Dubai’s Virtual Asset Regulation Provides A Window Into The New World

On March 9th, His Highness Sheikh Mohammed bin Rashid Al Maktoum, announced a new set of rules and regulations on ‘virtual assets’ in Dubai. The announcement was unprecedented, and the rules are the first of their kind not only in the UAE but across the world. Here’s what the rules mean for digital asset enthusiasts in the UAE, and the industry as a whole.

Virtual Asset Regulation

Virtual Assets in Dubai will be regulated by an independent authority in the coming future. The role of the independent authority, known as the Virtual Asset Regulation Authority (VARA for short), is to generally ensure that best practices are being adhered to in the virtual asset industry, protecting the rights of all parties involved in transactions and business operations.

Quoting the Government of Dubai website, the VARA will focus on the following key areas:

• Organizing issuing and trading of virtual assets and virtual tokens
• Organizing and authorizing virtual asset service providers
• Ensuring highest standards of protection for beneficiaries’ personal data
• Organizing the operation of VA (virtual asset) platforms and portfolios
• Monitor transactions and prevent VA price manipulation

The introduction of this independent regulator, and the sharpness of its focus, is a significant stride forward by not only the Emirate but the industry, providing a solid framework in which the virtual asset space can operate.

It is clear from the focuses outlined by the Government of Dubai that the remit of VASA is to keep traders in the virtual asset space safe, and free from fraudulent activity and malpractice. Whether these moves attract

Consumer Protection

One of the key responsibilities of the Virtual Asset Regulation Authority will be to protect consumers in the industry. Up until this point, cryptocurrencies and virtual assets in general have remained unregulated by political institutions — not that this hasn’t been a discussion point for some time amongst many corridors of power, however. To date, there has been very little protection given to consumers in the event of malpractice, with insurance providers more often than not failing to recognize digital assets as something to ‘pay out’ on in the event of a theft or a case of fraudulence.

The work that the VARA will complete in ensuring consumers’ data will be protected, and markets themselves will remain free from manipulation and malpractice, creates the fairest and most level playing field that the industry has seen to date. While a generally very safe industry, successful implementation of such a focus will fortify its position.

The Regulation Authority is working to ensure the “highest standards of protection for beneficiaries’ personal data”, and will monitor “transactions (to) prevent VA price manipulation”. While this work has until now been managed in house by exchanges and users alike, the hand of an authoritative position will be a welcomed contribution to the industry for those who want to see virtual assets thrive and see the industry continue to grow.

The Significance for the Industry

The first regulation of its kind, while there is of course a clear aim of creating governance in a previously ungoverned sector, a collateral effect could certainly be that the role of a regulator attracts new users who were previously put off by its lack of governance. While crypto enthusiasts have a deeper understanding of the industry and the technology upon which virtual assets are themselves built, the same isn’t true across the board and understandably so. Virtual assets are an emerging technology, and any further peace of mind that can be provided to newcomers to the space can only be a good thing.

The regulations also provide a blueprint to the rest of the world about how the industry could look in the future — give those involved in virtual assets a place to operate freely, but responsibly. The regulator will be particularly welcomed by those looking out for consumer rights, and providing an extra level of peace of mind to those who were concerned about the absence of laws around the industry previously. It will be no surprise to see the same model of stand-off regulation be adopted in other countries across the world also, with the United States currently researching how best to implement their own rules and regulations on the industry.

Fundamentally, cryptocurrencies and digital assets are underpinned by immense levels of safety. The Blockchain is an ultra-secure method of information storage, and is in itself virtually unhackable. However, to those that are new to the technology, sources of safety and security are required from more legal channels. This move will go a long way in providing much needed assurances for those who haven’t yet delved into the world of virtual assets. While purists may consider regulation an overreach of political influence and contrary to the fundamentals of a decentralized financial system, others will recognize the need for both crypto and politics to cooperate harmoniously, and such moves made by the Government of Dubai are a huge stride towards this.