Newsflash: First-of-its-kind law to regulate virtual assets in Dubai
The announcement that the Emirate of Dubai has chosen to “boldly go where no government has gone before” and create regulatory certainty that accounts for the meeting of the physical and virtual dimensions is most welcomed!
The regulatory regime will seek to:
- Establish a competent authority aka Dubai Virtual Asset Regulatory Authority (“VARA”);
- Regulate, supervise and control virtual assets services under Dubai Virtual Asset Regulation Law
The introduction of a bespoke regulatory framework for virtual assets was always an inevitability.
Despite the growing popularity of decentralisation using DLT, without adequate regulation, inherent vulnerabilities of the system will become targets for unfair exploitation. To manage such a risk calls for a framework of rules capable of ensuring certainty and predictability in the conduct of commercial affairs, while at the same time securing important rights, guarantees and protections for harmonious co-existence.Many regulatory frameworks for digital assets have represented modifications to traditional regulatory structures. These hybrid systems inevitably lack the depth of range and expertise to effectively respond to the dynamic developments in the virtual asset market. The unique attributes of the virtual world demand a robust public governance and regulatory model that can match the dynamics of the new environment.A distinct regulator for virtual assets has the advantage of a singular streamlined focus, covering all the legal, technical and other requirements that facilitate safe transactions using virtual assets.
The new law will apply throughout Dubai except for the state-owned financial free zone DIFC. DIFC’s regulator, the Dubai Financial Services Authority (DFSA), is introducing its regulation for the virtual asset sector in phases. Meanwhile the UAE’s Securities and Commodities Authority (SCA) and the Abu Dhabi Global Market (ADGM) have already established such frameworks. It is of course fully expected that cooperation with other regulators will continue. However the single virtual asset regulator will be able to oversee sustained legitimate expansion of the sector consistent with the public’s, especially investors’ expectations.
Dubai’s growth prospects will be significantly enhanced with this new regulatory model.
Kudos all round to Dubai’s leadership in its statement and strategy aimed at creating an advanced legal framework to protect investors and provide international standards for virtual asset industry governance that will promote responsible business growth in the emirate.
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Re/think is a boutique accounting, audit, advisory, regulatory compliance, and tax advisory firm with offices in Dubai and Abu Dhabi (ADGM) focused on providing businesses of varying sizes with timely, proactive, and customized business solutions from start-up and early development to the latest stages of a business lifecycle.
Authors
Gail Johnson-Goring
Partner & Director of Regulatory and Compliance Services
Rowena Bethel
Associate Director of Compliance
