Many countries would prefer to ban Bitcoin (BTC), and other virtual assets. However, regulators in the United Arab Emirates have a different approach.
It has consistently pursued its vision to become a blockchain capital, providing frameworks that will guide crypto businesses in operating according to the laws.
The country’s jurisdictions are split between the mainland (where the regulator is the Securities and Commodities Authority) and the free zones (i.e. geographically-specified areas within the UAE with relaxed taxation and regulatory regimes.
These zones are the Dubai International Financial Centre, (DIFC), regulated by Dubai Financial Services Authority. Abu Dhabi Global Markets is regulated under the Financial Services Regulatory Authority. The Dubai Multi Commodities Centre is regulated under the SCA’s regulatory remit.
Kokila Alagh (founder and CEO of Karm Legal Consultants) gave a short overview of the regulatory environment in the country during a conversation with Cointelegraph. Alagh stated that the SCA, which is the country’s regulator, offers certainty and opportunities to crypto and blockchain companies.
“The UAE regulations have provided certainty and opened up new opportunities, making SCA a progressive regulator in global landscape. They haven’t overlooked this vital growing sector, and are constantly working to develop the frameworks to adapt as per these emerging sectors such as DLT and blockchain.”
In 2018, the first digital asset regulations were introduced in the country by the FSRA (ADGM’s financial regulator). Alagh stated that ADGM was the first to implement digital securities regulations and guidance for virtual assets. He also said that ADGM is the “topmost jurisdiction” for established blockchain companies.
Alagh also spoke out about regulations in the DIFC. Alagh stated that the DFSA (the regulator of DIFC) “is one the first regulators to introduce regulations regarding security tokens.”
The current DFSA regulations allow for the tokenization securities using blockchain and distributed ledger tech. This includes the tokenization shares, derivatives, bonds or certificates as well as units of a fund. However, consultation papers are still being drafted for stablecoins as well as fungible cryptos or nonfungible tokens.
Related: Dubai World Trade Centre will create a new crypto hub and be regulated
Alagh also noted DMCC. The zone was granted special licenses, such as the DLT service provider license and proprietary trade in crypto commodities license. The free zone also hosts a crypto-dedicated centre called Crypto Oasis where more than 130 blockchain businesses have registered.
Alagh stated that the DMCC was “one of the most sophisticated regulators in this area and has led the development of crypto ecosystem in the UAE.” The DMCC provides a framework that allows companies to set up a business. It is a crypto-friendly regulator.
Binance, a crypto exchange, has begun to work with the UAE government in order to help crypto exchanges and businesses obtain their Dubai licenses. As they opened a crypto hub, the firm signed a memorandum with Dubai World Trade Centre Authority.