The UAE Cabinet issued a decision aimed at developing the legislative system related to the virtual assets sector and its related activities and service providers, in order to guarantee the rights and duties of all parties.

And according to the Emirati newspaper, Al-Khaleej, the decision will enter into force as of January 11.

The decision aims to regulate the virtual assets sector in the country and its related activities and service providers, and to comply with the virtual assets sector in the country with all provisions of Federal Decree-Law No. (20) of 2018 regarding countering money laundering crimes, combating the financing of terrorism and financing illegal organizations, its amendments, and its executive regulations, and applicable legislations related to the sector.

The decision also aims to support the state's efforts to provide an attractive investment, economic and financial environment for global companies and institutions operating in the virtual assets sector, to provide their services in the country, and to protect investors in virtual assets from illegal practices.

The provisions of the decision apply to the virtual assets sector in the country, including free zones, and activities related to virtual assets in the country, including free zones, as set forth in Article (5) of this decision, and virtual asset service providers in the country, including free zones.

The provisions of this decision do not apply to:

A- Regulating the virtual assets that take place within the financial free zones, and all related operations.

B- Digital securities and digital commodity contracts, which are subject to the respective regulations issued by the Securities and Commodities Authority.

C- Virtual assets for payment purposes, including stored value facilities, which are subject to the jurisdiction of the Central Bank, with the exception of those approved by the Central Bank for listing and trading for investment purposes in the Virtual Assets Platform.

General provisions

With regard to general provisions, the decision stipulates in Article (4) that it is prohibited for any person to engage in virtual asset activities in the country, without obtaining approval and a license from the Authority or the local licensing authorities, as the case may be, in accordance with the provisions of this decision. Virtual asset activities, to take a residence in the state to conduct its business, according to one of the legal forms approved by the local authorities concerned with commercial licenses.

A person wishing to engage in virtual assets activities must obtain the necessary preliminary approvals and permits from the Authority or the local licensing authorities - as the case may be - before proceeding with the licensing procedures from the local authorities concerned with commercial licenses.

It is prohibited to deal with any person who engages in virtual assets activities in the country, unless he is licensed by the Authority or the local licensing authorities - as the case may be - in accordance with the provisions of this decision.

Virtual assets designated for payment purposes and subject to the jurisdiction of the Central Bank are excluded from the text of this article.

subject activities

The articles of the decision clarified the activities of virtual assets that are subject to licensing and supervision by the Authority in accordance with the provisions of the decision, which are:

Providing services for operating and managing virtual asset platforms, providing exchange services between one or more forms of virtual assets, providing virtual asset transfer services, providing brokerage services in trading operations in virtual assets, providing services for preserving and managing virtual assets and enabling control over them, and providing financial services related to offering The issuer and/or its sale of virtual assets or participation in the provision of those services.

Authority's terms of reference

The Securities and Commodities Authority supervises and controls the activities of virtual assets, their service providers, and their transactions that take place within the country. Including in free zones, issuing decisions regulating virtual asset transactions, licensing its service providers, their work mechanism, and verifying the commitment of virtual asset service providers to applying the legislation in force in the country related to the protection of personal data.

And issuing the necessary instructions and guidelines, in coordination with the concerned authorities, to establish a mechanism for evaluating and monitoring virtual asset service providers, and the procedures and measures to be taken regarding suspicious transactions that take place in violation of the provisions of Federal Decree-Law No. (20) of 2018 regarding countering money laundering crimes and combating terrorist financing and financing organizations. illegal, its amendments, its executive regulations, the decisions issued pursuant to it, the legislation in force in the country and the international requirements.

Raising awareness and educating investors about the investment in virtual assets and its risks.

And obtaining the approval of the Central Bank in everything related to ensuring the protection and stability of the financial and monetary system in the country.

