UAE regulators pave way for crypto and blockchain adoption, says legal expert
While many countries are inclined to simply ban the use of Bitcoin (BTC) and virtual assets, regulators in the United Arab Emirates are taking a different approach.
The country has been consistently enacting its vision of becoming a blockchain capital by providing frameworks to guide crypto businesses on how to operate in accordance with the laws.
Jurisdictions in the country are divided between the mainland, where the regulator is the Securities and Commodities Authority (SCA), and free zones i.e. geographically-specified areas within the UAE with relaxed taxation and regulatory regimes.
Such free zones include the Dubai International Financial Centre (DIFC), which is regulated by the Dubai Financial Services Authority (DFSA), Abu Dhabi Global Markets (ADGM) which is regulated by the Financial Services Regulatory Authority (FSRA), and the Dubai Multi Commodities Centre (DMCC) which falls under regulatory remit of the SCA.
In an interview with Cointelegraph, Kokila Alagh, the founder and CEO of Karm Legal Consultants, shared a brief overview of the regulatory situation in the country. According to Alagh, the SCA, the mainland regulator, provides certainty and opportunities for crypto and blockchain businesses:
“The regulations provided certainty and have opened new opportunities in the UAE, which makes SCA a progressive regulator in the global landscape, as they haven’t ignored this vital growing sector and are continuously working on developing the frameworks to adjust as per these emerging sectors like DLT, blockchain.”
The FSRA, ADGM’s financial services regulator, was the first to introduce digital asset regulations in the country back in 2018. Alagh said that ADGM was also one of the first regulators globally to introduce digital securities regulations and guidance on virtual assets, adding that ADGM is “one of the topmost jurisdictions for established blockchain companies.”
Alagh also discussed regulations in the DIFC. According to Alagh, the DFSA, DIFC’s regulator, “is one of the first regulators from a major financial free zone to bring regulations in regard to security tokens.”
Current DFSA regulations cover the tokenization of securities through blockchain and distributed ledger technology, including the tokenization of shares, derivatives, bonds, debentures, certificates or units of a fund. However, consultation papers for stablecoins, fungible cryptos and nonfungible tokens are still in the process of being drafted.
Lastly, Alagh noted DMCC. The free zone issued special licenses such as the DLT technology service provider license and proprietary trading in crypto commodities license. It also has a crypto-dedicated center called Crypto Oasis, where more than 130 blockchain companies have registered.
Alagh said that “the DMCC is one of the most advanced regulators in this space and has spearheaded the development of the crypto ecosystem in the UAE. The DMCC is a crypto-friendly regulator and provides companies with a friendly framework for setting up a business.”
Meanwhile, crypto exchange Binance has set out to collaborate with the UAE government to assist crypto exchanges and businesses to get their licenses in Dubai. The firm signed a memorandum of understanding with the Dubai World Trade Centre Authority as they launched a crypto hub.