Cryptocurrency is a virtual or digital currency protected by cryptography; this makes it impossible to double-spend or counterfeit. This happens online and doesn’t require physical money. You don’t need a go-between like a bank to transfer money online to another party. Many Cryptocurrencies are devolved networks rooted in blockchain technology. Cryptocurrencies are not distributed by any central authority; this means the government cannot manipulate or interfere with this network.
The demand for digital currency and Cryptocurrency is set to increase in the UAE in the future as global crypto-assets trading volume continues to soar. People use Cryptocurrency to avoid transaction fees and for quick payments.
Types of Cryptocurrency
There are at least 3000 Cryptocurrencies; they are categorized into Bitcoin, tokens, and altcoins. Bitcoin was the first Cryptocurrency to be created and remains ahead of others globally. It is a worldwide electronic payment system that allows you to transact directly with others without needing a middleman such as a bank.
Bitcoin paved the way for other Cryptocurrencies known as ‘alternative coins’ (altcoins); they are alternatives to Bitcoins. Although some act similar to Bitcoin, while others have different purposes. All altcoins can operate independently on their network by using distributed ledger technology.
Tokens are different from altcoins and Bitcoin because they cannot operate independently; they rely on other Cryptocurrencys’ networks. This means that they do not have their own blockchain or distributed ledger technology blog.
Cryptocurrency Law in the UAE
As Cryptocurrency gains popularity it is difficult to continue ignoring it; this is why governments develop regulation laws. Here is everything you need to know about Cryptocurrency law in the UAE.
The Securities and Commodities Authority (SCA) and the United Arab Emirates Central Bank is the federal regulator of the financial and capital markets. There are various legal regulations that are embraced by federal regulators the SCA, the Central Bank, and the Free Zone regulators like the Financial Services Regulatory Authority (FSRA) and the Dubai Financial Services Authority (DFSA). These regulators and the insurance authority Dubai monitor have legal frameworks of anti-money laundering and preventing financial terrorism in insurance activities.
With the increasing popularity of tokens and virtual coins in the region, the UAE is at the forefront of promoting new business regulations. This has made the Abu Dhabi Global Market (ADGM) a recognized entity in the global market.
There is currently no Crypto law in the UAE; however, the Financial Services Regulatory Authority (FSRA) regulates Cryptocurrency activities. It provides the following detailed requirements for any company that deals with crypto assets;
· Only specific crypto assets are accepted based on traceability, market capitalization, price, security, volatility, etc.
· Disclosure and risk management
· You must own capital resources corresponding to 6 months operational expenses
· To protect information and funds by implementing security measures
· To prevent fraudulent activities; you can consult a legal expert from a law firm in Dubai to guide you through and avoid these activities.
Cryptocurrency and Taxation
Many entrepreneurs are attracted to the UAE because there is no income tax for Cryptocurrency projects. There’s no tax if you receive Cryptocurrency as salary or use it to trade. However, in 2018, the UAE introduced a 5% Value added tax. It’s necessary to consult a legal expert from a law firm in Dubai to help you understand whether your activities are VAT-exempt or not. Although there are exemptions, it’s crucial to remember that the UAE does not tax Cryptocurrencies.
Starting a Cryptocurrency Business
There are no requirements for the registration of a Cryptocurrency business in the country. You only have to register your company and apply for a business license; this allows you to operate. This way you can engage in crypto-related activities like storing customers’ coins.
You need to fill an application to Dubai Multi Commodities Centre (DMCC) to obtain a Cryptocurrency license. However, this license does not allow you to register a crypto exchange or to launch an Initial Coin Offering (ICO). This does not indicate that these activities are illegal. The DMCC allows companies to trade on their own behalf.
Cryptocurrency and Fraud
Like other investments, Cryptocurrency has its unique risks. To stay safe research Cryptocurrency exchanges; these platforms allow you to buy and sell virtual currencies. The UAE is against fraudulent activities. Anyone found conducting such activities shall be punished with a fine or jail time. Commercial fraud in the UAE is defined as deceiving customers by altering or changing the good, their nature, amount, price, origin, material or present misleading or untrue details on promoted goods, by defrauding or cheating by conducting activities that do not conform to applicable laws.
Cryptocurrency is gaining global popularity. There are various laws and regulations to guide Cryptocurrency investors in the UAE. It’s necessary to talk to a legal expert to help you understand the regulations and other provisions.