The United Arab Emirates (UAE) has taken a significant step towards embracing digital assets by introducing a new regulatory framework for the space. With the new law, the UAE will be able to provide legal certainty for virtual asset service providers (VASPS) and give crypto entrepreneurs peace of mind when investing and operating in the country. Irina Heaver, a UAE-based crypto and blockchain lawyer, explained that the new law seeks to ensure that entities that engage in crypto activities must secure a license and approval from the new regulator.
Companies that fail to comply may face fines of up to 10 million AED ($2.7 million), disgorgement of profits, and even criminal investigation.
All VASPs will also have to comply with the legislation in force on combating money laundering crimes, the financing of terrorism and the financing of unlawful organizations within three months. Heaver also mentioned that the draft affects all crypto and web3 projects operating in the UAE. “Every crypto and Web3 project operating in the UAE will have to structure a way to comply with the new federal law and all of the existing laws,” she said. The new law is set to come into effect on January 14, 2021, and is a welcome development for crypto entrepreneurs in the UAE.
This progress in regulatory certainty can help the country become the “Web3 capital of the world” and make it an even more attractive hub for crypto-related investments and businesses. However, the lawyer has pointed out that no amount of laws can protect us from people wanting to commit fraud intentionally. “FTX is a case of serious fraud,” Heaver noted. Still, the new law sets minimum requirements for VASPs to adhere to in order to protect consumers, which is a step in the right direction.
The UAE’s federal-level regulation of virtual assets is a historical moment that can have profound effects on the country’s emerging crypto and blockchain industry. The new law will enable the UAE to better supervise and protect digital asset investments, while also providing greater clarity and legal certainty to domestic and international investors. With its highly advanced infrastructure, the UAE is well-positioned to become the Web3 capital of the world.
