Legislation and regulatory authorities for cryptocurrencies in the UAE
Cryptocurrencies and blockchain projects in the UAE are regulated by FSRA (Financial Services Regulatory Authority) in relation to ADGM (Abu Dhabi Global Market). This authority publishes guidance on cryptocurrencies. It also monitors blockchain business to ensure transparency as well as to prevent money laundering and terrorist financing. Other bodies that may contribute to the regulation of cryptocurrencies in the UAE in the future are the SCA (Securities and Commodities Authority) and the DFSA (Dubai Financial Services Authority).
The Dubai Multi Commodities Center Free Zone (DMCC) is a place worth considering for cryptocurrency operations in the UAE. The DMCC cryptolicense guarantees the legality of your business.
The main benefits of running a cryptocurrency business include:
- the possibility of 100% foreign ownership of a local company – no need to look for local partners;
- zero restrictions on transfer of income and capital of the company;
- favorable tax regime – 0% corporate income tax for the next 50 years of operation;
- 0% tax rate for import and re-export;
- Zero currency restrictions;
- Absence of existing restrictions on hiring foreign employees to work for the company.
A license generally requires an authorized capital of 15,000 euros for the applicant company and a detailed business plan. There are currently no residency requirements when applying for such a license. If the application process is completed successfully, the license holder can carry out their operations unhindered.
You will need different types of licenses for different cryptocurrency operations:
- Distributed Ledger Technology Services – Providing solutions for developing and managing application databases, as well as providing any ancillary services using distributed ledger technologies, including Blockchain.
- Proprietary Crypto-Trade – the license holder can perform operations of buying and selling crypto-transactions (proprietary trade) based on the distributed ledger technology.
- This license is obtained for a local company, which requires the following documents:
- Proof of registered residence address;
- Document confirming the name of the future company;
- A detailed business plan.
The total cost of the entire process could be around $34,690 and includes:
- Company formation costs and expenses;
- Crypto-license application fees;
- Opening a corporate account with EMI (outside the UAE).
If we talk about the timeframe for setting up a new cryptocompany in the UAE, it can take about 4 weeks.
As of today, there is no law on cryptocurrencies in the UAE. “Regulation of Crypto Assets in ADGM” FSRA is the most detailed guidance on cryptocurrencies in this country. According to it, a crypto-asset company must meet the following requirements:
- Only certain crypto-assets are allowed. Specific crypto-assets are decided on the basis of market capitalization, traceability, security, price volatility and other factors.
- You must “have capital resources equivalent to 6 months of operating expenses” (the 12-month equivalent for crypto exchanges) in fiat.
- Fraud prevention. KYC required.
- Risk management and disclosure is mandatory.
- Securing funds and information through measures such as “controlling code versions, implementing updates, resolving issues.”