UAE Cabinet Resolution 111 of 2022 introduces the UAE’s first federal level regulatory regime for the digital assets sector (the Regulatory Regime) and will come into effect this month.

“Virtual Assets” are defined in the Regulatory Regime as a digital representation of value that can be digitally traded or transferred and can be used for investment purposes. It does not, however, include digital representation of fiat currency, securities, or other related assets.

Amongst other matters, the Regulatory Regime sets out a general framework for:

• licensing and compliance requirements;
• minimum standards for providers, including in relation to operation, capital and competencies; and
• sanctions for non-compliance.

Importantly, the UAE’s Securities and Commodities Authority (SCA) is identified as the regulator with various powers and authorities in connection with the general framework. In this regard, the SCA is empowered to issue various decisions in order to implement the Regulatory Regime and should do so in liaison with the local licensing authorities.

The regulation of virtual assets is rapidly evolving around the world, and it is important that service providers and users are informed and ready to comply. We have recently written about other virtual asset regulatory initiatives within the UAE, such as the launch of the Virtual Assets Regulatory Authority in Dubai and some of its free zones, and the Dubai Financial Services Authority’s unveiling of the Crypto Tokens regime. The introduction of the Regulatory Regime further supports the UAE’s efforts to position itself as a global leader in the virtual asset space whilst recognising the importance of robust regulation.

We are seeing an increase in enquiries relating to virtual assets and in particular, how they are / will be regulated. If you have any queries about this topic, please contact Alexandra Lester or Lucy Nash.