A block chain is a decentralized ledger of all transactions across a peer-to-peer network. Participants can validate transactions using this technology without the requirement for a central clearing organization. Applications could involve paying bills, concluding business deals, casting ballots, and a host of other things. It is this key feature of “decentralization” that makes this technology particularly attractive to investors globally. Block chain is the technology that enables the existence of cryptocurrency. In contrast to fiat currency, which is controlled by a single organization like a central bank, cryptocurrencies are validated through a decentralized system that allows any person taking part in the process to check the validity of individual transactions.
The Emirate of Dubai enacted Law No. 4 of 2022 on the Regulation of Virtual Assets (“VAL”) and established the Dubai Virtual Assets Regulatory Authority (“VARA”) on February 28, 2022 which became effective on March 11,2022. By establishing a legal framework for businesses related to virtual assets, including crypto assets and non-fungible tokens (NFTs), this landmark law reflects Dubai’s vision to become one of the leading jurisdictions for entrepreneurs and investors of block chain technology.
The VARA shall apply to virtual asset services provided throughout the Emirate of Dubai, including special development zones and free zones, with the exception of the DIFC financial free zone. According to Article 2 of the Dubai Virtual Assets Law, a virtual asset is a “digital representation of value which can be digitally traded or transferred or used as an exchange or payment tool or for investment purposes” and virtual token is a “digital representation of a group of rights which can be issued and traded digitally through a virtual asset platform (a platform operated by a virtual asset provider licensed by VARA)”.
The issuance, offering, and pertinent disclosure processes of virtual assets and NFTs are governed, supervised, and overseen by VARA. Virtual asset services can only be provided by a natural person or a legal business that is (1) granted a license from VARA, (2) based in the Emirate of Dubai and (3) in possession of a trade license from the Emirate of Dubai’s relevant commercial body. VARA’s mandate includes keeping an eye on trading activity in virtual asset services to stop price gouging and create strong standards for privacy protection.
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