The Dubai Virtual Asset Regulation Law, which was revealed by Sheikh Mohammed bin Rashid Al Maktoum in his capacity as the Ruler of Dubai, will boost trading volumes in cryptocurrencies, but will need more support from the UAE Central bank to encourage businesses into the virtual assets space, an industry expert told Arabian Business.
The Dubai Virtual Asset Regulation Law aims to create an advanced legal framework to protect investors and design international standards to govern the virtual asset (VA) industry.
The Dubai Virtual Asset Regulatory Authority (VARA) – which has been set up under the new law – will regulate, supervise, and control virtual asset services.
The authority will set the rules and controls that govern the conduct of virtual assets activities, including management, clearing, and settlement services, as well as classifying specifying types of virtual assets.
“Regulation is critical to long-term institutional adoption of cryptocurrency,” said Christopher Flinos, the CEO of the over-the-counter (OTC) crypto and regulated custody trading platform, Hayvn.
He added: “Regulatory oversight will go some way to increasing trading volumes. However, more critical is the support of the Central Bank of the UAE.”
Access to the traditional banking sector is critical for the success of the cryptocurrency ecosystem.
“Unfortunately, the UAE is also back on the FATF Grey List, which raises the question whether the central bank will announce anything supportive of cryptocurrencies,” Flinos said.
The CEO of Hayvn – which is currently regulated in Abu Dhabi under the ADGM, the sole regulatory body of the emirate – called for a two-pronged strategy in Abu Dhabi.
“In the emirate, businesses are encouraged to set up virtual asset business, but have no access to bank accounts to transact or operate through. If the Central Bank plays ball, then trading volumes and activity will explode and the UAE will become the global home of cryptocurrency businesses.”
Application of Bitcoin and crypto in financial markets is soaring
Currently, Bitcoin is at close to $40,000, but down from its record peaks of close to $70,000.
“The application of Bitcoin into the financial capital markets is soaring. Protocols built on the blockchain are redefining how finance operates across debt, equity, hybrids, lending, and custody,” Flinos added.
“The foundation of finance built over the last 80 years are currently being rewritten by the cryptocurrency community.”
On Wednesday, US President Joe Biden also signed an executive order to push for government oversight of cryptocurrency.
The executive order will explore whether the US government can launch a US digital currency.
Responding to the announcement, Flinos concluded: “US President Joe Biden’s administration is making positive noises around the regulatory framework of cryptocurrency but the US’ state-by-state approach makes Federal regulation difficult.
“Although a large player, the US markets are no longer critical to the success of the virtual asset industry, providing opportunities for Singapore, UAE, and Switzerland to be leading cryptocurrency centres.”
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