Out-Law News 1 min. read

UAE’s new virtual asset regulations take effect


The Securities and Commodities Authority (SCA) of the United Arab Emirates (UAE) has issued its long-awaited virtual asset regulations as part of an “increasingly sophisticated regulatory landscape”, according to one legal expert.

The SCA, which regulates financial markets in ‘onshore’ UAE, issued its new regulations surrounding virtual asset transactions and service providers. It also officially announced that it will now start receiving license applications from companies wishing to provide virtual asset services. The new Virtual Asset Regulations set out a list of criteria for the ‘accepted virtual assets’ that the SCA will oversee.

The ‘accepted virtual assets’ list reflects similar measures that were introduced by regulators in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market. The effect is that virtual assets cannot be traded in the onshore UAE unless they are approved on the SCA’s official list of virtual assets. The SCA has also provided guidance on measuring the appropriateness of accepting a virtual asset within the official list.

Virtual assets that do not meet the new SCA criteria cannot be traded in the onshore UAE unless separately approved by the SCA or by a competent authority, such as the Virtual Assets Regulatory Authority (VARA), which regulates virtual assets in Dubai – excluding in the DIFC – alongside the SCA.

The SCA’s Virtual Asset Regulations outline a number of duties and obligations for licensees, including but not limited to technology-related governance, stress-testing of systems and controls, relevant disclosures, short selling and trading-related controls, and compliance with the UAE’s federal anti-money laundering (AML) and Combatting the Financing of Terrorism (CFT) law.

The SCA also updated its rulebook to include various definitions of virtual assets as well as a new category of licenses for virtual asset service providers (VASPs). Applications can now be made to the SCA for a virtual assets license based on further guidance under the SCA’s Financial Activities Rulebook.

Barkha Doshi of Pinsent Masons said: “The development of the SCA’s Virtual Asset Regulations promotes the UAE’s efforts to transform itself into a global fintech hub. The UAE can expect increasing growth with VASPs trying to tap into the developing market.”

Doshi added that the introduction of the ‘accepted virtual assets criteria’ was a welcome news. “Dual licensing from two competent regulators, such as VARA and the SCA should go a long way towards strengthening the standing of a VASP looking to be taken seriously in an evolving market.”

“As more and more VASPs will apply for a license from SCA, the benefits of operating within the increasingly sophisticated regulatory landscape surrounding virtual assets in the UAE will become apparent,” Doshi added.

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