On 11 March 2022, Dubai Law No. 4 of 2022 Regulating Virtual Assets in the Emirate of Dubai (the “Law”)1 came into effect. The Law establishes the foundation of a regulatory regime for virtual assets in Dubai with the goals of protecting investors and promoting responsible business growth.
Under the law the statutory body for regulating Virtual assets was formed i.e., Dubai Virtual Assets Regulatory Authority (“VARA”).
The Dubai Virtual Assets Regulatory Authority (“VARA”) has taken two important steps.
- It has issued administrative orders governing the marketing, advertising, and promotion of Virtual Assets.
- It has issued provisional approval to operate in Dubai—referred to as a Virtual Asset Minimum Viable Product License (“MVP License”)—to several global crypto, blockchain, and digital asset market participants.
Definition of the Term “Virtual Assets” Under the Law
The Law broadly defines “Virtual Assets” as:
“digital representation[s] of value that can be digitally traded, transferred or used as an exchange or payment tool or for investment purposes, including virtual tokens, and any digital representation of any other value as determined by VARA.”
The Law requires service providers to establish a presence in Dubai, register with VARA, and obtain a license prior to conducting any of the following virtual assets activities in Dubai or any of its free zones:
- Operating and managing virtual assets platform services;
- Exchange services between virtual assets and currencies, whether national or foreign;
- Exchange services between one or more forms of virtual assets;
- Virtual assets transfer services;
- Virtual assets custody, management, or control services;
- Services related to the virtual assets’ portfolio; and
- Services related to the offering and trading of virtual tokens.
DMCC Free Zone
Dubai Multi Commodities Free Zone (DMCC) is the only free zone in Dubai that issues licenses for cryptocurrency businesses. DMCC is the hub for the innovative development in blockchain technology.
DMCC provides a range of crypto licences including
- Mining Facilities Operator
- Distributed Ledger Technology Services
- Metaverse Service Provider
- Proprietary Crypto Mining
- Proprietary Trading in Crypto-Commodities
- NFT’s E-Marketplace Provider
The DMCC is Dubai’s flagship free zone which gives tax breaks and other benefits to startups. It launched a crypto hub in 2021, located in a 68-storey skyscraper in the Jumeirah Lake Towers area of Dubai. The center is meant to serve as a coworking and networking space for entrepreneurs in the crypto and blockchain sectors.
The Dubai Multi Commodities Centre (DMCC) in year 2022 registered around 3,000 new businesses representing a 23% jump from 2021. Of those, 343 were digital asset startups joining DMCC’s “Crypto Center,”.
In order to obtain a UAE crypto licence, one must ensure that he meets the following eligibility requirements.
- A commercial licence form (requiring the following documents)
- Supporting documentation for registered address of residency
- Supporting documentation verifying company’s name
- Comprehensive business plan
- Passport copies of all partners in the business
- A clean crypto wallet with no fraudulent behaviour or activities
- A business runway of at least 6 to 12 months of operation
- Incorporation of crypto assets with the “UAE Free Zone” departments that are approved by the government
- A detailed business plan