Dubai sets up watchdog under landmark digital assets law

Dubai has introduced new legislation for the digital asset industry, joining other global hubs in bringing the nascent sector under their regulatory control.

The emirate’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, has announced the enactment of the new social media law, touting it as Dubai’s push to be among the jurisdictions shaping the industry’s future booming.

In addition to the new 56-page bill, the ruler of Dubai also revealed the introduction of a new regulator in charge of digital assets. The new Virtual Assets Regulatory Authority (VARA) will oversee the industry in all free and special development zones in the emirate, with the exception of the Dubai International Financial Centre, which has its own independent regulatory and judicial system .

“The passage of the Virtual Assets Act and the creation of the Dubai Virtual Assets Regulatory Authority is a critical step that establishes the UAE’s position in this sector, a step that aims to help the sector grow. and to protect investors”, Rashid Al Maktoum, who is also vice-president. President and Prime Minister of the United Arab Emirates (UAE) and its Defense Minister, said.

VARA will organize and authorize Virtual Asset Service Providers (VASPs) and virtual asset trading, ensure the highest standards of protection for beneficiaries’ personal data, organize the operations of virtual asset platforms and wallets and monitor transactions to prevent price manipulation.

VARA will have jurisdiction over digital asset exchange services, trading and custody services, and transfer services.

For now, Dubai will refrain from regulating NFTs within the scope of the new law.

In the proposal, the emirate said: “We propose to exclude NFTs from the scope of our current proposals on the grounds that no financial services are provided. However, this comes with a strong caveat that this exemption will depend on the characteristics of the NFT and its function, and not on the terminology or marketing terms used.

Dubai, which will host the BSV Global Blockchain Convention from May 24-26, has been making efforts to regulate the digital asset industry for years, but most of those efforts have been fragmented, with many of its special economic zones forming their own whole. . rules.

In December 2021, the Dubai World Trade Center established a regulated digital currency hub which it said would apply rigorous standards for investor protection, AML compliance and tracking cross-border transaction flows.

The Dubai Financial Services Authority also previously announced a regulatory framework for the sector, but it only addressed investment tokens.

The new regulations come as Russia turns to digital asset exchanges in Dubai to liquidate billions of dollars as sanctions render most global financial services unavailable to the Eastern European country.

A report by Reuters revealed that as Russian nationals seek refuge for their wealth, some are turning to digital assets to invest in real estate in the United Arab Emirates. Others seek to turn their virtual money into fiat currency and hide it elsewhere.

A Dubai-based digital asset company told the outlet that it had received numerous requests from Swiss brokers asking to liquidate billions of dollars worth of digital assets as they feared Switzerland could freeze their assets. None of these requests had been less than $2 billion.

“We’ve had five or six in the last two weeks. None of them have come out yet – they kind of dropped off at the last minute, which is not uncommon – but we’ve never had this much interest,” a digital asset manager revealed. .

Another real estate broker, whose company accepts digital asset payments, said it has never had more business than now, with Russians making up the bulk of their clients in recent weeks.

“We saw a lot of Russians and even Belarusians coming to Dubai and bringing whatever they could bring, even in crypto,” he told the outlet.

Watch: BSV Stories – Episode 4: The Blockchain Race in the Middle East

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