On Feb. 7, 2023, Dubai’s Virtual Assets Regulatory Authority [VARA] released a ten-part rulebook outlining various principles and goals. The same entailed rules pertaining to licensing, marketing, issuance of assets, and AML obligations.
The agency dedicated a section to cryptocurrencies that veil identities and prevent the tracking of ownership and transactions. According to the new rules, the issuance and all activities entailing such “anonymity-enhancing cryptocurrencies” are now forbidden.
This means that coins like Monero and Zcash will likely have to bear the brunt and local entities will not be able to create similar coins going forward.
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A gist of the other cryptocurrency rules
As far as other rules are concerned, only entities that are licensed by VARA can describe themselves as virtual asset businesses. That being said, large traders that actively invest in sums greater than $250 million in cryptocurrency, must register with the VARA. Furthermore, if any entity is insolvent, its license could be canceled by the regulator.
Breaching rules related to market conduct will be fineable under the new laws. The range of the same has been set up to 20 million Dirhams [~$5.4 million] for individuals. Likewise, the fine cap for a VASP, like a payment processor or an exchange, has been set at 50 million dirhams [~$13.6 million].
The new rules apply to virtual asset businesses within Dubai. Special development zones and free zones are included in the ambit. However, the Dubai International Financial Centre which has its own regulator has been excluded.
The VARA intends to promote the Emirate as a “regional and international hub” for virtual assets. It also intends to increase awareness and facilitate innovations. However, it stated that regulations are necessary to protect investors and curb illegal practices. Furthermore, these rules have been set in place to develop a regulatory standard.
The rules set are flexible in nature and will be amended as and when required. The official document stated,
“VARA may, from time to time, amend these Regulations in its sole and absolute discretion to address emerging risks and continually evolving developments in the global Virtual Asset sector.“
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