The regulations set out a comprehensive virtual asset framework built on principles of economic sustainability and cross-border financial security, and includes the following documents:

In general, adoption of such a considerable set of regulations means the Government of Dubai supports and will continue to support VA industry and businesses. At the same time, now there is a clearer understanding of the rights and obligations of those involved in VA activities. 

Below we provide some brief insights into new regulations, which could be helpful for you and your digital assets business. 

Meaning of “Virtual Assets” under new regulations

The interpretation of “Virtual Asset” or “VA” has the meaning ascribed to it in the Dubai VA Law. The law provides that a virtual asset means a digital representation of value that may be digitally traded, transferred, or used as an exchange or payment tool, or for investment purposes. This includes Virtual Tokens, and any digital representation of any other value as determined by VARA. Under “virtual tokens” the law implies a digital representation of a set of rights that can be digitally offered and traded through a virtual asset platform. All this means that new regulations will apply to cryptocurrencies or tradeable digital tokens, such as a NFTs.

Read also: New virtual assets law in Dubai

Types of regulated activities 

The new regulations apply to 7 licensed virtual asset activities, including advisory services, broker-dealer services, custodial services, exchange services, lending-borrowing services, payments and remittances services, virtual asset management and investment services. The regulations contain more detailed explanations of what is embraced by each type of regulated type of activity which in its turn helps investors to identify if they need a licence from VARA or not. 

In addition to the above list, issuance of digital assets (including crypto) is a regulated activity under the VARA regime. This allows consumers to make a more informed decision on new tokens being launched in Dubai, and the associated obligations of the issuer.

The VARA also stressed that all market participants, regardless of whether they are licensed by VARA or not, must comply with regulations for marketing, advertising and promotions. Violators will be fined between 20,000 dirhams and 200,000 dirhams and repeat offenders could see fines of up to 500,000 dirhams. The regulations also provide guidance on other issues, such as the issuance of virtual goods.

Licensing regime 

Pursuant to new regulations, all entities shall apply for, obtain and maintain a License issued by VARA in order to be permitted to carry out each VA Activity that it will conduct in Dubai. An entity can apply for one or more regulated activities to be included in a license subject to approval by VARA. There are some exceptions for government-related entities, who do not need to obtain a license. 

The process of licensing consists of 4 stages and is determined by VARA, which is authorized to grant, revoke, and suspend license at any time in case of any violation by an entity. As of today (27 March 2023), no license has been granted to entities. However, VARA expects to issue its first license in the first half of 2023.  

It should be noted that entities who fulfil VARA's licensing requirements will be required to comply with four Compulsory Rulebooks (Company, Compliance & Risk Management, Technology & Information, and Market Conduct) and particular activity Rulebook if they are licensed by VARA to offer this type of activity. 

Levels of Regulation of VA in the UAE

In addition to what has been explained above, it is essential to understand that regulation of VA may differ in each of seven emirates (Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Fujairah, and Ras Al Khaimah). Each emirate has its regulations in areas where there is no federal law. Moreover, some free zones have also their own regulator. For instance, the Dubai Financial Services Authority (DFSA) is the regulator in the Dubai International Financial Centre (DIFC) zone. The Financial Services Regulatory Authority (FSRA) is the regulator in the Abu Dhabi Global Market (ADGM) zone. Therefore, all the above explanations of new VARA regulations relate only to businesses in Dubai. 

It should be noted that in 2022 on a federal level the UAE passed a new law regulating virtual assets, which established the country’s initial regulatory regime for the cryptocurrency space. This law is a foundation for local regulations in different emirates, including the recently adopted regulations of VARA. 

In case you need assistance with understanding the complicated regulatory system of the UAE and application for VARA license, please, contact us. We would be happy to help you! 

Marsel Shadmanov

Head of Corporate Services at Garant Business Consultancy DMCC

Phone +971 4 421 4335

Email info@garant.ae