As a progression towards a digital UAE, the government has recently released a draft law for regulating and allowing dealing in cryptocurrency within the country. The most-awaited law for commercial markets has now finally been released initially as a draft and later to be officially published. The issuing and offering of Crypto Assets Law (Crypto-Assets Law) has been designed to govern the issuances, licensing, promotion, business conducts and other economic activities related to crypto-assets. The Securities Commodities Authority has released the law on their website for which the Commercial Lawyers of Dubai will provide you a brief insight for your perusal.
Who All Should be Concerned?
The primary discussion while reviewing this new regulation is to understand the applicability of the law on individuals residing in UAE and those are dealing in crypto-assets as dealers or otherwise. The regulation will be applicable on those who:
- Issues, promotes or provides crypto assets to residents of UAE or undertake any such activities in the country or internationally.
- Offers a platform for fundraising in crypto-assets, or provide services to operate and exchange crypto-assets.
- Undertakes any other financial activity directly related to crypto-assets within the country.
It is indeed important to note that the law exclude certain assets from the very scope of new Crypto-Asset Regulation, which are as follows:
- All assets issued by the government of UAE be it federal or state or even government institutions, companies or authorities.
- Any instruments, currencies, or units approved or accredited by the Central Bank of UAE.
- Any securities secured in dematerialised manner and are yet not issued as crypto-assets and are managed by electronic platform.
- Activities carried within the parameters of Financial Free zones such as DIFC and ADGM.
The Prerequisites
The new Regulations mandates the dealer to establish an incorporation either in UAE or an FFZ or a corporation with the state, which will further allow them to issue security tokens. The SCA will issue approvals for all such companies and in addition, the authority will maintain a register for recognised crypto currencies (for which commodity tokens will be issued) and further guidance for governing and recognising commodity tokens will be issued by the authority post issuance of this new regulation.
Additionally, the authority will have the power to regulate fundraising platforms for crypto-assets which allows the investors to subscribe crypto-assets, with a subscription limit of AED 50,000. This concept is alternatively referred to as Initial Coin Offering. Apart from the foregoing, the SCA has maintained a standard rules and regulation for the dealers and investors of crypto-assets to effectively regulate this channel of investment whilst being internationally updated.
Corporate Lawyers of Dubai believes that this new Regulation is a welcome growth in UAE’s technical and financial market. It will indeed offer increment in investment opportunities in the country and will represent UAE as a progressive commercial sector amongst other nations. This Law will offer certainty for crypto-businesses in the onshore market.
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