New Federal virtual asset regulations (set out in UAE Cabinet Decision No.111 of 2022 On the Regulation of Virtual Assets and Their Service Providers) (“Virtual Asset Regulations”) govern the licensing and regulation of virtual asset sector in the UAE, including in the free zones. Virtual asset activities regulated by the UAE Central Bank (including stored value facilities) are outside the scope of the regulations. “Virtual Assets” are defined as a digital representation of value that can be digitally traded or transferred and can be used for investment purposes, but excludes the digital representation of fiat currency, securities or other assets.
In order to carry out specified virtual asset activities in the UAE, an entity must obtain a licence from the SCA or the relevant local licensing authority and it must be based in the UAE to conduct its business. The specified virtual asset activities for which a licence is required include providing:
- services for the operation and management of Virtual Asset Platforms.
- services for the exchange between one or more forms of Virtual Assets.
- services for the transfer of Virtual Assets.
- brokerage services in Virtual Asset trading.
- services for the custody and management of Virtual Assets and enabling control over them.
- financial services in connection with the Issuer's offer and/or sale of Virtual Assets or participating in the provision of such services.
In order to obtain a licence, Virtual Asset Service Providers must meet certain minimum requirements as to, among other things, ant-money laundering and terrorist financing, data protection and cybersecurity (including notification to SCA of security risks and cybercrime), and SCA requirements as to capital, credit guarantees, securities and compliance management systems and controls.
According to the regulations, the SCA has ultimate oversight of Virtual Asset Activities and Virtual Asset Service Providers across the UAE, including free zones. Coordination between the SCA, the local licensing authorities and the UAE Central Bank will be required.
It remains to be seen how such coordination will work in practice, and the interplay between the Federal regime (set out in the Virtual Asset Regulations and regulations on crypto assets introduced in 2020 by the SCA (SCA Board of Directors’ Decision No.23 of 2020 concerning Crypto Assets Activities Regulation) (read more…) and the existing regulations relating to virtual assets introduced in the ADGM, DIFC and the Emirate of Dubai.
The ADGM and the DIFC each have their own regimes for the regulation of virtual assets. The ADGM regime regulating virtual assets was introduced in 2018 and is incorporated in the Financial Services Markets Regulations 2015 (FSMR) and FSRA Rulebook modules. In the DIFC, the DFSA introduced the digital assets regime in two phases: an Investment Token regime was introduced in October 2021 (read more… ) and a Crypto Token regime (read more…) was introduced in November 2022.
In the Emirate of Dubai, the Dubai Law No.4 of 2022 regulating Virtual Assets in Dubai was issued in March 2022 and regulates virtual assets activities in Dubai. The Dubai Virtual Assets Regulatory Authority (“VARA”) is the central authority for the virtual asset industry in Dubai, affiliated with The Dubai World Trade Centre (“DWTC”) Authority. Among VARA’s regulatory objectives is to develop the regulations, rules and standards required for regulating, supervising and overseeing virtual assets activities (including Virtual Asset Platforms, Virtual Asset Service Providers and all other matters related to Virtual Assets) (read more here and here…). The DWTCA and the SCA signed an agreement in September 2021 which establishes a framework enabling the former to issue the approvals and licences for the conduct of financial activities relating to cryptoassets within DWTCA free zones. Further, the Dubai Multi Commodities Authority (“DMCC”) announced the launch of their Crypto Centre as a new cryptocurrency and blockchain hub in May 2021.
You can also read about developments in the fintech sector in our blog, FintechLinks.
Companies in the UAE are subject to a modernised regime relating to registration in the Commercial Register maintained by the competent authority in the relevant Emirate (the relevant Economic Departments). The framework set out in Federal Decree-Law No.37 of 2021 On the Commercial Register (read more
… ) has now been supplemented by implementing regulations published by the Cabinet in Cabinet Decision No. 107 of 2022. The Implementing Regulations came into force on 16 November 2022, the day after publication in the Official Gazette.
Companies operating in the UAE, including those regulated by the Commercial Companies Law 2021, government-owned companies which carry out economic activity, decree companies, professional companies and branches, offices and agencies of foreign companies are required to register basic information in the Commercial Register. The Implementing Regulations set out the detail of the information to be registered with the Commercial Register, ranging from information about the company (such as licence details, address, activities, share capital, but not including constitutional documents) and its management, to information about the shareholders (including nationality). The Implementing Regulations are silent on any requirement to register security granted by a company over its assets in the Commercial Register.
The Implementing Regulations also clarify the information required to be included on the Economic Register, which includes information relating to intellectual property (such as trademarks and patents), commercial agencies.
Some of the information on the Commercial Register or Economic Register may be published by the Ministry of Economy and the competent authority in the relevant Emirate on their websites, and an extract of such information on the relevant register may be provided to “any party having any interest or any person with the relevant capacity” who submits a request to the Ministry of Economy or the relevant competent authority. It is not clear from the Implementing Regulations who may be considered eligible to submit a request for an extract of a register.