KSA working on policy decision to define different virtual asset types

KSA working on policy decision to define different virtual asset types

During the Financial sector conference 2023 in Riyadh KSA, Mohsen Al Zahrani, Virtual assets and CBDC Program Director at Saudi Arabia’s Central Bank, told Anna Tutova, CEO of Coinstelegram media platform when asked about the regulation of cryptocurrencies in the country, that there is a current forum looking into  that, yet no policy decision has been made yet on different virtual asset types.

He noted in his reply during a panel discussion on CBDC, public money in the digital age, “We are working on a policy decision with the Saudi Central Bank and other relevant governmental agencies.”

KSA appointed AlZahrani in September 2022 to lead the virtual assets and digital currency program at the Central Bank.  In January 2023, The Saudi Central Bank (SAMA) confirmed that the Central Bank is continuing to experiment on Central Bank Digital Currencies (CBDC).  SAMA is currently working on a project that focuses on domestic or national wholesale CBDC use case in collaboration with local banks and FinTech’s. Experts explained to LaraontheBlock that this is a CBDC for local wholesale bank settlements.

During the 2023 World Economic Forum’s session on Financial Institutions innovating under pressure, the Saudi Arabian Minister of Finance Mohammed Al Jadaan states that while CBDCs have privacy issues they are fantastic tool in developing countries.

Prior to this KSA had engaged in a pilot with UAE on CBDC Aber project for cross border wholes sale CBDC transactions utilizing Hyper Ledger Fabric at the time.

Kucoin cryptocurrency exchange revealed in a report published in July 2022 “ Crypto Verse Report on adoption of digital currencies in Saudi Arabia” that 3 million Saudi Arabians are crypto investors who currently own cryptocurrencies or have traded in past six months. This means 3 million out of an adult population of 21 million or 14 percent currently own cryptocurrencies.

The survey also found that another 17 percent of adult population surveyed, was crypto curious and are likely to invest in crypto in the next six months. This would be imply that by the end of 2022, 31 percent of Saudi adult population or 6.6 million will be trading or owners of cryptocurrencies.

Global crypto exchanges in first phase of Dubai’s regulator journey with Binance and Crypto.com a step further

Global crypto exchanges in first phase of Dubai’s regulator journey with Binance and Crypto.com a step further

Global Crypto exchanges, Huobi, Bybit, Equiti, and OKx have all made it to the MVP ( Minimum Viable Product) provisional phase of VARA’s regulatory journey, while crypto.com  and Binance have moved one step forward to the preparatory license phase. 

As per VARA the MVP License is a 3-stage process starting with a (1) Provisional Permit; graduating to a (2) Preparatory License and concluding with an (3) Operating License. Applicants that are already in the MVP process will be advised by VARA to either continue within the MVP licensing process and/or be transitioned to the FMP Licensing process, ensuring a seamless transition with a focus on efficiency.

So far as per VARA the only crypto exchanges in the second phase under preparatory license are Binance and crypto.com. Binance is also in preparatory phase for its payments offering. 

VARA recently announced that Crypto.com move to the preparatory phase of the license after graduating from the provisional phase. 

As per the release, Crypto.com  received this MVP preparatory license after a detailed review of its key personnel, governance procedures, Anti Money Laundering / Countering the Financing of Terrorism (AML / CFT) capabilities, Know Your Customer (KYC) and Ultimate Beneficial Owner (UBO) policies and procedures, cross-border safety and security measures, and best-in-class compliance practices. 

“We are pleased to welcome Crypto.com to the MVP Programme preparatory phase,” said Henson Orser, Chief Executive Officer of VARA. “VARA’s regulatory framework will be instrumental in creating and managing a unique, resilient and securely future-proofed ecosystem that delivers a sustainable and thriving global best-in-class VA market with secure cross-border interoperability. As such, participation from credible players like Crypto.com will further our mission of delivering a progressive and future-focused regulatory framework”.

