The United Arab Emirates (UAE) has taken another step towards embracing cryptocurrency by allowing companies to apply for licenses to offer digital asset services within the country. The move comes as the UAE continues to position itself as a hub for technology and innovation in the region.
The country’s Securities and Commodities Authority (SCA) is now accepting applications from interested firms that wish to offer cryptocurrency services within the UAE. All virtual-asset service providers (VASPs) in the country are required to apply for approval, with exceptions allowed for those already licensed in the UAE’s financial-free zones.
Upon obtaining authorization from the SCA, firms must demonstrate operational efficiency and flexibility and meet specific operational standards to obtain a license. The goal is to ensure that only reputable and reliable firms are allowed to operate in the market, thereby providing a safer and more secure environment for investors.
Firms operating in Dubai must acquire licensure from both the SCA and Dubai Virtual Asset Regulatory Authority (VARA). This is to ensure that the regulatory frameworks of both entities are adhered to by all VASPs operating within the city.
The regulation outlines business activities requiring a license, such as platform operation, custody, and brokerage of digital assets. It also specifies minimum capital requirements for firms and anti-money laundering guidelines stipulated by the Financial Action Task Force (FATF) – a global financial watchdog.
The SCA regulates investment-related digital asset transactions, while the UAE’s central bank oversees payments made with cryptocurrency. This means that the UAE has taken a cautious approach to ensure that digital assets are being used responsibly and that consumers are protected from fraudulent activities.
Amendments to the rule book are planned for 2022, which will include new categories of virtual-asset service providers and provisions granting financial activities such as brokerage and custody of virtual assets. This will create a more robust regulatory framework that will facilitate the growth of the cryptocurrency market within the UAE.
The move by the UAE to embrace cryptocurrency is part of a wider trend that has seen governments around the world begin to recognize the importance of blockchain technology and digital assets. The US, Japan, Switzerland, and Singapore have all developed regulatory frameworks for cryptocurrency businesses and exchanges in recent years.
The UAE’s decision to regulate digital assets will provide a much-needed boost to the country’s economy, which has been hit hard by the Covid-19 pandemic. It will also help to position the country as a global leader in technology and innovation, attracting more companies and investors to its shores.
Overall, the new regulations regarding cryptocurrency in the UAE are a positive development for the industry, as they make it easier for legitimate businesses to operate and provide greater clarity for investors. With the planned amendments to the regulatory framework set to come into effect next year, the future looks bright for the cryptocurrency market in the UAE.