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UAE planning to license virtual asset service providers

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The United Arab Emirates is joining the bandwagon to advocate for a friendly cryptocurrency and blockchain sector. The UAE plans to issue federal licenses to cryptocurrency service providers within the first quarter of 2022.

The UAE is hoping for a nationwide crypto licensing framework that will attract some of the largest players in the sector.

UAE planning to regulate crypto

According to a Bloomberg report, the crypto regulatory framework to be developed by the UAE will apply to all virtual asset service providers operating in the region.

The cryptocurrency sector in the UAE will be regulated by the UAE’s Securities and Commodities Authority (SCA). This regulatory body is currently close to amending legislation that will regulate VASPs.

Towards the end of last year, the UAE finalized a risk assessment of the cryptocurrency sector. The risks were assessed on 14 agencies in the public sector and 16 agencies in the private sector.

Following the successful completion of this assessment, the relevant government authorities proposed that crypto-assets should not be banned. Instead, the risk associated with these assets could be mitigated to ensure they are not used for illegal activities.

Bloomberg referred to a UAE official with knowledge of the matter, who said that the crypto regulatory framework in the UAE accounted for the latest guidelines from the Financial Action Task Force (FATF). It also copied the regulatory frameworks implemented in other countries such as the UK, US and Singapore.

Crypto regulation will have a hybrid approach

Unlike in many countries where crypto regulations have been left to one organization, the UAE is taking a hybrid approach to involve stakeholders in the sector. The SCA will work with the central bank for a broad regulatory oversight. Moreover, the local financial bodies will also implement their own daily procedures.

Besides VASPs, the UAE is also looking towards the crypto mining sector, which is also becoming highly popular. Some VASPs operating in the financial free zones have already received their licenses. Last December, exchange giant Binance entered into an agreement with the Dubai World Trade Centre Authority to create a global crypto hub.

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