Nowadays, cryptocurrency topics are trending on almost every crypto-related news media site. Where digital assets are more prominent, governments want to promote innovation and market development. Still, at the same time, they are wary of the potential misuse of cryptocurrencies for sanctions evasion, fraud, terrorist financing, and money laundering.
The crypto space has already gone through a very rough time in the last year, as there have been many sad incidents in the industry. Many individuals lost their entire life savings due to the bankruptcy of several crypto firms.
The United Arab Emirates also seems very enthusiastic about cryptocurrencies, and the country is looking forward to becoming a crypto hub. In this article, we will learn how the country is planning to legally control virtual assets like cryptocurrencies. After finding out how cryptocurrencies are regulated within the country and whether investing in digital assets is legal, the article will also define the legal framework for investing in digital currencies.
Regulation of cryptocurrency in UAE
Looking at the United Arab Emirates developments in light of the regulation of cryptocurrencies more broadly, it is necessary to mention that CBUAE(Central Bank of the UAE) started regulating cryptocurrencies in 2017. The federal government of the United Arab Emirates has also reportedly already given a green signal to virtual assets by implementing a patchwork of crypto-friendly regulations.
The 2017 law mandated that all transactions involving these digital assets be carried out through authorized exchanges and comply with anti-money laundering regulations set by the CBUAE. Using virtual assets for illegal purposes can be looked into by the regulator.
Interestingly, in 2018, the government of the United Arab Emirates set up a committee in the capital city of Abu Dhabi to study cryptocurrencies and their impact on the wider economy. The committee concluded that cryptocurrencies pose no threat to the UAE’s financial stability or economic system.
Is Investing in crypto legal or not in the UAE?
Reportedly, the UAE’s Central Bank has not licensed cryptocurrencies or recognized them as legal tender. However, there is no restriction against crypto assets, and they can be traded on crypto exchange platforms. Citizens of the United Arab Emirates can own cryptocurrencies and can deposit and trade them.
It is noteworthy that in 2020 SCA introduced a regulation on digital assets at the federal level. Decision no 23 of SCA regarding the Crypto Asset Activity Regulation (CAAR) regulates the issuing, listing, offering and trading of cryptocurrencies in the onshore UAE, including initial coin offering exchanges, virtual asset platforms, marketplaces, custodian services and related financial services based on or leveraged on crypto assets.
Interestingly, the UAE has maintained a favorable environment for developing its digital asset industry through its UAE Blockchain Strategy 2021. Furthermore, with its relaxed regulatory approach, the UAE has successfully attracted crypto firms to boost its economy. In fact, UAE is one of the most progressive countries for its cryptocurrency industry and a preferred destination for businesses.
The country also believes that cryptocurrencies could be used as a convenience for economic growth if appropriately regulated by the law.