Overview of the New Licensing Regime
The SCA’s board of directors has approved the new rules, which mandate compliance with codes of business conduct. Companies wishing to operate in the UAE must adhere to guidelines regarding asset protection and the limitation of specific product trading to certain customers. Licenses are now required for activities such as brokerage, custody, platform operation, and virtual asset service provision.
Enhanced Oversight and Minimum Capital Reserves
The SCA is empowered to request additional documentation from crypto firms and imposes minimum capital requirements in line with the Financial Action Task Force’s (FATF) anti-money laundering guidelines. Currently, the UAE is on FATF’s gray list, warranting increased monitoring.
Applicability and Exceptions
While the SCA’s licensing requirements apply to all emirates in the UAE, exceptions are in place for economic free zones and Dubai. Local financial centers like Abu Dhabi maintain autonomy in daily licensing procedures, while crypto firms in Dubai must register with the Virtual Assets Regulatory Authority (VARA).
Ras Al Khaimah Digital Assets Oasis: A Free Zone for Digital Assets
UAE Supreme Council Member Sheikh Saud bin Saqr Al Qasimi recently established a free zone dedicated to digital assets called the Ras Al Khaimah Digital Assets Oasis. This initiative, set to open in Q2 2023, will attract metaverse, blockchain, NFT, DAO, and other Web 3 firms, bolstering the UAE’s digital asset ecosystem.
Enforcement and Cooperation
The SCA will collaborate with the central bank to enforce the new regulations, which came into effect on January 15, 2023. The UAE Cabinet’s Decision No. (111) of 2022 informed the SCA’s requirements.
VARA’s Increased Scrutiny and Binance Launch Delay
VARA has recently tightened licensing requirements for crypto firms in Dubai. This led to increased scrutiny of Binance, the world’s largest exchange, which subsequently delayed its plans to offer trading through its Binance FZE entity. Other firms like Bybit, Komainu, Hex Trust, and Crypto.com have secured Dubai licenses, with Hex Trust having to provide additional information under an Operational MVP license.
What does the new licensing regime cover?
The framework includes requirements for brokerage, custody, platform operation, and virtual asset service provision. It also mandates adherence to business conduct codes and minimum capital reserves in line with FATF guidelines.
Are there any exceptions to the SCA’s licensing requirements?
Yes, the licensing requirements do not apply to economic free zones and Dubai. Crypto firms operating in Dubai must register with the Virtual Assets Regulatory Authority (VARA).
What is the Ras Al Khaimah Digital Assets Oasis?
The Ras Al Khaimah Digital Assets Oasis is a free zone dedicated to digital assets, established by UAE Supreme Council Member Sheikh Saud bin Saqr Al Qasimi. Set to open in Q2 2023, it aims to attract metaverse, blockchain, NFT, DAO, and other Web3 firms.
How will the new licensing regime be enforced?
The Securities and Commodities Authority will partner with the central bank to enforce the new regulations, which came into effect on January 15, 2023.
What are the implications of VARA’s increased scrutiny?
VARA’s tightened requirements have led to increased scrutiny of crypto firms in Dubai, such as Binance, which delayed its trading offering. Other firms like Bybit, Komainu, Hex Trust, and Crypto.com have secured licenses, with some providing additional information to meet the requirements.