“This achievement is the next significant step for Crypto.com in an incredibly important market for our business and industry,” said Kris Marszalek, CEO of Crypto.com. “With the MVP preparatory license, we look forward to continuing to work with regulators in providing customers the most comprehensive and secure crypto experience.”

Only VASPs that receive a final approval post review from VARA – and receive the FMP License, are in a position to undertake any regulated VA activities, or offer such services to and/or from the Emirate of Dubai.

The only entity in VARA that has reached one stage before a fully operational license is HexTrust which provides crypto custody and staking services.

During a recent interview by LaraontheBlock with the CEO of VARA, Orser explains how VARA will be offering more licenses in areas such as DAOs, DeFi, Crypto mining, and more. He also explains what is of most importance to VARA as a regulator.

Exclusive Interview with CEO of Dubai’s Virtual asset regulator on the leading role VARA will play in global regulations

Exclusive Interview with CEO of Dubai’s Virtual asset regulator on the leading role VARA will play in global regulations

In March 2022 Dubai announced the launch of the world’s first virtual asset regulatory authority. The authority would be set up to grant blockchain and crypto licenses in Dubai UAE. VARA then announced the first presence of a virtual asset regulatory authority in the metaverse with its headquarters in the Sandbox. Soon afterwards VARA hired the first CEO to head a virtual asset regulator, Mr Henson Orser.

As per the recently published rulebooks the goal of VARA is to promote the Emirate and ultimately the UAE as a safe and progressive jurisdiction worthy of attracting meaningful Virtual Asset growth and innovation, in complement with all related UAE Government programs, and  position VARA and the UAE as globally trusted and respected in the realm of international law.

Henson Orser in an interview with LaraontheBlock clarifies how the first global comprehensive rule book for VASPs and issuance of virtual assets issued by VARA in February 2023 is achieving its aim of becoming a global leading regulatory authority and jurisdiction.

The importance of VARA for UAE’s D33 strategy

Orser believes that VARA not only aims to help develop the virtual asset regulations globally given the enormous demand for regulatory clarity worldwide but is also a part of the broader initiative under D33 (Dubai 33). He explains, “Dubai’s D33 Economic Plan has outlined our mission to establish the Emirate as the capital of the Future Economy. VARA was launched as the world’s only independent and specialist regulator for Virtual Assets to serve as the accelerator for a truly borderless Digital Economy. Our regulatory framework, which is first of its kind, has been structured to accelerate Dubai’s economic agenda and sustainable market growth.

VARA according to Orser assists in achieving the objectives of Dubai 33, a strategy that targets to double the size of Dubai’s economy to $8.7 trillion by 2033 making it top three global cities, because it encourages innovation and technology which will attract individuals and companies to the city.

He adds, “VARA follows Dubai’s footsteps in global innovation, fostering collaboration between public, private and government entities to enable economic independence and create long term value. Dubai’s virtual asset regulations set out a comprehensive framework built on principles of economic sustainability and cross-border financial security. Ultimately, by defining an equitable framework, we help mitigate risk and create space for newcomers and seasoned players alike to innovate responsibly.

Dubai VARA and its relation to UAE Securities and Commodities Authority

On January 14th 2023, the UAE Security and Commodity Authority released its federal regulations on crypto assets. It shed light on the interaction between the jurisdictions of VARA and SCA, by stating that no person may engage in Virtual Asset Activities in the UAE without obtaining a license from “the [SCA] or the Local Licensing Authorities such as VARA.

Questions have arisen as to the roles of both SCA and VARA. Is an SCA licensing enough to operate in Dubai and do entities regulated by VARA are overseen by SCA?

Orser when asked about the relationship with VARA noted that as we are dealing with a globally integrated, and borderless virtual economy. VARA is extremely fortunate to have such strong internal alignment and synchronization of local and federal efforts. He states, “These are absolute must-haves. Reflective of the UAE’s commitment to the new economy and confidence in the Metaverse and Web 3.0 ecosystems, VARA serves as the central authority for this specialized global industry mandated to provide VA oversight across the Emirate of Dubai [except DIFC], fully supported by relevant UAE Regulators and Legal Authorities to create a Global Operating Benchmark.”

