As a growing fintech center, Dubai has become one of the most promising countries in the cryptocurrency industry. Thus, the intricacies of crypto license in Dubai is integral for most crypto market players to learn.
Crypto trading is currently rising and spreading everywhere as investors are always looking for new business opportunities. With its growing popularity, cryptocurrency is expected to become more mainstream in the next few years. Middle East countries like the United Arab Emirates (UAE) are also participating in the hype by adding more Free Zones and allowing companies to indulge in crypto trading, crypto-asset handling, and related activities. Such practices have been approved by the Securities and Commodities Authority (SCA) of the UAE since early 2019.
The market capitalization for cryptocurrency in the UAE is about USD265 billion. The city of Dubai, in particular, is home to approximately 2 million citizens and the center for all financial activities in the country. Cryptocurrency is becoming more popular in Dubai, so there certainly is a huge opportunity to explore the crypto trading world there. Almost any popular cryptocurrency such as Bitcoin, Ethereum, Dogecoin, Ripple, and Tether can be found in various crypto exchanges in Dubai.
Who Can Buy Crypto Assets in the UAE?
Essentially, there are two classes of people that can buy crypto assets in the UAE. The two classes are qualified investors and the rest of the people who do not meet the criteria to be qualified investors.
The criteria for a qualified investor are as follows:
- Institutional investors (banks, financial institutions, etc.) who own more than AED75m in assets, or have a net turnover of AED150m. It can also be state governments, foreign governments, and international bodies.
- Individuals who own AED4m in funds or have an annual income of at least AED1m. Apart from that, the licensee must be able to prove that they have sufficient knowledge about the risks of investing in crypto assets.
As a part of conducting anti-money laundering act and "Know Your Customer (KYC)" checks on potential investors, the SCA stated that all customers must be classified as they were "high risk". This also means conducting "enhanced due diligence" into the customers' source of funds, political exposure risks, ultimate beneficial ownership structure, the potential risks of customers being used as conduits for money laundering activities, and any geographical dangers presented by the customers, their directors, shareholders, and associated suppliers and intermediaries.
What is a Crypto License?
If we talk about crypto trading, the foremost concern that every trader must prioritize is safety and security. Especially if you intend to trade in the long term or plan to trade frequently; you would want always to ensure that your money is as safe as possible. In this case, it depends on what exchange and crypto wallet that you use. It's crucial to check if the companies have obtained crypto licenses from reliable regulatory bodies in the country.
Crypto license is one of the most crucial things to check if you want to ensure the safety of a crypto exchange. In the UAE, all cryptocurrency businesses must be legalized by using a commercial license. So, all crypto trading activities including monitoring, buying, etc. must operate under a crypto license.
It has become mandatory for all crypto businesses in Dubai to obtain a crypto license as set out by the SCA in its publication, "The Authority's Chairman of the Board of Directors Decision No. (21/R.M) of 2020 Concerning the Regulation of Crypto Assets". The decision basically talks about the licensing regime for anyone who wishes to offer crypto-assets within the UAE. This includes ICOs, exchanges, marketplaces, crowdfunding platforms, and related businesses.
See Also: 4 Ways to Trade Cryptocurrencies
Meanwhile, the crypto assets themselves refer to any digital asset that works as a medium of exchange, a unit of account representation of ownership, storage, and assets that can be transferred electronically from one person to another using the operation of a computer program. This applies to commodity tokens and security tokens as well.
Law Governing Crypto Trading in the UAE
Currently, crypto licenses in the UAE are issued by several authorities and Free Trade Zones:
- DMCC (Dubai Multi-Commodities Centre)
- DAFZA (Dubai Airport Free Zone Authority)
- ADGM (Abu Dhabi Global Market)
- Sharjah Research Technology and Innovation
DMCC (Dubai Multi-Commodities Centre)
In Dubai, any company that wishes to open a cryptocurrency-related business must register in the Dubai Multi Commodities Center (DMCC) and obtain a license that allows them to operate the business. The license will then enable the company to offer crypto-related services like storage, management, trading, software applications, advisory, services, etc.
