Launch of Crypto Currency Jointly by UAE and Saudi
The UAE has been anti-crypto in the beginning. However, now it is one of the best countries for cryptocurrency projects in the world. An advantage of working in UAE is that there are no taxes imposed on cryptocurrency projects.
When did the Agreement Take Place?
UAE and KSA has jointly signed a bilateral agreement to initiate the development of a common cross-border digital currency The cross-border digital currency will be strictly targeted for banks at an experimental phase with the aim of better understanding the implications of Blockchain technology and facilitating cross-border payments.
The important details of the same were released a little later jointly by the United Arab Emirates Central Bank (UAECB) and the Saudi Arabian Monetary Authority (SAMA).
This is a strategic move on part of UAE because the current trend is that the blockchain companies are flocking towards the Middle East to tap the market, expecting a high market growth.
How shall it be implemented?
The name of the joint digital currency is ‘Aber’. The scope of the same is limited for the time being and it focuses on financial settlements on a probationary basis between the banks of both the countries on an exclusive basis. However, the official date for the launch of the same has not been released yet.
Crypto Laws in UAE
The FSRA (Financial Services Regulatory Authority) of Abu Dhabi Global Market (ADGM) is the main authority which regulates the cryptocurrency and blockchain projects in UAE. Others are SCA (Securities and Commodities Authority) and the DFSA (Dubai Financial Services Authority – DIFC) in a limited capacity.
As of now, there is no federal law governing the crypto assets in the UAE. SCA has recently passed a draft regulation governing the crypto assets. It is the FSRA of ADGM which has issued the “Regulation of Crypto Asset Activities in ADGM”, which is the only guide available.
To deal in crypto, there is a mandatory requirement to acquire the an OCAB (Operating a Crypto Asset Business) license from FSRA or the requisite license from DSFA. This license will allow the company to provide crypto services, such as providing storage facilities to the people, crypto asset exchange platforms etc.
As on date, FSRA has given in-principle approval to three crypto asset licenses out of seven.
The Dubai Multi Commodities Centre (DMCC) in Dubai grants Crypto trading license. However, it doesn’t allow launching an ICO or registering a crypto exchange. DMCC has also granted license to a major company to act as ‘deep cold storage’ for crypto assets thereby allowing customers to store their Bitcoins and other crypto assets with the company in DMCC vault.
What shall be the advantages of setting up crypto business in the UAE?
- Higher accountability: The various authorities mentioned herein above directly deal with the customer, which eliminates the need for a middle man. The networking structure, on account of being peer to peer, brings more clarity and greater accountability.
- Specialist mode of transfer: It is a large property rights database, which is beneficial for the parties to execute an agreement in a two-party contract on commodities like automobiles or real estate. Specialist mode of transfers can also be done through cryptocurrency.
- Higher transparency: Under a regular cash- credit system, the banks or the credit agencies are involved and generally keep a tab on your history. This could involve keeping a check on your account balances to ensure that sufficient funds remain. Since cryptocurrency is a transaction between two parties, you can transmit exactly what you wish to submit to the recipient, and nothing else. There is greater transparency.
- No transaction fee: All the remote and separate computer systems that do the number crunching, also known as data mining, that involves generation of cryptocurrencies like bitcoins, get their compensation from the cryptocurrency network involved; hence, there is no application of transaction fee. Although, if you get a third party to manage your services, an external fee could be charged.
- Ease of accessibility: The facilitation of the exchange of cryptocurrency is done by digital transfer of data and through the internet. So it is accessible to anyone with an active internet connection. It is easy to access the relevant websites and portals and to extract the relevant information.
- No hidden charges: The cryptocurrencies are not susceptible to transaction charges, exchange rates, interest rates or any other fee or levy which might be imposed by the parties. This makes easy cross border transactions since they can done without any complications and fluctuations that occur in the markets.
- Security and authenticity of transaction: One of the greatest advantages of this is that unless you yourself allow the involvement of third parties, you are the sole owner of the both the private and public encryption keys that constitute the cryptocurrency network identity or address.
Cryptocurrencies are on the rise in the global market and ignoring the same will not be beneficial to the economy and the market. The UAE should dwell into this soon and come up with laws and regulations for the same.
Adv. Shayan Dasgupta
Corporate & Commercial Law | M&A | FinTech, Blockchain & AI