The government of the United Arab Emirates has recently approved a new law that regulates virtual assets, creating the nation’s initial set of rules for the cryptocurrency industry at a federal level.
This follows previous efforts to supervise digital assets in specific financial areas, such as the Abu Dhabi Global Market (ADGM( and the creation of the Virtual Asset Regulatory Authority (VARA) in Dubai.
According to Cointelegraph, Irina Heaver, a legal expert in the field of cryptocurrency and blockchain in the UAE, stated that the recent legal development has significant ramifications.
Heaver explained that the new law requires entities involved in cryptocurrency-related activities to obtain a license and authorization from the newly established regulator, and failure to comply could result in significant fines.
She quoted, “Failure to comply leads to heavy sanctions, such as a fine of up to 10 million AED ($2.7 million), disgorgement of profits and even criminal investigation by the public prosecutor.”
Heaver also noted that the law is scheduled to take effect on January 14th, and will enforce compliance among crypto entrepreneurs in the UAE.
She stated that every crypto and Web3 project operating in the UAE will have to find a way to comply with the new federal law and all existing laws.
Nevertheless, Heaver believes that while the minimal standards set by the new law for VASPs are achievable, some companies may face challenges. She noted, “Those are actually quite realistic, however, in practice, most crypto companies struggle to meet even basic requirements.”
The lawyer also emphasized that the new legislation has established minimum standards for virtual asset service providers (VASPs). Heaver explained that all VASPs must abide by the laws in place for combating money laundering, terrorist financing, and funding illegal organizations. Furthermore, all legal entities classified as VASPs will have a three-month period to adjust and meet the requirements of the new law.
Despite the new law being implemented to safeguard consumers, the lawyer is of the opinion that it will be hard to deter entities like FTX from committing fraud. Despite its efforts, Dubai’s regulatory body VARA had previously granted approvals to FTX, but later revoked it in November.
She said, “FTX is a case of severe fraud, on a level that makes Madoff look like a saint. Unfortunately, no amount of laws can protect us from individuals who intend to commit crimes.”
Nevertheless, the lawyer thinks that this new legislation is positive for founders, investors, and consumers in the UAE, and that regulatory clarity positions the country to become the “Web3 capital of the world.”
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