Regulation of virtual currencies in the United Arab Emirates: accounting for the emerging public/private distinction

Abstract

This article maps the changing global conversation on virtual currencies (VCs) internationally And brings that to bear on the development of a suitable regulatory framework for VCs in the United Arab Emirates (UAE). Through a review of recent international developments, the article notes a reversal in regulatory attitude towards VCs. This review suggests two emerging horizons of regulatory intervention. The first concerns the public issue of VCs to develop financial traceability and economic transparencyan arrangement that would be particularly relevant for developing countries with large informal economies. In particular, public VC issue raises follow-up questions of technological adequacy and the legal status of a means of payment guaranteed by the State. The second concerns privately issued VCs traded on independent platforms and focuses on the trade off between economic development, through a private market for VCs, and the risks connected to money laundering and the financing of terrorism. Here, a two-pronged system of ex ante licensing to private venture capitalists, coupled with ex post-sanctions, appears to be an emerging international standard for supporting economic development in countries marked by the preponderant weight of an underground economy.

Anti-money laundering regulation of cryptocurrency: UAE and global approaches

“…The aim of the alignment is to develop an integrated ecosystem that will support blockchain and crypto industries. The MoU will also create an environment for spurring growth within the sector, as well as supporting the application of blockchain technologies in Dubai (El Maknouzi and Sadok, 2021). The DMCC has been licensing and regulating proprietary trading involving crypto commodities since 2017.…”

“…The amended AML Law also prohibits legal or natural persons from engaging in the activities of VASPs or any other financial activities without a valid license, registration, or entry. The authorization should be from competent regulatory authorities (El Maknouzi and Sadok, 2021; Hadef and Partners, 2021). The amendment AML Law is essential because VASPs and crypto exchanges have been operating with significantly less regulatory scrutiny.…”

“…The efforts have laid the groundwork for the UAE to become the global hub for blockchain and crypto technology. The achievement of this goal has been the primary motivator for the UAE's rapid legal modernization (El Maknouzi and Sadok, 2021). The UAE has adopted and continues to work on new laws and legislations that will propel it to the global status of the largest hub for blockchain and crypto technology.…”

“…Consider the case where the DFSA warned investors about cryptocurrencies, clarifying that the regulator was not actively regulating crypto assets, license farms and product offerings in the DIFC. However, the DIFC introduced a new regulatory framework for VAs in October 2021 through the Consultation Paper 138 issued in March 2021 (El Maknouzi and Sadok, 2021). The regulations, operationalized by the DFSA, apply to investment tokens.…”

“…For example, the DFIC is currently keen on adopting investment tokens that are missing in the new regulations. They include utility and exchange tokens, as well as stablecoins (El Maknouzi and Sadok, 2021).…”