UAE to implement federal level virtual asset regulations on 15th January 2023

14 January 2023

Saranya Mohan

The UAE cabinet has issues a new legislation governing virtual assess, which establishes the state’s first federal regulatory structure for the industry.

The UAR cabinet has issues a new legislation governing virtual assess, which establishes the state’s first federal regulatory structure for the industry

The Cabinet has approved an order that puts a new legislation for virtual assets and virtual asset service providers into effect, adding another layer of control to the UAE's virtual asset sector. The new rule is scheduled to go into effect on January 15, 2023, and will serve as the primary supervisory framework for virtual assets in the UAE.

The framework is intended to protect investors while also supervising the industry, and providing with a tool to respond to the anticipated hazards posed to virtual asset investors.

The rule would also assist the state in creating a favorable investment, financial, and economic environment so that foreign businesses and institutions operating in the virtual asset sector can provide services in the emirates.

Prior to federal regulation, many regulatory measures for virtual assets were implemented in certain sections of the UAE, such as the financial free zones Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC). Dubai has also just developed its own virtual asset regime and Dubai's Virtual Asset Regulatory Authority (VARA).

The interaction between regional authorities and the UAE's Securities and Commodities Authority, the central regulatory body, is one of the new regime's most important features.

The Federal Regulation clarified that the "local licensing authorities" would still hold some authority in terms of licensing and the businesses vying for their license approval would have to decide additionally need an SCA license to operate in the Emirates.

The Federal Regulation has also clarified that businesses who have sought for or hold a license from a 'local licensing authority’ such as ADGM or DIFC may not need to also get a license from SCA.

In addition to licensing restrictions and new liabilities and compliance requirements, the Federal Regulation includes penalties for rule violations. They range from a warning and suspension of virtual asset listing or trading to license revocation and a fine of up to AED10 million (US$2.7 million).