UAE INVITES CRYPTO FIRMS
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UAE INVITES CRYPTO FIRMS TO APPLY FOR LICENSE
APRIL 19, 2023 8:23 PM UTC, ABDELAZIZ FATHI
The federal securities regulator in the United Arab Emirates (UAE) has officially began accepting applications from companies planning to offer one or more crypto-related services in the jurisdiction.
In accordance with new legislation, the UAE’s Securities and Commodities Authority (SCA) kicked off the process of reviewing approval requests from virtual asset service providers (VASPs). The SCA assumed regulatory responsibilities for crypto businesses on February 1st.
According to the announcement, all companies that are not already licensed in a financial free zone are required to apply for a license. Additionally, companies operating in Dubai must also obtain a license from the city’s regulatory authority (VARA) in addition to the SCA’s stamp.
At the end of 2022, the UAE Council of Ministers issued Decision No. 111, which designated the SCA as the agency responsible for regulating virtual asset transactions and issuing licenses for service providers and their “work mechanism.” The emirate’s ambitious framework tackles a broad range of assets and activities, designed to attract firms seeking regulatory clarity.
Under the new regulations, the SCA has the authority to request data and documentation from cryptocurrency businesses at any time, with a reasonable amount of time given for response. Service providers have the right to appeal any disciplinary decisions made by the regulator.
The new rules create a legal framework for crypto aimed at protecting investors and designing much-warranted international standards for industry governance. In addition, the VARA now has enforcement powers in Dubai’s special development and free zones with the exception of the Dubai International Financial Centre.
The regulations set out four compulsory rulebooks and activity-specific rulebooks that VASPs must comply with to offer their services. The “Full Market Product Regulations” include guidelines that lay down the rules for compliance, risk management, market conduct, and other requirements.
The VARA also cites the investor protection motivations, but hefty fines could make things tougher for crypto service providers. Under the new regulations, all authorized crypto firms must adhere to rulebooks for marketing, advertising and promotions.
There are heavy penalties for the breach of these guidelines as violators will be fined between $5,500 and $55,000. If a business repeats the same violation within the year, it could see fines double as high as $135,000.
Notably, the UAE was the first global economy to have set up a specialised regulator for the virtual asset sector. Announced by the UAE’s Prime Minister and ruler of Dubai, Sheikh Mohammed Bin Rashid, the emirate has enacted its first law governing cryptocurrency activities in 2022, and it has also formed an independent regulator to supervise the sector.
The country has developed a crypto-friendly reputation compared to other financial jurisdictions that instructed crypto companies to refrain from consumer-oriented marketing.