Visual assets, or digital properties such as Bitcoin, NFTs, and Cryptocurrencies, have become an increasingly popular payment tool for digital and real-world transactions. This surge in interest is expected to only grow in the coming years with the advent of blockchain technology and crypto-assets. Seeing this, Dubai’s authorities have noted that this digital commerce sector is in need of regulatory control.
As such, the Emirates of Dubai has introduced a new law to regulate the virtual asset industry. Known as Law No. 4 of 2022, this regulation establishes guidelines that simultaneously protect business owners, digital currency users, and governmental bodies. This law was passed and brought into effect on March 11, 2022, and applies to Free Zones and special development zones, but not Dubai’s International Financial Centre.
What is a Virtual Asset?
A virtual asset is a digital commodity that can take the form of any virtual token that can be traded or used as payment for goods or services. In other words, the term ‘virtual asset’ is an overarching term that is used to describe any digital currency, regardless of its origination.
These digital currencies are often used to conduct E-commerce transactions across a wide variety of websites and platforms. It’s become such a facet of the average citizen’s life that brick-and-mortar establishments have begun accepting various virtual assets for payment.
The Role of the Virtual Asset Authority
To regulate crypto transactions, the Virtual Asset Regulatory Authority (VARA) was founded in March of 2022 by the Dubai government. This sector manages, maintains, and regulates a comprehensive legal framework that covers all exchanges of virtual assets in the region.
VARA is granted authority over the operation and management of virtual asset platforms, exchange services that function as middlemen between virtual assets and other currencies, the custody of virtual assets, as well as any services related to the use or trade of virtual tokens.
The Various Activities Subject to Authorization Under VARA Authority
By creating a comprehensive system for managing virtual assets, Dubai is continuing its tradition of implementing progressive regulations that benefit the entire market and economy. With a robust framework in place, foreign investors are more likely to use the region to conduct business. This increase is an investment that will continue to bear fruit as both Dubai’s economy and E-commerce trading continues to grow.
Important Things to Consider Regarding the Virtual Asset Law
If you’re a potential investor that’s interested in conducting business using various virtual assets, it’s essential to have a clear understanding of the laws and regulations surrounding it. Let’s take a look at a few vital things to keep in mind:
1. Applicability
The Virtual Asset Law applies to most of Dubai’s business sectors, including all Free Zones and particular development areas. However, the Dubai International Financial Centre is independent of VARA jurisdiction instead of relying on its own regulations.
2. The Establishment of VARA
Conducting business in Dubai will require you to operate under the authority of Dubai’s Virtual Asset Regulatory Authority. In addition to closely regulating any digital exchanges, VARA is responsible for providing an extensive array of services in cooperation with the Securities and Commodities Authority and the UAE Central Bank.
3. The Activities Under VARA Authority
• The operation of virtual asset platforms, including management services
• Any exchange between virtual assets and currencies, both domestic and foreign
• Any exchange between one virtual asset type and another
• Virtual asset transfer services
• Virtual asset custody
• The settlement, management, and control of virtual assets
• Virtual asset wallet platforms
• The trade of any virtual token
4. The Role of Dubai’s World Trade Centre Authority
The DWTC Authority is a dedicated, regulated zone for virtual asset businesses. This division is also coordinating with VARA to develop a well-regulated virtual asset business license for entrepreneurs.
Why is Virtual Asset Regulation So Crucial?
With traditional finance and virtual assets becoming increasingly inseparable from one another, it’s become imperative to regulate and manage the playing field. A vast majority of virtual assets use decentralized frameworks, making it difficult to maintain the necessary oversight. But by controlling these financial avenues, more and more potential investors will be willing to use them, providing the room needed for this bourgeoning industry to grow and prosper.
What Does the Dubai Virtual Assets Law Require Mean for UAE Companies?
Dubai is quickly becoming one of the most significant cryptocurrency hubs in the world, attracting investors, ex-pats, businesses, and start-ups to the region. With a well-regulated market and benefits that are aimed at easing the cost of business, it’s no surprise that Dubai is on its way to becoming a global crypto player.
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