On March 9, UAE Deputy Prime Minister and Prime Minister Sheikh Mohammed bin Rashid Al Maktoum signed the first law regulating virtual assets in Dubai, the Virtual Assets Law, and established an independent body to oversee the cryptocurrency industry.

The law establishes the regulatory status of the United Arab Emirates (UAE) in the industry.

Notably, the same day the Biden administration issued regulations regarding cryptocurrencies in an executive order document. The UAE and the U.S. appear to be coincidentally ready to accept cryptocurrencies.

Industry insiders analyzed to Blockchain Daily that as an oil power, the UAE's resources are actually relatively single and fragile, and the Dubai government needs to think about how to find opportunities in the new economic system. And the innovation of blockchain technology in digital assets and financial industry is very inspiring for them.

Dubai's opportunities in the new economic system

According to the Virtual Assets Law, Dubai residents are required to register with VARA (Dubai Virtual Assets Regulatory Authority) before engaging in activities related to cryptocurrencies, and businesses engaged in virtual assets activities must also establish operations in Dubai. These activities include operating cryptocurrency exchanges, conducting cryptocurrency transfers and other services related to the provision and trading of tokens.

The virtual assets law does not specify which cryptocurrencies will be subject to the law, but adds that the Dubai Virtual Assets Regulatory Authority will classify and designate the types of virtual assets, in addition to setting rules and controls.

The Dubai Virtual Assets Regulatory Authority will monitor digital transactions and protect the personal data of users. It will also be responsible for licensing and regulating the industry in the Dubai mainland and free zone areas (excluding the International Financial Centre).

The Virtual Assets Law makes it clear that anyone found to be in violation of the new law could face fines or have their business license suspended or revoked. The Dubai World Trade Center's Board of Directors will determine the course of action in the event of a violation.

Sheikh Al Maktoum, Deputy Prime Minister and Prime Minister of the UAE, noted that the law is an important step forward to advance the digital sector and protect the rights of investors.

"With the state to promote this digital asset industry, including compliance and transparency of transactions, I think there is a certain value of this." Deng Jianpeng, a professor at the Law School of Central University of Finance and Economics, said to Blockchain Daily.

Deng Jianpeng further analyzed that the mainstream economy of the Middle East countries has been dominated by the oil economy, and these countries have tried to break through the economic diversification in the past few years. As we all know, blockchain is one of the most revolutionary technologies since the birth of Internet technology.

"Dubai UAE they want to make a new attempt in this area, then we also see the blockchain itself has a lot of this novelty in terms of digital assets, virtual assets, including the innovation of the financial industry." Deng Jianpeng said.

Hu Jie, a professor at Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University, had expressed the same view in an interview with Blockchain Daily.

Hu Jie said that the UAE and Dubai as a major oil country, in fact, the resources are relatively single and fragile, and the Dubai government has been thinking about how to find opportunities in the new economic system.

According to Hu Jie, blockchain as a new technology is still in the stage of groping and precipitation in the world, and Dubai is taking the lead in the future development of blockchain industry through its open policy to attract blockchain enterprises and talents from all over the world.

Cryptocurrency is discussing applying for a license to operate

Due to the UAE's open policy on cryptocurrencies, many companies are being attracted to the country.

In total, the digital economy contributed about Dh100 billion (about $27.25 billion) in 2021, accounting for 4.3% of the UAE's GDP, according to a report by Local News UAE. The country is home to more than 1,400 blockchain or cryptocurrency startups with a total valuation of Dh90 billion ($24.5 billion).

The UAE is the third largest cryptocurrency market in the Middle East, after Turkey and Lebanon, with a trading volume of about $26 billion, according to data compiled by Chainalysis, a third-party service provider, for the period July 2020 to June 2021.

Notably, the approval of the Virtual Assets Law and the establishment of the Dubai Virtual Assets Regulatory Authority is a step forward for Dubai. Dubai had previously planned to regulate cryptocurrencies in December 2021, when cryptocurrency exchange Cryptocurrency partnered with the Dubai World Trade Center to make it a full-fledged cryptocurrency zone to accelerate the industry's adoption.

Dubai is part of the United Arab Emirates, which is poised to issue federal licenses for virtual asset service providers by the end of the first quarter of 2022.

"We welcome this important development." Richard Teng, head of the Middle East and North Africa region for Cryptocurrency, said in a statement, "We will continue to work closely with the DWTC (Dubai World Trade Center) to help make Dubai a world-class and advanced regulatory environment for cryptocurrencies."

Cryptocurrency founder Zhao Changpeng also reportedly bought a property in Dubai in October 2021. Sources say that CoinSec is discussing with Dubai to apply for an operating license to further enhance its presence in the Middle East. The Blockchain Daily reporter asked Coinan for confirmation on this matter, and as of press time, the other side had no response.

"The virtual asset law and the new regulator are also likely to be welcomed by players in the cryptocurrency world and open up the Dubai real estate market." Zhan Kaiyuan, a partner at Hangzhou-based TECO Equity Investment, told Blockchain Daily that the real estate sector could benefit greatly, which would attract real estate investors who can use cryptocurrencies to buy properties.

"The future belongs to anyone who designs it." Sheikh Al Maktoum said on social media, "Our move is a big step into the future, aiming to grow the sector and protect all investors."

Author: Xu Xihao