Dubai’s highest court recently clarified the regulations for cryptocurrency trading in the emirate in which it established clear guidelines for both personal and commercial virtual asset activities.
In a landmark ruling issued on Nov. 20, the Dubai Court of Cassation determined that individuals conducting cryptocurrency exchanges for their own accounts do not require regulatory approval, whilst maintaining strict oversight for commercial trading activities.
The ruling, which stems from case 452/2024 Criminal Cassation, marks a significant development in Dubai’s approach to cryptocurrency regulation, providing much-needed clarity for investors and traders in the region’s growing digital asset market.
Legal experts from BSA Law, who obtained the ruling, say it establishes an important distinction between personal and commercial trading activities.
“If individuals engage in cryptocurrency trading strictly for personal investment, they are generally exempt from licensing requirements under the Virtual Asset Law,” Nadim Bardawil, Partner and Head of TMT & FinTech at BSA Law, told Arabian Business.
However, Bardawil said that compliance with the UAE’s anti-money laundering regulations remains mandatory for all traders, regardless of their trading volume or purpose.
The ruling comes amid Dubai’s broader push to position itself as a global hub for the virtual asset industry, governed by the Virtual Assets Framework introduced under Dubai Law No. 4 of 2022.
Understanding the boundaries
For everyday cryptocurrency users in Dubai, the distinction between personal and commercial use is crucial. According to legal experts, several key factors determine whether trading activities require licensing:
Trading for personal investment and portfolio management typically falls under personal use, whilst offering services or acting as an intermediary constitutes a commercial enterprise requiring regulatory approval.
“The prohibition encompasses exchanging virtual assets for fiat currencies, selling virtual assets, or participating in them without a license if the activity or related operations are conducted as a commercial enterprise,” the Court of Cassation stated in its ruling.
Mahmoud Kreidie, a lawyer at BSA, advises cryptocurrency users to exercise caution when their activities might blur the line between personal and commercial use.
“To avoid regulatory risks, individuals should not advertise or promote services without appropriate licensing, and should avoid pooling funds or managing assets for others, as this could be deemed a commercial activity,” Kreidie said.
Regulatory framework
The Dubai Virtual Assets Regulatory Authority (VARA) oversees virtual asset activities in the emirate. Under the Virtual Asset Law, commercial activities requiring VARA licensing include:
- Operating virtual asset platforms
- Exchanging virtual assets with fiat or other virtual assets
- Providing custodial services
- Facilitating transfers or managing wallets
- Issuing and trading virtual tokens
Penalties for non-compliance with licensing requirements can be severe, ranging from fines to operational suspensions or criminal liability.
The recent court ruling, however, helps clarify that these requirements do not extend to personal trading activities.
Compliance requirements
Although personal traders are exempt from licensing requirements, they must still adhere to federal anti-money laundering regulations. This includes:
- Trading only through VARA-approved platforms
- Maintaining transaction records
- Reporting suspicious activities
- Complying with know-your-customer (KYC) requests from regulated platforms
Non-compliance with anti-money laundering regulations can result in penalties of up to AED5 million or imprisonment, according to Federal Decree-Law No. 20 of 2018.
Future implications
The Court of Cassation’s ruling marks a significant step in Dubai’s development as a virtual asset hub, effectively balancing regulatory oversight with personal investment freedom.
“This ruling provides welcome clarity for individual investors while maintaining robust protection against illegal commercial activities in the virtual asset space,” Bardawil said.
Experts advise individuals engaging in cryptocurrency trading to regularly review updates to VARA and Securities and Commodities Authority regulations to ensure ongoing compliance.
For those uncertain about whether their trading activities qualify as personal or commercial, legal experts recommend consulting regulatory specialists to determine if licensing is necessary.
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