The approval of the virtual asset law has once again placed the oil kingdom of Dubai at the forefront of the world

Author: Xu Xihao, Blockchain Daily

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

The law establishes the regulatory position of the United Arab Emirates (UAE) in this sector.

Notably, on the same day, the Biden administration released regulations regarding cryptocurrencies in an executive order. The UAE and the United States seem to be simultaneously ready to embrace cryptocurrencies.

Industry insiders analyzed to Blockchain Daily reporters that, as an oil-rich nation, the UAE's resources are relatively singular and fragile, and the Dubai government needs to consider how to find opportunities in the new economic system. The innovations in digital assets and the financial industry brought by blockchain technology are very inspiring for them.

Opportunities for Dubai in the New Economic System

According to the Virtual Assets Law, residents of Dubai must register with VARA (Dubai Virtual Assets Regulatory Authority) before engaging in cryptocurrency-related activities, and businesses involved in virtual asset activities must 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 legal constraints but adds that the Dubai Virtual Assets Regulatory Authority will classify and designate types of virtual assets in addition to setting rules and controls.

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

The Virtual Assets Law clearly states that anyone found in violation of the new law may face fines or suspension or cancellation of their business license. The board of the Dubai World Trade Centre will decide on the course of action when violations occur.

Sheikh Al Maktoum pointed out that this law marks an important step aimed at advancing the digital industry and protecting investors' rights.

"Driving this digital asset industry at a national level, including compliance and transaction transparency, I think has certain value," said Professor Deng Jianpeng from the Law School of Central University of Finance and Economics to Blockchain Daily reporters.

Deng further analyzed that the mainstream economy of Middle Eastern countries has traditionally been oil-based, and these countries have been attempting to diversify their economies in recent years. It is well known that blockchain is one of the most revolutionary technologies since the advent of the internet.

"Dubai and the UAE want to make a new attempt in this regard, and we can see that blockchain itself has a lot of novelty in terms of digital assets, virtual assets, and innovations in the financial industry," Deng said.

Professor Hu Jie from the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University expressed a similar view during an interview with Blockchain Daily reporters.

Hu stated that as an oil-rich nation, the UAE and Dubai have relatively singular and fragile resources, and the Dubai government has been considering how to find opportunities in the new economic system.

Hu noted that blockchain, as a new technology, is still in the exploratory and settling stage globally. By adopting open policies, Dubai attracts global blockchain companies and talents, gaining a competitive edge in the future development of the blockchain industry.

Binance is Discussing Applying for a Business License

Due to the UAE's open policies towards cryptocurrencies, many companies are being attracted to set up operations there.

According to local news reports, the digital economy contributed approximately 100 billion dirhams (about 27.25 billion USD) in 2021, accounting for 4.3% of the UAE's GDP. The country has over 1,400 blockchain or crypto startups, with a total valuation of 90 billion dirhams (24.5 billion USD).

According to data compiled by third-party service provider Chainalysis from July 2020 to June 2021, the UAE is the third-largest cryptocurrency market in the Middle East, following Turkey and Lebanon, with a trading volume of about 26 billion USD.

It is noteworthy that the approval of the Virtual Assets Law and the establishment of the Dubai Virtual Assets Regulatory Authority are steps forward for Dubai. Previously, Dubai had planned to regulate cryptocurrencies in December 2021, when the cryptocurrency exchange Binance collaborated with the Dubai World Trade Centre to create a comprehensive crypto zone to accelerate industry adoption.

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

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

Reports indicate that Binance founder Zhao Changpeng also purchased a property in Dubai in October 2021. There are rumors that Binance is discussing applying for a business license in Dubai to further enhance its presence in the Middle East. Blockchain Daily reporters sought confirmation from Binance on this matter, but there was no response by the time of publication.

"The Virtual Assets Law and the new regulatory authority are likely to be welcomed by players in the crypto world and open up the Dubai real estate market," said Zhan Kaiyuan, a partner at Hangzhou Dongyuan Equity Investment, to Blockchain Daily reporters, noting that the real estate industry could benefit significantly, attracting real estate investors who can use cryptocurrencies to purchase properties.

"The future belongs to anyone who designs it," Sheikh Al Maktoum stated on social media, "Our actions are a significant step towards the future, aimed at developing this field and protecting all investors."