The UAE’s regulation of cryptocurrencies saw a major change last week, as the Securities and Commodities Authority (SCA) and Dubai’s Virtual Assets Regulatory Authority (VARA) announced that they would cooperate in the creation of a comprehensive regulatory framework, for virtual and digital assets within in the UAE.
SCA & VARA Merge
The Securities and Commodities Authority (SCA) and Dubai’s Virtual Assets Regulatory Authority (VARA) are collaborating to create a set of unified guidelines for the licensing and supervising of Virtual Asset Service Providers or VASPs.
The Dubai Virtual Assets Regulatory Authority or VARA, was established in 2022, and it oversees the provision, use, and exchange of virtual assets in Dubai, that take place outside of Dubai’s financial free zones.
The Securities and Commodities Authority, or SCA, is the key regulatory body in the United Arab Emirates (UAE) that oversees financial markets and securities-related activities.
The SCA was established in 2000 and its primary objective is to supervise and monitor financial markets in the UAE, including the Dubai Financial Market and the Abu Dhabi Securities Exchange.
Can DIFC businesses act for Dubai-based clients?
Crypto trading and custody conducted within the Dubai International Financial Centre (DIFC) falls under the remit of the Dubai Financial Services Authority (DFSA).
Companies operating in the DIFC can only act for overseas, and expat clients, and not for UAE citizens or businesses.
Those businesses looking to operate in cryptocurrencies and digital assets “on-shore” in Dubai must apply for a licence from VARA.
What do the new regulations mean for crypto investors and businesses in Dubai and the wider UAE?
Virtual Asset Service Providers or VASPs, operating in Dubai must now obtain a license from VARA, while those based in the other Emirates need to secure a license from the SCA.
VASPs operating in Dubai can now service and act for clients in the whole of the UAE, which could presumably make establishing and operating a VASP, a far more attractive proposition.
The new regulations also emphasize strict compliance with anti-money laundering (AML) and counter-terrorism financing standards.
In addition, the new rules establish a framework for collaborative oversight between the SCA and VARA.
Allowing both organizations to effectively monitor compliance with the new rules by VASPs and others, and to impose penalties for any violations it detects.
The framework also includes provisions for mutual supervision between the regulatory bodies as well as the exchange of information and the regulatory training of employees.
Why have Dubai’s regulators decided to cooperate with the Securities and Commodities Authority?
The collaboration with the SCA aligns with the goals set out in Dubai’s 2033 Economic Agenda, which aims to establish the Emirate as a leading hub for finance and innovation.
The new regulations are expected to attract international businesses, boost investor confidence, and position the UAE as a global leader in crypto regulation.
His Excellency Helal Saeed Al Marri, the chairman of VARA’s executive board was quoted as saying:
“Today marks a pivotal milestone, demonstrating regulatory cohesion across the UAE, driving forward our shared vision for a robust, secure and interoperable virtual assets ecosystem.”
Whilst his Excellency Mohamed Ali Al Shorafa, the SCA’s Chairman said:
“The goal (of the new regulatory framework) is to foster the growth and stability of virtual assets in the UAE.”
He added
“This ensures the enforcement of Anti-Money Laundering (AML) legislation and boosts the confidence in the country’s investment ecosystem”
The new regulatory framework is likely to make it easier for Dubai-based VASPs to operate across the UAE.
However, this is still a fledgling market, which research website Statista estimated to be worth $292 million in April 2024.
As of December 2023, there were thought to be some 770 crypto-related businesses operating in Dubai.
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
In addition to the financial analysis and commentary he provides as an editor at GoodMoneyGuide.com, his work has been featured in publications including Fool.co.uk.
As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
Darren is an expert in areas like currency, CFDs, equities and derivatives and has authored over 260 guides on GoodMoneyGuide.com.
He has an aptitude for explaining trading concepts in a way that newcomers can understand, such as this guide to day trading Forex at Pepperstone.com
Darren has done interviews and analysis for companies like Queso, including an interview on technical trading levels.
A well known authority in the industry, he has provided interviews on Bloomberg (UK), CNBC (UK) Reuters (UK), Tiptv (UK), BNN (Canada) and Asharq Bloomberg Arabia.
You can contact Darren at darrensinden@goodmoneyguide.com
