The federal financial regulator of the United Arab Emirates (UAE) has announced that it will start receiving license applications from companies looking to offer virtual asset services in the country.
The Securities and Commodities Authority (SCA) said in a release that all virtual asset service providers (VASPs) operating in the country must submit an application and obtain a license from the regulator, but are licensed in the country’s financial free zones except for. Meanwhile, digital asset firms operating within the emirate of Dubai must still comply with its own financial regulator, the Virtual Asset Services Authority (VARA). These companies must also apply to and obtain a license from VARA.
On December 11, 2022, the UAE Cabinet issued Resolution No. 111 of 2022 to regulate virtual assets in an attempt to provide "an attractive investment, economic and financial environment for global companies and institutions operating in the field of virtual assets." The SCA officially announced on February 1 to undertake the task of regulating the virtual asset industry in accordance with the cabinet resolution. According to the SCA, the resolution aims to “ensure the protection of investors’ virtual asset funds from illegal activities”
The SCA added that the resolution applies to all virtual asset-related transactions for investment purposes, including in the country’s non-financial free zones. However, regulators also impose some restrictions. They explain: “Its provisions do not apply to virtual assets used for payment purposes, as they are subject to the jurisdiction of the central bank. They also do not apply to financial free zones.”
UAE blockchain lawyer Irina Heaver spoke to Cointelegraph on Jan. 13 to explain the implications of the new federal virtual asset law. According to Heaver, failure to comply with the new law could lead to fines of up to 10 million dirhams ($2.7 million), forfeiture of profits and criminal investigations by prosecutors.
