Know About Dubai Virtual Asset Regulation Law

Dubai has taken another step towards becoming a worldwide center for virtual assets with the issuance of new legislation that establishes the Dubai Virtual Assets Regulatory Authority. The Emirate of Dubai issued Law No. 4 of 2022 on the Regulation of Virtual Assets (Virtual Asset Law).

The Virtual Asset Law lays the groundwork for a regulated ‘onshore’ business for virtual assets in Dubai. This article outlines some of the fundamental elements of the new government.

What is a Virtual Asset?

Virtual Assets are defined in the law as “a digital representation of value that can be digitally traded or transferred, or used as an instrument for exchange, payment, or investment purposes, including Virtual Tokens, and any digital representation of any other value specified by the Authority in this regard.”

The law defines virtual assets as cryptocurrencies such as Bitcoin, and Ethereum, as well as non-fungible tokens (NFT). Cryptocurrencies are digital currencies that are protected by encryption and are based on blockchain technology rather than a centralized authority such as banks. NFTs are tokens that are used to indicate ownership of unique items such as artwork or collectibles. As they are unique, they cannot be duplicated, which means that these tokens can only have one legitimate owner at a time. They vary from cryptocurrencies, which are all the same and thus can also be traded and used as a medium for business transactions. Virtual assets, on the other hand, do not contain digital representations of fiat currency, stocks, and other financial assets.

Virtual Asset Regulation Law

The Virtual Assets Law establishes the legal framework for VARA to operate inside the Emirate of Dubai, especially within the Dubai World Trade Center.

The Regulator – Virtual Assets Regulatory Authority (VARA)

The Dubai Virtual Assets Regulatory Authority (VARA) is formed as an autonomous entity associated with the current DWTC Authority. VARA’s regulatory reach stretches across Dubai and it includes all of the Emirate’s economic free zones, with the exception of the financial services free zone, Dubai International Financial Center (DIFC). VARA’s objectives include promoting Dubai as a virtual asset hub, stimulating investment in the virtual asset business in Dubai, and ensuring safeguards for virtual asset investors.

VARA has been entrusted with preparing virtual asset rules and regulations, proposing virtual asset legislation, and serving as a supervisory authority for virtual asset platforms, as well as the issuance and sale of virtual assets, to help it accomplish its objectives.

Key Feature of VARA

VAL requires applicants to be formed in the Emirate of Dubai, as well as have their business headquarters there. In addition, applicants must first get a commercial license from the appropriate licensing authorities in Dubai. Specific licensing processes and additional ongoing requirements are expected to be outlined in separate implementing decisions issued by VARA following the VAL’s implementation, which will also include a description of the activities, exempted virtual assets, licensing procedures, and associated fees and charges for virtual asset custodians, digital wallets, and tokenization and trading.

Activities that Need a Permit Under the Virtual Assets Law

According to the legislation, it is illegal for any individual in the emirate to engage in operations without authorization from VARA. In addition, anybody intending to engage in virtual asset activities must establish a presence in Dubai in order to do business.

The following are the activities that require VARA authorization, according to the law:-

Platform services for operating and managing virtual assets
Services for exchanging virtual assets and currencies, whether national or international
Exchange of services between one or more forms of virtual assets
Virtual asset transfers services
Virtual asset custody and management services
Services associated with the virtual asset portfolio
Services related to the offering and trade of virtual tokens