Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai in the United Arab Emirates who holds several positions including prime minister, has announced a new law on virtual assets as well as the establishment of a crypto regulator.
In a Wednesday announcement, 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. In addition, the ruler said a newly formed Dubai Virtual Asset Regulatory Authority, or VARA, would have enforcement powers in the Emirate’s special development zones and free zones with the exception of the Dubai International Financial Centre.
“Approving the virtual asset law and establishing the Dubai Virtual Asset Regulatory Authority is a vital step that establishes the UAE’s position in this sector a step that aims to help the sector to grow and protect investors,” said the Sheikh.
Today, we approved the virtual assets law and established the Dubai Virtual Assets Regulatory Authority. A step that establishes the UAE’s position in this sector. The Authority will cooperate with all related entities to ensure maximum transparency and security for investors. pic.twitter.com/LuNtuIW8FM
— HH Sheikh Mohammed (@HHShkMohd) March 9, 2022
According to Sheikh Al Maktoum, the crypto law will require Dubai residents to register with VARA prior to engaging in crypto-related activities. Businesses dealing in virtual asset activities must also establish a presence in Dubai. These activities include operating a crypto exchange, conducting transfers of cryptocurrencies, and other services related to offering and trading tokens.
The announcement did not state which cryptocurrencies would fall under the law, but added that VARA would classify and specify the types of virtual assets in addition to setting rules and controls. Anyone found violating the new law could face fines or a suspended or cancelled business permit. The board of directors of the Dubai World Trade Centre will determine the course of action when violations occur.
Related: Crypto City: Guide to Dubai
It’s unclear how the legal framework will impact free zones like the Dubai World Trade Centre, which announced in December it planned to 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.
As an Emirate within the UAE, Dubai largely has its own laws and regulations, operating several “free zones” where people can incorporate companies and apply for trade licenses. 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.