UAE Prepares National Crypto Licensing

Last Updated on 3 months by Ameer Hamza

The UAE, or the United Arab Emirates, is one of the largest cryptocurrency markets in the Middle East, after Turkey and Lebanon. As shown by Chainalysis from July 2020 to June 2021, the UAE would have a transaction volume of about $26 billion. Currently, this country is aiming to license crypto companies. As stated in a government announcement, the country is planning to grant the licenses for Virtual Asset Service Providers (VASP) in order to attract some large crypto companies around the world by the end of March 2022.

Binance Holdings, one of the biggest crypto exchange platforms, is one among the top companies that want to broaden their activities in UAE. It is clear that this licensing policy for virtual-asset firms will play a crucial role in helping UAE increase their competitiveness compared to other big financial markets like Hong Kong and Singapore, which are also now establishing crypto trading ecosystems.

Therefore, many of the economic free zones in UAE have already provided VASP permits. The Dubai Multi Commodities Center approved 22 of them. Specifically, Abu Dhabi Global Market gets 6 permits, while Dubai Silicon Oasis Authority owns at least one.

The country is attempting to manage licenses in a variety of ways. For example, the Securities and Commodities Authority, or SCA, is on the way to finalise the legislation changes to allow VASPs to be established.

At the end of 2021, the country reviewed and assessed risks on virtual assets, comprising 14 public agencies and 16 private entities. Although there is a high risk that VASPs may be applied in illegal financial schemes, the government comes up with a conclusion that they should respond with reasonable regulation rather than an outright ban, according to the report.

It’s worth noting that Abu Dhabi took into account the newest recommendations from the Paris-based Financial Action Task Force (FATF) as well as approaches used in the United States, the United Kingdom, and Singapore. As declared by an Emirates official, accepting crypto licensing indicates the UAE’s technology acceptance.

In addition, Emirati authorities try to address concerns relating to financial crime that continue to plague the cryptocurrency industry, while attempting to promote the ideal environment for business. This country is also planning to promote the development of a sustainable cryptocurrency mining ecosystem that uses renewable energy to reduce environmental impact and is supervised by the government. This is the reason why UAE can be a perfect destination for financial companies in the very near future.

The FATF is expected to decide whether the UAE should be added to its so-called grey list of countries subject to increased scrutiny for money laundering and terrorism financing inadequacies at some point in the future.

The government also aims to create an ecosystem for crypto mining, a business that has drawn scrutiny from environmentalists and policymakers around the world due to its high electricity usage and subsequent impact on greenhouse-gas emissions.

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