Dubai Takes a Stand Against Privacy Coins with Ban on Anonymity-Enhancing Crypto
Dubai's virtual asset authority has prohibited the use of privacy coins such as Monero (XMR) and ZCash (ZEC), as well as any activities related to the coins.
According to the new set of crypto regulations,
"The issuance of Anonymity-Enhanced Cryptocurrencies and all VA Activity[ies] related to them are prohibited in the Emirate."
The regulator defines these "Anonymity-Enhanced Cryptocurrencies" as
"Means a type of Virtual Asset which prevents the tracing of transactions or record of ownership through distributed public ledgers and for which the VASP has no mitigating technologies or mechanisms to allow traceability or identification of ownership."
The document titled 'The Virtual Assets and Related Activities Regulations 2023' was published on February 7, stating that it set out the regulatory framework governing virtual assets and all related activities in the nation, "including the general and specific supervision and enforcement powers of VARA."
It noted that the Dubai Virtual Assets Regulatory Authority (VARA) was established and authorized in 2022 by Regulating Virtual Assets in the Emirate of Dubai (Dubai VA Law) to regulate Virtual Assets and Virtual Asset Service Providers (VASPs).
Therefore, the regulations have set licensing and authorization requirements for VASPs and issuers that want to operate in Dubai.
Additionally, VARA has been given full power to make decisions and adapt laws related to crypto-assets where it sees fit, stating that,
"VARA may, in its sole and absolute discretion, classify, or otherwise provide clarification or opinion, by public notice either generally or in a specific case, on [among other things] any Virtual Asset, or type of Virtual Asset, as being prohibited in the Emirate."
The regulator has also specified requirements for crypto firms to pass before they can operate in the country. These pertain to anti-money laundering and combating terrorism, marketing regulations, and market offenses such as insider trading and market manipulation.
Companies that do not follow the new rulebook may be fined, per violation and depending on the offense, with:
- between AED 8m ($2.2m) and AED 50m ($13.6m) for any individual;
- disgorgement of the profits gained or losses avoided;
- 5%-15% annual revenue for a VASP;
- 200%-300% of the profits gained or losses avoided (if greater than the above values).
Meanwhile, as reported in late January, the UAE said it planned to use crypto for trade in the future, with the Minister of State for Foreign Trade, Thani Al-Zeyoudi, saying that "crypto will play a major role for UAE trade going forward. The most important thing is that we ensure global governance when it comes to cryptocurrencies and crypto companies."
Al-Zeyoudi added that the UAE focused on making itself a major hub with crypto-friendly policies that also have sufficient protections in place.
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