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Cryptocurrency Laws and Regulations in UAE

The UAE has developed over the last two decades into a key Middle East center for investment, real estate, and the financial industry. Blockchain technology is also not a new idea in the UAE market since Bitcoin, the most well-known blockchain-based cryptocurrency worldwide has been used for transactions since its inception. 

The “Pizza Guys” was the first restaurant in the UAE to accept Bitcoin as a form of payment in 2014. Further, the first bitcoin exchange, IGOT, was created in the UAE in the same year to provide an opportunity to exchange bitcoin for physical currency. The UAE government quickly recognized the potential of blockchain technology, and steps have been taken to nationalize that technology.

Recently, The Dubai Virtual Assets Regulatory Authority (VARA) was established by Law No. 4 of 2022 on the Regulation of Virtual Assets (VAL), which was enacted by the Emirate of Dubai on February 28, 2022 and got published in Dubai’s Official Legal Gazette hence came into force on March 11, 2022.

This historic law highlights Dubai’s aim to become one of the leading jurisdictions for blockchain technology entrepreneurs and investors by creating a legal framework for enterprises relating to virtual assets, including crypto assets and non-fungible tokens (NFTs).

Virtual asset-related operations in the Dubai International Finance Centre (DIFC) are not covered by VAL’s application. A prominent free zone in the UAE called the DIFC has its legal framework for virtual assets that are governed by the Dubai Financial Services Authority.

As per VAL, “virtual asset” is defined as a “digital representation of value which can be digitally traded or transferred or used as an exchange or payment tool or for investment purposes”.

Key Characteristics of VARA

  • With its independent legal position, financial independence, and administrative autonomy, VARA will have the power to safeguard and control all parties involved in virtual asset services.
  • This Law applies to Virtual Asset services offered throughout the Emirate including Special Development Zones and free zones, except for the Dubai International Financial Center.
  • VARA will be associated with the Dubai World Trade Center Authority.
  • The issuance, offering, and pertinent disclosure processes of virtual assets and NFTs are regulated, supervised, and overseen by VARA.
  • In addition to issuing a code of ethics, general policies, and strategic goals, VARA will also enforce VAL in cooperation with other federal agencies, such as the UAE Central Bank.
  • On a federal level, however, VARA will not regulate any services relating to virtual assets.
  • If an entity violates the VAL, there may be several penalties and fines, including the six-month suspension of VARA’s authorization.

Virtual asset services can only be provided by a person or a legal business that is (i)based in the Emirate of Dubai, (ii) operating in the Emirate of Dubai, and (iii) in possession of a trade license from the Emirate of Dubai’s relevant commercial body.

According to the guidelines of this Law, the following activities necessitate Permits and are governed by VARA:

  • The provision of management and operation services for virtual asset platforms.
  • Services that are provided for the exchange of virtual assets and local or international currencies.
  • Services provided for the exchange of one or more types of virtual assets.
  • Services provided for the transfer of virtual assets.
  • Services provided for the safekeeping, management, or control of virtual assets.
  • Services provided for virtual asset wallets; and
  • Services provided for the offering and trading of virtual tokens.

VARA’s mandate includes keeping an eye on trading activity in virtual asset services to stop price gouging and create strong standards for privacy protection. This authority is expected to publish implementing decisions on the implementation of VAL, outlining pertinent activities, exempt virtual assets, licensing procedures, and related costs, virtual asset custodians, digital wallets, and tokenization and trading.

Convention 360 will continue to monitor further developments in this area and share our insights and experience. Please feel free to contact us, for further information and assistance.

Tejinder Singh | Legal Assistant | C360

Tejinder Singh

Legal Assistant


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