On July 10, the Dubai Virtual Assets Regulatory Authority (VARA) suspended BitOasis’s conditional license to engage in activities related to digital assets. This action by the Dubai regulator is representative of and lends credence to the novel approach the United Arab Emirates (UAE) and its domestic regulators have taken towards regulation of digital assets.
The UAE approach has prioritized providing regulatory clarity and guidance to entities that want to engage in activities related to digital assets – providing notice as to the types of activities are permitted and prohibited.
Bret Johanneson received his law degree from New York University and will be working as associate at a law firm in New York this fall.
In contrast, U.S. regulators, as demonstrated by the charges against Coinbase and Binance in early June, have organized around an approach that provides no advance notice to industry participants, opting instead to bring charges which rely on untested and novel legal theories. (Another example is the SEC’s action against Ripple for issuing unregistered “securities,” which concluded Thursday when the judge found that XRP is a security only in certain circumstances.)
The UAE has followed a different playbook, and the digital asset industry has taken notice. CoinDesk named two UAE cities as major crypto hubs in 2023, and to a large extent industry participants are voting with their feet. Scores of companies are either relocating wholesale to the country or opening satellite offices there.
See also: Abu Dhabi: A Wealthy Middle-East Capital Bridging TradFi to Crypto | Crypto Hubs
To understand why the UAE has been able to implement such a progressive and responsive digital assets regulatory regime, look no further than the UAE form of government. In short, the UAE is made up of seven emirates, with each emirate (i.e. state) empowered to legislate on any matter not within the exclusive jurisdiction of the UAE federal government (i.e. foreign affairs, defense and security).
Each emirate is left to determine for itself how it will regulate digital assets – a situation which has fostered intrastate competition through regulation for business and investment effected through incentives, including tax breaks and designated free economic zones. Abu Dhabi and Dubai in particular…
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