UAE Strengthens Global Leadership in Virtual Assets with SCA & VARA Regulatory Framework

The United Arab Emirates (UAE) has taken another critical step towards solidifying its position as a global hub for virtual assets. On the 5th of September 2024, the Securities and Commodities Authority (SCA), entered into a cooperation agreement with the Dubai’s Virtual Assets Regulatory Authority (VARA) to set the framework to regulate virtual assets in the UAE. This move aligns with the time wherein virtual assets are gaining momentum worldwide, prompting governments and financial authorities to devise robust regulatory structures to ensure the safe and effective growth of this sector.
Virtual assets including cryptocurrencies, have gained prominence in the global financial ecosystem. Their decentralized nature and potential for high returns have made it an attractive option for companies and investors alike. However, with such growing prominence, arises the need to address concerns like security, non-compliance with regulations, and instances of defrauding the government. The UAE has meticulously addressed the issue by bringing forth various regulatory frameworks. The collaboration between the SCA and VARA demonstrates the UAE’s commitment to becoming a leading player in this domain.
The terms of the agreement empower both the SCA and VARA to set rules for licensing and supervision of Virtual Asset Service Providers (VASPs). But such licensing is subject to the provisions of the Cabinet decision No 111 of 2022 and 112 of 2022 (Regulating Virtual Assets and Their Service Providers) and within the respective jurisdiction of both parties.
The parties intending to obtain license for VASPs operating in or from Dubai can obtain the same from VARA and may register with SCA for widening the service to the UAE.
The joint framework of SCA and VARA is aimed at resisting money laundering, and financing of terrorism, and to protect investors and operational security. Such a regulatory framework will aid in fostering confidence among stakeholders, including investors, startups, and established businesses, by providing clear guidelines on compliance and risk management. The regulatory framework is designed to cover a broad range of virtual asset activities, from cryptocurrency exchanges to digital wallets, custodianship, and token offerings.
Looking forward, the UAE’s virtual asset regulatory framework is poised to play a pivotal role in the country’s economic and technological development. By establishing clear rules and guidelines, the SCA and VARA are laying the foundation for a vibrant and secure virtual asset ecosystem in the UAE. This move not only strengthens the country’s global standing but also ensures that it remains a competitive player in the rapidly evolving digital economy.
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