2024 in review: The UAE crypto legal chronicles

2024 will be remembered as one of the most transformative periods in the global crypto regulatory landscape. As crypto assets continue steadily into mainstream finance, policymakers worldwide are stepping up with comprehensive rules.

From the United States president-elect pledging a strategic Bitcoin reserve to the European Union’s rigorous Markets in Crypto-Assets (MiCA) directive, regulators made one message clear: We are from the government, and we are here to help regulate!

For the United Arab Emirates, 2024 marked a significant milestone. With five regulators now overseeing virtual asset service providers (VASPs), the nation introduced a series of laws, licensing frameworks and tax exemptions.

A global perspective first

President-elect Donald Trump’s plan to establish a strategic Bitcoin reserve in the United States has fueled enthusiasm and debate, with rumors now that six other international governments are looking to emulate the US, including Russia, Japan and Thailand. Such a bold move signaled that top-tier governments now consider Bitcoin strategic holdings rather than fringe experiments.

Across the Atlantic, the EU’s MiCA regulation compelled crypto exchanges to over-comply by delisting non-compliant stablecoins ahead of regulatory deadlines, effectively pushing USDt from what some might consider one of the world’s less relevant markets. Tether did not seem to be shedding any tears in the corner. It continued to grow its market share despite the EU regulatory shake-up.

The UAE’s regulatory landscape

The UAE has no shortage of regulatory bodies shaping its crypto sector. With five regulators now available for companies seeking virtual asset services, businesses can align with the legal environment best suited to their offerings. Regulatory arbitrage available within the UAE is a feature, not a bug, but this feature needs to be navigated intelligently, bearing in mind the overarching federal regulations.

A highlight of the year was when the Central Bank of the UAE (CBUAE) introduced the Payment Token Services Regulation via Circular No. 2/2024 in June 2024, regulating the issuance of stablecoins. Moreover, after a 12-month grace period, businesses in the UAE will only be allowed to accept crypto payments in dirham-backed stablecoins issued by CBUAE-approved entities.

Similarly, the Abu Dhabi Global Market (ADGM) introduced a regulatory framework specifically for stablecoins, or “fiat-referenced tokens.” Under these rules, issuers must fully back their tokens with reserves, maintain strong governance and ensure rigorous transparency.

Meanwhile, a tax development from the Federal Tax Authority provided that all cryptocurrency transactions are exempt from value-added tax (VAT) from Nov. 15, 2024, retroactive to Jan. 1, 2018. This tax relief is only relevant to those making a lot of trades on centralized UAE exchanges and being charged VAT on exchange fees. Therefore, please disregard the hyped-up, misleading tweets claiming the UAE has released all virtual assets from taxes. That is not the case.

The Dubai International Financial Centre (DIFC) enacted the Digital Assets Law No. 2 of 2024. Recognizing digital assets as property under English common law principles, thus treating tokens as tangible property.

Court milestones and media misinterpretations

In a notable court decision, the Dubai Court upheld an employment contract stipulating that an employee’s bonus could be paid in the company’s native crypto tokens, in addition to other typical bonuses employees receive in the UAE, such as an annual ticket flight home or a school subsidy for children.

While some international media outlets reported that salaries can now be paid entirely in Bitcoin and crypto, such interpretations misread the ruling. The judgment did not redefine wage laws; it merely recognized crypto tokens as a valid form of bonus payment within a specific employment contract.

As always, the public is urged to rely on official government sources for accurate information rather than sensationalized social media posts.

Tightening marketing guidelines

On the marketing front, the Virtual Assets Regulatory Authority introduced stricter rules applicable across the entire UAE, not just the emirate of Dubai. Influencers and businesses promoting digital assets must now include clear risk warnings, refrain from guaranteeing returns and operate within a licensed framework.

Marketing at events is being tightened as well. Violators risk fines of up to 10 million dirhams, which equates to more than $2 million. This move was implemented in close cooperation with the federal Securities and Commodities Authority (SCA), illustrating the cohesive regulatory ecosystem that the UAE is building.

Licenses, collaborations, and market entrants

Regulatory clarity has a gravitational pull, and in 2024, it drew significant market players to the UAE. Heavyweights like Binance, Crypto.com, OKX and Bybit received VASP licenses, expanding the range of services available, from exchange and lending to derivatives trading.

Ripple obtained in-principle approval from the Dubai Financial Services Authority within the DIFC. Meanwhile, in the ADGM, prominent companies such as Blockdaemon, Circle, Paxos and eToro made significant expansions or relocations, attracted by the region’s clarity and business-friendly climate. Tether’s USDt was listed as an accepted token in ADGM.

Dubai’s DMCC Crypto Center welcomed many new entrants who relocated their HQ to the region’s most active crypto ecosystem.

Gazing into the future

As 2024 draws to a close, the shape of the future is becoming more apparent. In the US, all eyes are on the incoming Bitcoin strategic reserve. Europe’s MiCA framework may tighten further, pushing more companies out of the EU.

Within the UAE, the trend is toward more granular rules for token issuance, stablecoins and decentralized finance platforms. However, despite tighter regulations, the UAE is expected to attract even more global players.

Buckle…no, lawyer up for 2025. Expect stronger Anti-Money Laundering rules, more defined stablecoin governance and deeper cross-border regulatory cooperation.

Source: https://cointelegraph.com/news/2024-in-review-the-uae