In general, crypto trading is growing most steadily in this area. Just a while ago, the DMCC has launched a new crypto center with a well-supported environment for businesses operating in crypto trading and blockchain sectors. The center is designed as a hub for the development and application of crypto and blockchain technologies. It provides support for all types of companies that are trying to find solutions related to crypto and blockchain technology.
The center has a crypto advisory practice led by CV labs, which is the company behind the Switzerland Government-backed Crypto Valley. Other than that, there's also a series of incubators and accelerator programs that are provided for start-ups who want to receive funding for their crypto projects.
In short, the DMCC's new crypto center will be the center for Dubai's future blockchain activities. Dubai is often seen as one of the biggest global hotspots and technology leaders in the world, especially when it comes to blockchain and related applications. With the addition of the DMCC crypto center, the blockchain and crypto trading environment in the UAE is expanding to new levels.
DAFZA (Dubai Airport Free Zone Authority)
Dubai Airport Free Zone Authority (DAFZA) is another Free Zone in Dubai that has signed an agreement with the SCA in order to support crypto trading and related business activities within the area. It monitors the offering, issuance, and trading of crypto assets as well as licensing-related activities within the area.
DAFZA-licensed companies now allowed to provide crypto assets in their services. Moreover, it is integrating the crypto license issuance along with its other value-added service for global investors. There is a legit regulatory framework and flexible legislative support from DAFZA for the smooth functioning of the business activity. Overall, the act is aimed to increase the growth of Bitcoin and other cryptocurrencies trading in the region.
ADGM (Abu Dhabi Global Market)
Generally, the regulation of crypto-assets activities in the UAE is governed by the Financial Services Regulatory Authority (FSRA) and Abu Dhabi Global Market Free Zone (ADGM). It is probably the most extensive regulatory framework available and the only law governing cryptocurrency in the country at the moment. The two bodies have published a guideline about the usage of cryptocurrency in business and the criteria for acquiring a crypto license in the UAE. Apart from that, the authorities also monitor the blockchain and crypto trading activities to protect clients from money laundering and other illegal activities.
How to Obtain Crypto License in Dubai
Each country typically has a set of regulation and compliance requirements for crypto exchanges. In most cases, all crypto exchanges in the UAE must apply and fulfill the requirements from several bodies including the SCA, ADGM, and the respective Free Zone authorities. On top of it, every exchange must also obtain a crypto license issued by the local authority, depending on the Free Zone that they operate in.
In order to obtain the license, a company must make sure that they are eligible to apply based on these criteria:
- The company must own enough capital needed to operate the business for at least 6 months ahead.
- The company must follow the strict KYC Norm.
- The company must fulfill the disclosure for value-added tax, anti-money laundering, and other government authorities on request.
- The company must be able to secure the clients' financial information as a way to prevent cybercrimes.
Once the criteria are met, the company must follow the legal procedures to obtain the license by doing the following steps:
- Submit the crypto license application form to the respective Free Zone authority.
- Submit the required documents of the shareholders such as passport copies and photographs.
- A brief business plan and share capital to successfully run the company.
- Prepare a suitable office space according to the requirement and prepare the tenancy agreement.
- Pay the required amount of capital for the license and office rent.
After that, the respective Free Zone authority will examine the application and once it's approved, the crypto license will be issued for the company. Suppose the owner of the company is a non-UAE resident, they can then submit an application for a UAE residence visa and open a corporate bank account in the country.
In conclusion, we can see that cryptocurrency is expected to be the next big thing in the UAE, especially in Dubai. For instance, the government has shown massive support to the growth of crypto trading and blockchain technology by building a crypto center in DMSS, Dubai, to accommodate the needs of all crypto entities within the country. Crypto licenses are also issued by the Free Zones authorities in the UAE to ensure added safety of crypto trading in the UAE and protect all parties from cybercrimes, identity theft, and money laundering activities.
All in all, the UAE is taking a giant leap in expanding its crypto trading environment while simultaneously making the rules stricter to make it safer. So as a trader, this can be a huge opportunity to explore crypto trading even more and earn consistent profit in long term.