The Securities and Commodities Authority (SCA) in the United Arab Emirates (UAE) has announced that it will begin accepting applications from virtual asset service providers looking to offer crypto services in the country. However, firms that are already licensed in the UAE’s financial free zones are exempt from this requirement. The licensing regime was approved by the SCA on Monday, following a decision by the UAE Council of Ministers last year to regulate the crypto sector. The SCA took on the role of regulating the sector earlier this year.
The local industry in the UAE has already embraced Dubai’s recently unveiled regime, with some of the seven emirates, including Dubai and Abu Dhabi, already having licensing frameworks for crypto firms in force. Companies looking to operate in the Emirate of Dubai must obtain a license from its Virtual Assets Regulatory Authority (VARA) in addition to SCA approval, according to the announcement.
Firms seeking authorization will have to demonstrate “operational efficiency and flexibility” and meet operational standards rules for a set of standards. Amendments have been made to the virtual asset rulebook from 2022, according to the announcement. Financial activities like brokerage and custody of virtual assets, as well as a new category of virtual asset service provider, have been added to the legislation.
The regulation also states that “a person wishing to engage in virtual asset activities shall have headquarters in the State to conduct his business, according to one of the legal forms approved by the local authorities concerned with commercial licenses.” This means that companies must have their headquarters in the UAE and conduct their business under one of the legal forms approved by the local authorities concerned with commercial licenses.
The move to regulate the crypto sector comes as part of the UAE’s wider efforts to embrace digital innovation and modernize its economy. Last week, the UAE unveiled its central bank digital currency (CBDC) strategy, with the first phase set to be completed by mid-2024. The strategy aims to take advantage of the benefits of blockchain technology and enhance the efficiency of the country’s financial system.
The UAE has been at the forefront of digital innovation in the region, with initiatives such as Dubai’s Blockchain Strategy 2020 and the Dubai Future Accelerators program. The country’s leadership has recognized the potential of blockchain technology to transform various sectors, including finance, healthcare, and transportation.
The move to regulate the crypto sector is a significant step towards creating a more secure and stable environment for virtual asset service providers in the UAE. It will help to build trust and confidence in the industry, which is essential for its growth and development. The UAE’s efforts to embrace digital innovation and modernize its economy are commendable, and they are likely to have a positive impact on the country’s economic growth and development in the coming years.
