Cryptocurrency projects rise in popularity and become more and more diversified. Ignoring this fact is not an option anymore, so governments around the world must develop policies to regulate them. At the beginning, UAE was among the countries that tried to neglect the new technological improvements. Nowadays, it is one of the best countries for cryptocurrency projects in the world.
To operate a legal business with cryptocurrencies, you need to obtain a crypto license in UAE. It can be used for providing crypto-related services to customers, such as storing their coins. Getting license for cryptocurrency in Dubai requires filing an application to Dubai Multi Commodities Centre. It should be noted that this license doesn’t allow to launch an ICO or register a crypto exchange. However, it doesn’t mean that exchanges and ICOs are illegal in UAE, and we will discuss that in detail later.
Regulation of cryptocurrency and blockchain projects in UAE is performed by the FSRA (Financial Services Regulatory Authority) regarding ADGM (Abu Dhabi Global Market). This authority publishes guidance on cryptocurrencies. It also monitors blockchain businesses to ensure transparency as well as prevent money laundering and financing terrorism. Other authorities that might contribute to crypto regulations in UAE in the future are the SCA (Securities and Commodities Authority) and the DFSA (Dubai Financial Services Authority).
The Dubai Multi Commodities Centre (DMCC) Free Zone is a place worth considering for working with cryptocurrencies in UAE. The DMCC crypto license will guarantee the legality of your business. The first company to receive this license was Regal Assets, which offered cold storage of cryptocurrencies for its customers.
As of today, there is no crypto law in UAE. “Regulation of Crypto Asset Activities in ADGM” by the FSRA is the most detailed guide of cryptocurrencies in this country. According to it, the following requirements must be met by a company that performs actions with crypto assets:
As cryptocurrency projects in UAE are yet to become fully regulated, legal status of cryptocurrencies is only constituted by practices and guidelines for now. According to the ADGM regulations, whether a crypto is allowed or not is determined separately for each case. It seems reasonable to say that the main cryptocurrencies are legal in this country, because DMCC already issued crypto licenses to companies that use them. Moreover, Crypto Bulls Exchange is the first crypto exchange that is expected to be officially registered in Dubai. As the country embraces new technologies and even plans to issue an official cryptocurrency, friendly legislation is expected.
Nowadays, a license on work with cryptocurrencies, such as cold storage or trading with personal funds can be obtained from DMCC. As for crypto exchanges, the first one is yet to be registered, so there is no public information regarding the crypto license it will use.
No income taxes in UAE for cryptocurrency projects is what makes this country very appealing for entrepreneurs. The tax of cryptos in Dubai equals zero percent if you use cryptocurrencies for trading or receive them as salary. However, since the beginning of 2018, UAE has Value Added Tax at a very low rate of 5%. You should seek for specialist consultation to determine for sure whether your project is VAT-exempt or not. Thus, while there can be some exceptions, taxation of cryptocurrencies is generally not performed in UAE.
If you decide to open a crypto exchange in UAE, you will be among the first people to do that. This implies certain difficulties, such as diving into existing regulation deeper than most of crypto projects have to. Registering cryptocurrency exchange might be difficult, but it is not impossible. As we mentioned before, there is information that the first completely legal crypto exchange will start operating in 2019. The Crypto Bulls Exchange is said to be supported by the government, and it will offer cryptocurrencies in trading pairs with Arab Emirate Dirham.
Opening an exchange probably requires a license for crypto exchange. As of today, the DMCC crypto license does not allow to operate an exchange or launch an ICO. As for financial licenses for crypto exchanges in UAE, they can be theoretically obtained from the FSRA, since the ADGM regulations mention that crypto asset exchanges “will need to be licensed/approved by FSRA”. Moreover, the document lists additional requirements exchanges must meet, such as monitoring, identifying and managing operational risks or preventing market misconduct.
It is unclear for now what kind of a license, if any, Crypto Bulls Exchange has obtained. Was it approved by the FSRA? Since this exchange will open in Dubai, perhaps it managed to receive a DMCC crypto license for its operation. This is yet to be determined.
Holding an ICO in UAE can be problematic for now. There is no ICO regulation as such yet, but some ICOs can pass the FSRA review and be allowed. If you want to launch an ICO in this country, make sure you are offering security tokens, because otherwise the Authority will not regulate it. You can find an economic advisor to determine the primary purpose of your tokens.
As investors are not losing interest in crowdfunding projects, UAE will eventually find a way to regulate ICOs efficiently. This is likely to happen in 2019. For now, however, even though UAE is generally crypto-friendly, a license for blockchain project does not grant permission to launch an ICO.