Approving the Virtual Assets Law: Oil Kingdom Dubai is once again at the forefront of the world

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

The law establishes the United Arab Emirates (UAE)’s regulatory role in the industry.

It is worth noting that on the same day, the Biden administration issued regulations on cryptocurrencies in an executive order document. The UAE and the United States seem to be ready to accept cryptocurrencies at the same time.

Industry insiders told the reporter of Blockchain Daily that as a major oil country, the UAE's resources are actually relatively single and fragile, and the Dubai government also needs to think about how to find opportunities in the new economic system. The innovation of blockchain technology in digital assets and the financial industry is very inspiring to them.

Dubai’s opportunities in the new economy

According to the Virtual Assets Law, Dubai residents must register with VARA (Dubai Virtual Asset Regulatory Authority) before engaging in crypto-related activities, and businesses engaging in virtual asset activities must also establish a business in Dubai. These activities include operating cryptocurrency exchanges, performing 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 the law, but adds that the Dubai Virtual Assets Regulatory Authority will classify and specify 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 Dubai’s mainland and free zone areas, excluding the international financial center.

The Virtual Assets Law clearly states that anyone found violating the new law could face fines or have their business license suspended or revoked. The Dubai World Trade Center’s board of directors will decide on the course of action when violations occur.

Sheikh Al Maktoum, Vice President and Prime Minister of the UAE, noted that the law is an important step forward in advancing the digital sector and protecting the rights of investors.

"I think it is valuable for the state to promote the digital asset industry, including compliance and transaction transparency," Deng Jianpeng, a professor at the School of Law of the Central University of Finance and Economics, told the Blockchain Daily reporter.

Deng Jianpeng further analyzed that the mainstream economy of Middle Eastern countries has always been dominated by oil economy, and these countries have also tried to make breakthroughs in economic diversification in recent years. As we all know, blockchain is one of the most revolutionary technologies since the birth of Internet technology.

"Dubai and the United Arab Emirates want to make a new attempt in this regard, and everyone has also seen that blockchain itself has many novelties in digital assets, virtual assets, and innovation in the financial industry," said Deng Jianpeng.

Hu Jie, a professor at the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, once expressed the same view in an interview with a reporter from Blockchain Daily.

Hu Jie said that as major oil-producing countries, the UAE and Dubai actually have relatively single and fragile resources, and the Dubai government has been thinking about how to find opportunities in the new economic system.

Hu Jie said that as a new technology, blockchain is still in the stage of exploration and sedimentation in the world. Dubai, through its open policies, attracts blockchain companies and talents from all over the world, and has an advantage in the future development of the blockchain industry.

Binance is discussing applying for an operating license

Due to the UAE's open policy towards cryptocurrencies, it has attracted many companies to settle in.

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

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, second only to Turkey and Lebanon, with a transaction volume of approximately US$26 billion.

Notably, the approval of the Virtual Assets Law and the establishment of the Dubai Virtual Assets Regulatory Authority is a step forward for Dubai, which had previously planned to regulate cryptocurrencies in December 2021, when cryptocurrency exchange Binance partnered with the Dubai World Trade Center to make it a full-fledged 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,” Richard Teng, head of Binance Middle East and North Africa, said in a statement. “We will continue to work closely with DWTC (Dubai World Trade Center) to help establish Dubai as a world-class and advanced crypto regulatory environment.”

It is reported that Binance founder Zhao Changpeng also bought a property in Dubai in October 2021. It is reported that Binance is discussing with Dubai to apply for an operating license to further enhance its presence in the Middle East. The reporter of "Blockchain Daily" asked Binance to verify this matter. As of press time, the other party has not responded.

"The virtual asset law and the new regulatory agency are also likely to be welcomed by players in the crypto world and open up the Dubai real estate market." Hangzhou Dongyuan Equity Investment Partner Zhan Kaiyuan told the Blockchain Daily reporter that the real estate industry may benefit greatly, which will attract real estate investors who can use cryptocurrencies to purchase properties.

"The future belongs to whoever designs it," Sheikh Al Maktoum said on social media. "Our move is a big step towards the future, aimed at developing this sector and protecting all investors."