The global cryptocurrency market has been expanding at a steady pace as many organizations and countries all over the world have viewed it as a substitute for traditional financial systems. With this, the industry is expected to reach $1758 million by 2027, exhibiting a compound annual growth rate of 11.2% during the forecast period.
In the UAE, transactions have become more accustomed to digital currencies, with even government-owned licensing firm Kiklabb now allowing clients to pay using various digital assets for their visa and trade license fees. With this, UAE has become one of the most progressive crypto countries in the world with its crypto-friendly policies that prompted even Ripple, a firm known to have been unsuccessful in the US, to open an office in Dubai, clearly showing how the country has developed into a cryptocurrency hub.
SCA Decision No. 23 of 2020
With the growth projection that the global crypto market has, the UAE Securities and Commodities Authority (SCA) issued SCA Decision No. 23 of 2020 concerning the Regulation for Issuing and Offering Crypto Assets (ICAR) which is designed to regulate the key aspects of dealing with crypto assets from its issuance, promotion, and licensing, to the conduct of business for custodians, exchanges, and fundraising platforms.
The ICAR applies to any person who: (1) promotes, offers, or issues crypto assets in the UAE or carries on related activities in the country; (2) provides custody services or operates an exchange for crypto assets or a platform used for fundraising in the country; or (3) carries out any other financial activities in the UAE in relation to crypto assets.
The scope of the ICAR, according to the decision, also applies to those with the potential to capture promotions and offers made on a cross-border basis, and other SCA-regulated activities.
However, the regulation does not apply to crypto assets issued by the federal and local governments, virtual currencies required to be approved by the UAE Central Bank, and those held in dematerialized form in a clearing or settlement system, unless they satisfy any other criteria to qualify them as a crypto asset.
Moreover, this regulation does not cover activities carried out in the UAE financial free zones as they have their own laws, making onshore regulations inapplicable to them.
Offer of Security Tokens and Recognition of Crypto Currencies
It is expressly provided in the ICAR that security tokens may be promoted in the UAE in accordance with the Promotions and Introductions Regulations. With this, it may only be offered or issued in the country by an offeror incorporated therein or in a financial free zone. Offers to qualified investors, under the regulation, also require the prior approval and authorization of the SCA.
As to commodity tokens, assets which are not considered as security tokens, the SCA shall keep a register of recognized cryptocurrencies. Other crypto assets not formerly recognized may also be admitted upon request.
Exchanges Relating to Crypto Assets
The ICAR expressly applies SCA’s regulations pertaining to conventional exchanges to crypto asset exchanges in addition to its provisions. With that, the SCA’s approval is required before operating a crypto exchange accessible to public investors. Aside from these, abuse laws and regulations generally applied to trading on an exchange are also authorized, protecting all investors against fraud and deceit in relation to crypto asset investments.
To mitigate the risk of financial crimes, the ICAR introduced specific requirements that would safeguard investors and digital asset users, such as that SCA-licensed crypto asset and investment firms should assign a high risk rating to clients dealing with crypto assets, and take tracing measures on all transactions involving the same to establish a legitimate transaction history. This allows all individuals dealing with cryptocurrency, including investors, to ensure that all their transactions are monitored in order to easily determine fraud and other related crimes.
Dealing with Cryptocurrencies is More Secure in the UAE
With this regulatory framework, UAE has become among the most secure and reliable crypto asset platforms in the world, causing 33% of its residents to invest in the crypto market. If along these residents, you too are looking to invest in cryptocurrencies in the country given its protective and investor-friendly policies, reach out to AIX Investments and be in contact with the best financial advisors in Dubai to help you get started.