What Is Dubai’s New Virtual Asset Regulation Law?
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the United Arab Emirates and Ruler of Dubai, recently announced the approval into law of the Virtual Asset Regulation Law, which creates a body known as the Virtual Asset Regulatory Committee (abbreviated as VARA).
Virtual Asset Regulation Law in Dubai
The ruler posted the following on his official Twitter page: “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.” But what does that mean?
The new law defines a 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”. Although the law does not specify, these are expected to include Bitcoin, Litecoin, Ethereum, Shiba Inu coin, other cryptocurrencies, and non-fungible tokens.
Now that we’ve defined a digital asset, the purpose of the law becomes clearer. VARA is part of the Dubai World Trade Center Authority and is designed to protect users’ personal data and keep a record of digital transactions. The regulatory body will have full jurisdiction throughout the entirety of the city, with the one exception of the Dubai International Financial Centre, a sector that is independently governed and designed to be used by financial services around the world. This does not affect Abu Dhabi or any other part of the United Arab Emirates, as the law only applies to the city of Dubai.
VARA will set the rules and guidelines for citizens of Dubai when purchasing these digital assets. It does mean that anyone wishing to purchase crypto or NFTs within the city limits will be required to obtain a license, however. The idea is not to punish or more strictly regulate cryptocurrency, but simply to ensure that consumers are protected and that unsavory “crypto management firms” aren’t allowed to cheat their customers.
The punishments for violating the law or VARA regulations include potential revocation of the digital assets purchases a permit for a period of six months, canceling the permit altogether, or coordinating with the commercial licensing district to ban the offending person or organization from conducting business in Dubai at all.
There are still quite a few aspects of the law whose effects remain to be seen. For example, the law does not specify which digital assets will be regulated; it is possible that Bitcoin or tokens might be exempt from regulations. The law also does not specify how licenses will be issued or to whom, although VARA has reportedly already issued its first license.
To sum up, there are many unknowns and it is impossible to say what the exact implications of the bill will be at this time. However, one thing that is certain is that this could be the start of increased regulation and consumer protections worldwide for crypto and NFT purchasers. Only time will tell.