The UAE SCA has issued on its website the final crypto assets legislation for the UAE in terms of issuing, marketing, and distribution of crypto assets. In the legislation, the SCA has defined a crypto asset as a valuable electronic record or a distributed database that can be used as a valuable medium of trade or storage, or an asset that represents ownership or economic rights, or the right to be used for profits. This crypto asset can be transferred electronically from one person to another using a computer application.
The new legislation also defines Security tokens, as a financial instrument that can be issued, transferred and traded in cryptographic form, while the SCA has defined a commodity token as an asset that doesn’t represent a financial instrument. The legislation differentiates between a commodity token and a regulated commodity token which can be traded in crypto or digital asset exchanges that has been registered in the UAE.
The SCA legislation also goes on to define crypto asset exchanges as any platform or entity that trades, transfers crypto assets, money, stocks, bonds licensed and registered within the UAE. In addition to that it defined crypto asset custodians which include securely storing crypto assets such as crypto financial instruments, crypto regulated commodities, as well as the storage of crypto keys, or its equivalent on the behalf of a person or clients’ digital wallets, crowd funding platforms, or private investment platforms for crypto assets.
The legislation as stipulated in the crypto assets law aims to regulate the issuance, trading or crypto assets in the UAE with all the financial activities related to that. The SCA will issue the necessary licenses approvals, and exceptions as the SCA deems fit and in accordance with general good.
The Legislation discusses in detail the requirements for launching of Security tokens or crypto assets as financial instruments whether through a financial free zone area or onshore. They also discuss the legalities related to crowd funding platforms or utilizing crypto assets for raising funds and issuing shares. As for crypto custodians , not any institution can carry out this activity unless SCA has provided a license for this. Custodians can be owners of the crypto assets being issued, or crypto asset platform operator.
The legislation also delves into the requirements for crowd funding platforms that also need to obtain licenses, while investors cannot invest more than 350,000 AED and all the necessary KYC and AML tools should be put in place. The legislation also discusses the launching of crypto exchanges, as well as raising of funds or investments using crypto assets by companies and entities working within the UAE.
The UAE Crypto asset legislation is detailed and its requirements go deep into the technologies that entities will be utilizing as well as the measures in place for mitigating risks of money laundering, fraud, and others. Full information on the crypto asset legislation is in the pdf that can be downloaded from this article.
After one year since the onset of the discussions with regards to crypto asset legislation in the UAE, the country has finally come out with a comprehensive legislation that will allow the issuance, trade, and marketing of crypto assets. It will bring forth the digitization of financial tools and instruments be they in the form of shares or bonds or commodities.
In conclusion the new Crypto assets law, and the UAE Central Bank’s latest issuance on digital currencies and digital wallets is ushering the UAE and the region into the world of digitization, utilizing crypto, blockchain, DLT, decentralization.