Dubai passes legislation and forms a new virtual asset regulator.
With the publishing of a new law creating the Dubai Virtual Assets Regulatory Authority, the Emirate of Dubai has taken a step closer to becoming an international hub for virtual assets. The Emirate of Dubai published Dubai Law No. 4 of 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (Virtual Asset Law) on March 11, 2022. The Virtual Asset Law lays the groundwork for establishing a regulated ‘onshore’ virtual asset industry in Dubai. This article outlines some of the most important aspects of the new government.
The Dubai Virtual Assets Regulatory Authority (VARA)
will be established as a new regulatory body. VARA will operate as a separate body within the Dubai World Trade Centre (DWTC) but will be associated with the existing DWTC Authority. Except for the financial services free zone, Dubai International Financial Centre, VARA’s regulatory reach spans throughout Dubai and covers all of the Emirate’s economic free zones. VARA’s goals include promoting Dubai as a virtual asset hub, attracting investment into the virtual asset sector in Dubai, and establishing procedures to protect virtual asset investors.
VARA has been tasked with creating virtual asset rules and regulations, proposing virtual asset legislation, and acting to promote the achievement of its objectives.
Scope of the new law
As previously stated, the Virtual Asset Law just establishes the groundwork. As a result, the definitions employed are somewhat broad. The word ‘virtual asset,’ for example, is defined as:
“Any digital representation of any other value determined by the Authority in this regard, including Virtual Tokens, that can be digitally traded, transferred, or utilized as an exchange or payment instrument or for investment reasons.”
This definition does not clearly say whether virtual assets are included in it or not, whether it encompasses cryptocurrencies (and, if so, what criteria apply), and whether non-fungible tokens (NFTs) are included or not. We anticipate that future VARA regulations and guidelines will provide additional clarity.
Prohibition and licensing in general
While the scope is vast, the Virtual Asset Law establishes a clear general prohibition on engaging in any activity covered by VARA without first obtaining permission. These are the activities:
Any organization intending to engage in any of these activities must first acquire VARA clearance before obtaining a license. Although it was rumored that VARA had issued at least one license, the specifics of the licensing process have yet to be revealed.
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