How the UAE established itself as a global leader in the race to regulate digital assets

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In the aftermath of the FTX debacle, calls for effective regulation of crypto assets will only grow louder.

Lawmakers and regulators around the world have responded by creating, updating and innovating stronger regulatory regimes that both mitigate risk and facilitate the exciting opportunities that cryptoassets present.

The UAE has emerged as a global leader in the race to regulate digital assets in an attractive and efficient manner. Back in 2018, when Abu Dhabi Global Market became the first jurisdiction in the world to introduce a customized framework for digital assets, the region’s strategic vision to become a regulatory pioneer was self-evident. The rest of the UAE quickly followed suit.

strategic thinking

The UAE prides itself on its hunger and ambition for innovation, and it all comes from the top.

In 2022, His Highness Sheikh Mohammed, Vice President and Prime Minister of the UAE and Ruler of Dubai, tweeted that he wanted “Dubai to provide the most advanced virtual asset ecosystem in terms of organization, governance and security.”

Across the UAE, various emirates and free zones have been working tirelessly to develop strategies to facilitate the adoption of digital assets across a wide range of topics such as blockchain and the metaverse, NFTs and crypto tokens, central bank digital currencies (CBDCs) and more). As a result, a diverse and complex digital asset ecosystem is forming much faster in the UAE than in other jurisdictions.

As a result, digital assets are booming in the UAE. Cryptocurrency exchanges Kraken and Binance have received licenses to operate in the Abu Dhabi Global Market. The Dubai Police Force launched two NFT collections (becoming the first police force in the world to do so), while Dubai-based coffee shop Bake N More became one of the first retail businesses in the region to accept cryptocurrency payments.

stay one step ahead

Various regulators in the UAE keep abreast of developments by conducting public consultations on specific aspects of virtual assets, issuing new regulations and guidance, and updating regulatory rulebooks. As early as 2023, there will be further major developments.

On February 7, the Virtual Assets Regulatory Authority (VARA) published the Virtual Assets and Related Activities Regulations 2023, which sets out the regulatory framework governing virtual assets (including cryptocurrencies) and all related activities in Dubai (excluding DIFC). VARA will be the first regulator to operate in the Metaverse.

As one of the first jurisdictions to implement a virtual asset framework, the UAE has already addressed in practice certain issues that other jurisdictions are still thinking about theoretically. For example, while the United Kingdom has emphasized the need to consider payment of damages in cryptocurrencies, the Dubai Lower Court has ordered damages to be paid in cryptocurrencies and is believed to be one of the first courts in the region, and possibly the world, to use cryptocurrencies for damages payments one. this way.

Expect more updates throughout the year as the virtual asset framework continues to evolve.

Where should we go in the future?

The adoption of digital assets continues to grow in the region, with the MENA region expected to be one of the fastest-growing markets globally. Many financial institutions are now exploring the possibility of launching their own crypto tokens to better serve their clients.

The UAE Central Bank also intends to launch a digital currency for cross-border payments and domestic use by 2026. Countries that are serious about addressing the challenge of regulating digital assets will no doubt look to the UAE for inspiration.