WEB 3.0 & Blockchain Compliance in the UAE

Blockchain technology has gained significant interest and adoption globally, and the United Arab Emirates (UAE) has not been left behind but became a leader in taking new initiatives. In recent years, the UAE has made significant strides in adopting and promoting blockchain technology and Web3 compliance. In April 2018, the UAE government launched the Emirates Blockchain Strategy 2021, which aims to integrate blockchain technology into all government services in the UAE. The strategy includes four pillars: government efficiency, industry creation, social wealth, and education. The government aims to use blockchain technology to enhance the efficiency, transparency, and security of government services and promote innovation in the private sector.

While the UAE has not yet issued specific regulations as of now for Web3 compliance, the country is expected to take a proactive approach to regulating this emerging technology. Web3 technologies, which include decentralized finance (DeFi), non-fungible tokens (NFTs), and other decentralized applications (dApps), are rapidly evolving and have the potential to transform various industries.

The UAE's regulatory framework for cryptocurrencies and blockchain technology is overseen by the Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA), and the Abu Dhabi Global Markets (ADGM) Financial Services Regulatory Authority. These regulatory bodies have issued guidelines and regulations related to initial coin offerings (ICOs), cryptocurrency exchanges, and other aspects of the crypto industry. Decision No. 23 of 2020 concerning the Crypto Assets Activities Regulation (the Crypto Asset Regulations), regulation for digital assets, which aims to regulate the issuance, listing, trading, and custody of digital assets and other related financial activities in the UAE. The regulation covers a wide range of digital assets, including cryptocurrencies, tokens, and other digital assets.

The following are some of the key regulations and initiatives related to blockchain compliance in the UAE:

1. Dubai Blockchain Strategy: In 2016, the Dubai government launched the Dubai Blockchain Strategy, which aims to make Dubai the first city in the world to be fully powered by blockchain technology by 2020. The strategy includes a series of initiatives and partnerships aimed at integrating blockchain technology into various government services.
2. Emirates Blockchain Strategy: In April 2018, the UAE government launched the Emirates Blockchain Strategy, which aims to capitalize on blockchain technology to transform 50% of government transactions into the blockchain platform by 2021. The strategy includes several initiatives aimed at increasing efficiency, reducing costs, and enhancing the overall customer experience.
3. Regulation of Cryptocurrencies: On 9 March 2022, Dubai Law No. 4 of 2022, Concerning the Regulation of Virtual Assets, established a brand-new Dubai Regulator called Virtual Asset Regulatory Authority (VARA).?Also The UAE Central Bank has issued regulations that require companies operating in the cryptocurrency space to obtain a license. The regulations also outline the requirements for anti-money laundering (AML) and counter-terrorism financing (CTF) measures that must be implemented by cryptocurrency exchanges and other crypto-related businesses.
4. The UAE Government issued Cabinet Resolution No.111 of 2022 on 12 December 2022 that came into force on 14th January 2023. This Law is enacted for a specific purpose of defining the guidelines for the entities who are engaged in the virtual Assets-related activities without having proper licensing and approvals from the Financial Regulators or its delegates. Also to implement compliance policies as defined in Federal Decree-Law No. (20) of 2018 Concerning Countering Money Laundering Crimes and Combatting Terrorism and Illegal Organizations'.?All entities and individuals involved must abide by the new legislation to avoid fines up to AED 10,000,000 (Ten Million Dirhams) and/or criminal implication.
5. Dubai International Financial Centre (DIFC) Courts: The DIFC Courts have established a specialized division called the Technology and Construction Court (TCC), which has jurisdiction over disputes arising from technology-related matters, including blockchain disputes.
6. Dubai Multi Commodities Centre (DMCC) Free Zone: The DMCC has launched a blockchain initiative aimed at streamlining the process of issuing business licenses and registering companies. The initiative, called "DMCC Blockchain Strategy," uses blockchain technology to create a more efficient and transparent business environment.

Overall, the UAE has taken significant steps to promote blockchain technology and Web3 compliance, creating a favorable environment for companies, Private offices, and investors in the digital asset industry. The government's proactive approach towards regulation and adoption of new technologies suggests that the UAE will continue to be a leader in the blockchain industry in the coming years.

Khubaib Bin Naeem

Senior Associate

Dubai, UAE

Ph No. +971529349402

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