‘risky business’ and denied access to bank accounts and other regular financial services.

waheedabbas@khaleejtimes.com

Waheed Abbas

Waheed Abbas is Assistant Editor, covering real estate, aviation and other business stories that directly affect the lives of UAE consumers. He frequently reports human interest stories, too.