Eternity Law International — News — Cryptocurrencies in the UAE

Cryptocurrencies in the UAE

Published:
July 3, 2018

Investors, traders and cryptocurrency issuers face an ambiguous regulatory climate in the United Arab Emirates (UAE).

On the one hand, the UAE, in particular Dubai, is pursuing a state policy of introducing new industries and innovations, and the promotion of distributed ledger technology (including Blockchain) is a priority for the government.

At the same time, the UAE Central Bank, the Securities and Commodities Authority (SCA) and the financial regulators of the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM) have published guidelines, white papers, circulars and clarifications on cryptocurrencies , some caveats and other innovations to promote virtual money.

This article describes the current state of affairs.

Virtual currencies

In January 2017, the Central Bank of the UAE issued regulations to govern the operation of electronic payment systems (“Rules for the storage of valuables”).

It contains only a brief mention of virtual currencies and the definition of electronic money as “a digital unit used as a medium of exchange, account creation or storage of value.” The rules recognize the cryptocurrency, but it is confusing that its use (and any operations with it) is prohibited.

In February and October 2017, the UAE Central Bank made statements published in the media. They clarified that trading in bitcoins, other cryptocurrencies and altcoins is not regulated by the “Rules for the storage of values”.

According to the UAE Central Bank, trading in virtual money was a “trial practice”.

Also, noteworthy reports have been published about transactions and investments available in Bitcoin. One Dubai marketplace has announced that it will be trading its own units in Bitcoin.

In January 2018, the National Bank of Dubai announced that it would stop processing “suspicious” bitcoin transfers to account holders of cryptocurrency trading platforms.

The bank later clarified that it does not prohibit customers from transacting with digital asset trading platforms, but restricts prohibited suspicious transactions that are financial crimes.

Cryptocurrency exchanges and trading

BitOasis is the first cryptocurrency exchange in the UAE. The platform, originally operating in the Dubai Silicon Oasis (DSO) free zone, is now operating as an organization established in the British Virgin Islands due to an ambiguous regulatory climate. At the same time, DSO provides her with technical and operational support.

In February, Dubai Multi Commodities Center (DMCC) licensed Regal RA DMCC as the first company in the DMCC free zone to trade cryptocurrencies. The DMCC clarified that it considers digital currency a commodity. Therefore it operates within its jurisdiction.

DMCC offers cryptoasset holders “frozen storage” by providing its vault at the Dubai headquarters where the company stores its gold. Thus, the cryptocurrency is protected from hacking and theft from the wallet (the main problem of most cryptocurrency exchanges), since it is not stored online.

Mining Cryptocurrency

Mining, in relation to cryptocurrencies, is the confirmation of a transaction, with the help of which a miner, using computer potential, successfully solves a cryptographic hash function, that is, a mathematical puzzle.

It is encouraged by the payment of a reward in the form of digital money issued. It allows cryptocurrency networks to keep transaction fees low.

The computing power required to validate transactions increases in proportion to the number of people coming to work in the virtual currency world. A solving mathematical puzzles successfully has become very difficult over the years.

Most home miners are losing money, and mining is currently done in large data centers using specialized hardware, mainly in jurisdictions with low electricity costs such as China or Iceland.

In the case of Bitcoin, special integrated circuits (Asic) are used, which are designed for the sole purpose of mining BTC.

Energy consumption is a major concern in the growing production of cryptocurrencies, compared to the easy mining of bitcoin in Costa Rica and Ethereum in Namibia.

Recently, “minerless” and “blockless” e-currencies have emerged, based on less power-consuming methods of verifying transactions, including the directed acyclic protocol “Tangle” used by IOTA. They are also said to be resistant to encryption hacks thanks to the use of quantum computers.

There are no rules yet regarding the mining of virtual money in the UAE. In its October 2017 circular, the ADGM FSRA clarifies that it does not consider spot trading or crypto mining as regulated activities.

For detailed advice on registering a cryptocurrency business in the UAE, please contact our specialist.

You could be interested

The Digital Europe Programme: overview

The Digital Europe Programme is an innovative EU financing program launched with the purpose to bring DLT to individuals, legal entities, and public administrative bodies. It tries to cover many facets including how to make the European Union more ecologically friendly and more digital – these two pillars are probably the most challenging for our...

Features of opening a merchant account

Merchant account is a type of bank account that enables companies to receive payments from debit cards or credit cards. For example, merchant account is an agreement between a retailer, a merchant bank, and a payment system for making payments with credit cards or debit cards. When a user pays for a product or service...

Legal consultation

Legal consultation helps to find the best way to solve legal issues. This extremely useful service eliminates irreparable mistakes made out because of ignorance of the laws. The lawyer assists in legal matters in family, criminal, housing, labor, financial, tax, inheritance law, as well as in real estate transactions. The consultation is primary and detailed....

Permanent resident card in Europe

Permanent resident card in Europe is always a topical question. Each European state has its own characteristics: the economic situation, geographical location, attitude towards emigrants, and so on. When choosing a country to apply for a permanent resident card, all these factors must be taken into account. What is also important to remember is that...

Crypto license in Japan

Japan is considered like countrysides that is the most loyal to this type of business environment, such as crypto-currencies. Since 5 years, local authorities have amended payment-services legislation to determinate crypto-currencies as a mechanism of payment. Since then, anyone who owns them can consider their accumulated crypto as legal-assets. To work in this sphere, it...

The variety of functions of the financial market

The variety of functions of the financial market, at first glance, it may seem that the international financial market is very conservative, but if you look closely, you will understand that this is not so. An analogy from anatomy is appropriate here. If the world economy is the whole body, then the financial market is...

Discover our services

The international company Eternity Law International provides professional services in the field of international consulting, auditing services, legal and tax services.

Ready-made companies for sale

Companies with a bank account around the world

Banks for sale

Established Banks for sale

Ready-made licenses for sale

Forex, cryptocurrencies, gambling, EMI, PSP, SVF, MSO, DLT

Licensing

Forex licenses, cryptocurrencies, gambling, EMI, PSP, SVF, MSO, DLT

Offshore company registration

Expert advice on the acquisition of an offshore company

Open a bank account

Open bank accounts in more than 120 banks around the world
Fill the blank:

Zurich

Dreikonigstrasse, 31A, Stockerhof
+41 435 50 73 23

Kyiv

Baseina street, 7
+38 094 712 03 54

London

Grosvenor Gardens, 52
+44 203 868 34 37

Washington

1629 K St. Suite 300 N.W.
+1 (888) 647 05 40 Toll Free

Vilnius

Gediminas Avenue, 44A
+370 52 11 14 32

Tallinn

Kesklinna linnaosa, Tuukri 19
+372 880 41 85

Edinburgh

Lochrin Square, 1
+44 203 868 34 37

Nicosia

Jacovides Tower, 5 floor
+371 665 550 51

Riga

Esplanade, 7 floor
+371 665 550 51

Hong Kong

18 Harbour Road, 35/F, Central Plaza, Wanchai
800938622 Toll Free

Singapore

Level 42, Suntec Tower Three, 8 Temasek Boulevard
+6531594300

Sydney

20 Martin Place
+61 2 888 00 365

Porto

2609 Avenida da Boavista
+351 800 500 206 Toll Free

Tbilisi

Revaz Tabukashvili Str., N 45, area N 7
+995706070360