Dubai Virtual Asset Regulation Law: What we know so far?
Law No. 4 of 2022 on The Regulation of Virtual Assets in the Emirate of Dubai
A short guide on what we know so far.
The United Arab Emirates (UAE), the Gulf region’s financial capital, has long been aiming to develop and enhance its virtual asset sector to attract new forms of businesses. UAE came one step closer to its aim when it recently adopted the Dubai Virtual Assets Law (“VSL”). Under the VSL, the Dubai Virtual Asset Regulatory (VARA) has been established, which has its own legal personality and financial autonomy and is linked to the Dubai World Trade Centre Authority (DWTCA).
Here is what we know about VSL:
- VSL will not regulate services related to virtual assets on a federal level but only across Dubai except for the Dubai International Financial Centre (DIFC), which is under the ambit of the Dubai Financial Services Authority (DFSA). Last week, DFSA also issued its Consultation Paper No. 143 for the Regulation of Crypto Tokens;
- VARA is tasked with regulating the sale of virtual assets and virtual tokens while also being responsible for regulation and authorizing virtual asset service providers. In addition to these responsibilities, the VARA will also be ensuring that the data of investors remains secure and safe;
- It is not clear at this stage which cryptocurrencies would fall under the VSL; however, VARA is tasked with the responsibility to classify and specify the types of virtual assets in addition to setting rules and controls;
- VSL defines “Virtual Asset” as “A digital representation of value that can be digitally traded, transferred or used as an exchange or payment tool or for investment purposes, including Virtual Tokens, and any digital representation of any other value determined by the Authority in this respect”;
- VSL defines “Virtual Token” as “A digital representation of a set of rights that can be digitally issued and traded through a Virtual Asset Platform.”
- Article 15 stipulates that any natural or legal person who wishes to engage in virtual asset activities should receive authorization from VARA and must establish a presence in Dubai to conduct business;
- Article 16 outlines a number of activities that are subject to VARA’s authorization, which includes 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; virtual asset custody and management services; services related to the virtual asset portfolio; and services related to the offering and trading of virtual tokens; and
- In case of violation of the provisions of the VSL, VARA is authorized to either suspend permits for up to six months, cancel the permit, or coordinate with the competent commercial licensing authority in Dubai to cancel the breacher’s commercial license.
Binance is the first virtual asset exchange to receive a fully governed license by VARA under the VSL. The awarding of the license comes after Bahrain announced a week before that it had awarded Binance a crypto-asset service provider license. For now, it is understood that Binance will only be permitted to extend limited exchange products and services to pre-qualified investors and professional financial service providers in Dubai.
Despite some clarity on the regulation of virtual assets in Dubai, a lot of questions continue to remain unanswered. It is expected that separate decisions will be issued by the VARA on the implementation of the VSL, which are expected to include description of the activities, exempted virtual assets, procedures for licensing and associated fees and charges.
If you have any questions, please get in touch with our team who can answer your questions and provide insight into the new law.
Dennis Varghese – Paralegal
Peter Gray – Partner