Pressured by the rapid pace of innovation, governments are changing existing laws, developing new regulations, prohibitions, and recommendations for the digital economy. The UAE may become the world's next cryptocurrency center because of the pace of its legal decisions.
The UAE legalized cryptoassets five years ago. This move was preceded by lengthy development of the crypto regulatory framework by the Securities and Commodities Authority (SCA) in cooperation with blockchain industry CEOs.
The regulatory framework is still expanding. On January 2, 2022, new regulations against crypto fraud came into effect
in the UAE. Meanwhile, fundraising platforms, cryptocurrency custodians, exchanges, and organizations that convert assets into tokens are licensed in the UAE.
However, the advisory documents for stablecoins, exchangeable cryptoassets, and NFTs
(non-fungible tokens) are still being prepared.
The UAE has a federal structure consisting of seven states or emirates that have their own laws. Although the country is divided into jurisdictions, there are also economic zones where the laws and taxation are more lenient.
So far, the authorities have developed locations with special conditions for crypto initiatives and organizations.
In the Abu Dhabi zone, trading in a limited number of cryptocurrencies is allowed. In the Dubai free economic zone, companies can work with all coins and even accept payments in them.
Authorities in Dubai have also developed legislation for cryptocurrency trading and asset tokenization and are now working on regulations for stablecoins and utility tokens.
One of the most prominent crypto zones is the Dubai Multi Commodities Center
(DMCC). It currently hosts 18,000 companies of various types. Blockchain community members at the DMCC Crypto Center offer advice on UAE laws and regulations for the crypto market.
The next crypto zone is the Dubai World Trade Center (DWTC). Its organizers plan to develop a set of policies and products and gather crypto companies and operators to accelerate the country's progress in the crypto sector. Its promotors are committed to creating a secure and attractive environment for investors and enterprises and creating and adhering to strict security measures.
In recent years, more and more countries have been talking about creating their own central bank-issued digital currency
(CBDC). Last year, the Central Bank of the United Arab Emirates announced the development of its own national digital currency. The bank published a development strategy for 2023-2026 that aims to make the bank one of the top ten central banks in the world.
The UAE's central bank has already collaborated with Saudi Arabia to develop a prototype national digital currency using blockchain technology. The two-country project was called Aber
. Previously, the state-owned bank also joined the Central Bank Digital Currency Bridge project, which involves central banks in Hong Kong, Thailand, and China.
In general, the digitization
of capital increases market transparency and reduces transaction costs. However, the success of any initiative depends on careful costing and risk assessment. In the case of cryptoassets, technology and information security are important.
The UAE is committed to supporting new industries that are emerging around cryptocurrencies. Measures taken by UAE regulators and recent initiatives are attracting new companies to the country. In late 2021, one of the largest cryptocurrency exchanges announced plans
to relocate its offices to Dubai.
The role of the state in coordinating efforts to digitize the country's economy and public services is key to harmonizing the transformation process and creating favorable conditions for the development of businesses and the self-actualization of the population. These are the first steps that will be followed by the introduction of AI and the digital transformation
of other sectors, including public administration, production and distribution of goods, and so on.