The Authority may - based on the Authority's Board of Directors' decision - delegate any of its competencies mentioned in this decision to the Virtual Asset Service Providers.

requirements

The Securities and Commodities Authority is obligated to verify the availability of requirements when granting licenses to virtual asset license providers; Where the license applicant or one of its partners must not be included in the sanctions lists or terrorism lists issued by the official authorities in the state or international organizations recognized by the state, especially those concerned with countering money laundering and combating the financing of terrorism and illegal organizations, and not be Subject to any criminal investigations inside or outside the country during the submission or study of the registration application, and that no final judicial ruling has been issued against him in the crime of money laundering, financing terrorism or financing illegal organizations.

The efficiency of the technical systems used by virtual asset service providers and their ability to protect investor data in accordance with international best practices and current technology or cybersecurity standards, and that virtual asset service providers meet the capital requirements and requirements and credit guarantees.

The Authority is obligated to verify, through setting up inspection programs and control procedures, that the following requirements are met when virtual asset service providers engage in virtual asset activities.

The obligation of virtual asset service providers to provide their services to investors in accordance with the provisions of this Resolution and the decisions issued pursuant thereto, and to disclose to them all risks related to those services in a clear, fair and non-misleading manner.

And the compliance of virtual asset service providers with the provisions and requirements contained in Federal Decree-Law No. (20) of 2018 regarding countering money laundering crimes, combating the financing of terrorism and financing illegal organizations and its implementing regulations, as well as the requirements of the Financial Action Task Force (FATF), in particular the provisions and requirements related to virtual assets and its service providers.

Providing an effective mechanism that obliges providers of virtual assets services to notify the Authority and the concerned authorities in the event that the services provided by them are exposed to security risks, security breaches, or any behavior that falls within cybercrime.

Legislation to combat money laundering and combat financing of terrorism and financing of illegal organizations must also be adhered to. Where all providers of virtual assets services in the country are required to comply with the legislation in force regarding combating money laundering, combating terrorism and financing illegal organizations, and the decisions issued in implementation thereof.

Licensing authorities' obligations

According to the decision, local licensing authorities are obligated to provide the Authority with all data and information related to virtual asset service providers, licenses issued to them, and transactions of these assets, upon request from the Authority in order to comply with applicable legislation and international obligations.

The Authority has the power to supervise and control virtual asset service providers licensed in the country, including those licensed by local licensing authorities.

The Authority coordinates between the various local licensing authorities, the Central Bank and the concerned authorities. In order to exchange information and hold the necessary activities regarding spreading the necessary awareness regarding the regulation of virtual assets.

International representation

According to the decision, and without prejudice to the powers of the Central Bank of the legislation in force in the financial free zones, the Securities and Commodities Authority is specialized in participating in organizations and events related to virtual assets that require representation of the state, and it has the right to invite the local licensing authorities and the concerned authorities to participate in these organizations and events.

Fees


In return for issuing licenses, approvals and all other services it provides in accordance with the provisions of this resolution and the decisions issued pursuant thereto, the Authority shall collect the fees and commissions to be determined by a decision of the Council of Ministers, taking into consideration not duplicating any fees collected by the local licensing authorities that it provides under the provisions of this resolution.

Violations and penalties

The Board of Directors of the Authority, after coordination with the local licensing authorities and the Ministry of Finance, and the approval of the Council of Ministers, shall issue a decision specifying the violations and administrative penalties for acts that occur in violation of the provisions of this decision and the decisions issued pursuant thereto, provided that the decision includes the authority of the Authority or the local licensing authorities - as the case may be - in Take one or more of the following penalties:

Warning.

Suspension of the process of listing or trading virtual assets.

Stopping the technologies used by service providers related to virtual assets and adopting alternative means.

Stopping or preventing the operation of the virtual assets platform, and seeking the assistance of the concerned authorities in the country to implement this.

Suspension of any virtual asset service providers from practicing their activities or revoking their license in accordance with the provisions of this resolution.

Stopping any activity that is being practiced without a license in accordance with the provisions of this decision, and preventing any natural person from carrying out any tasks or work related to it without his approval from the Authority, and the Authority may seek the help of the competent authorities to implement its decisions or close the violating headquarters.

Imposing a fine not exceeding 10 million dirhams.

Imposing a financial fine equal to the value of the profits obtained from the violation or the loss that was avoided.

Referring the violator of the provisions of this decision to the Public Prosecution.