He adds, “To this end, Cabinet Resolutions No. (111) and (112) of 2022 have been very effective in providing clarity on how the VA industry standards setting, rules enforcement and market protection responsibilities and authority assigned to VARA for the Emirate of Dubai, will be supported by SCA’s assurance of an agreed acceptable operating baseline across the wider UAE. Similarly, the UAE CB and SCA being the custodians responsible for National FATF compliance – will provide the guidance on Anti-Money Laundering [AML], Combating the Financing of Terrorism [CFT] and such other rules that warrant uncompromised consistency in execution.” 

The importance of compliance to FATF

In June 2019, the Financial Action Task Force (FATF) adopted an Interpretive Note to Recommendation 15 to further clarify how the FATF requirements should apply in relation to Virtual Assets and Virtual Asset Service Providers.

VARA has exhaustively taken the FATF AML/CFT guidelines to heart in its extensive 7 Rulebooks.

Orser explains, “Compliance to FATF and its AML/CFT guidelines are an absolute top tier global principle that we adhere to and aim to set the global standard for. There is no compromising on these guidelines within VARA and so people entering the VARA regime can expect a zero-tolerance for failure environment, here in Dubai..”

VARA Positive stance on crypto staking

Globally, 2023 has seen a lot of news related to cryptocurrency staking service and severe penalties and fines being imposed by regulators where such programs were being undertaken without relevant supervision. In the VARA Rulebooks, staking is a fully regulated activity as VARA feels strongly for the need for full investor disclosure, including marketing and solicitation activities being tailored for specifically qualified audiences.

Further elaborating on VARA’s perspective in permitting VA staking, Henson explained “We strongly believe that so far as a VASP exhibits the right level of responsibility and demonstrates robust transparency, investors must be able to effectively benefit from the offering that is built on permissioned DeFi protocols with proper regulatory guardrails and mandatory disclosures. When it comes to proof of stake versus proof of work tokens, we are also studying many of the interesting developments in protocols, with a strong focus on environmental sustainability.

VARA DeFi Regulatory Sandbox

While the term DeFi is not specifically referenced in the 7 Rulebooks from VARA, DeFi lies very much at the core of Dubai’s Future Economy considerations. 

 Orser explained that VARA’s Rulebooks have focused on facilitating borderless ‘value-exchange’ both in the traditional and new economy contexts, by leveraging a full spectrum of cross-cutting ‘activities’, which should not in any way be construed as TradFi specific. 

He states, “We are well aware that in this sector new technologies and products will be continually emerging, and constructively challenging traditional financial systems. It is exactly for this reason that VARA has been constructed as a technology agnostic and product-neutral framework that allows us to remain progressive and future-focused.  This means that our regime will provide for R&D sandboxes to test, learn and evolve prototypes across DeFis and DAOs today, to wider innovations across Metaverse and Web3.0. As we have maintained, the VARA Regulations will strike a measured balance between remaining agile so we benefit from future waves of technological innovations, yet being definitive in their ability to provide the required market certainty, FATF assurances, and cross-border security which are non-compromisable to us.”

Privacy coins no go at VARA

The rules on privacy coins are pretty simple says Orser. “Rather than going through specific examples of coins that will or will not be prohibited, we think it is important to emphasize how this issue is handled in VARA’s regulations. Our definition of an anonymity-enhanced cryptocurrency states that the prohibition will apply when a VASP has no means of establishing traceability or identifying ownership in relation to that cryptocurrency. If a VASP or a particular token or coin has the right technology or mechanisms to establish traceability or identify ownership, then Virtual Asset activity on that cryptocurrency may be conducted.” 

VARA is therefore focused on preventing financial crime and ensuring that the highest standards are met by VASPs in the areas of anti-money laundering and combating the financing of terrorism.

He concludes, “We hope the above provides you with a better understanding of VARA’s approach to this issue”.

NFTs within VARA regime

While no direct reference was made to the term NFTs [Non-Fungible Tokens] within VARA’s Rulebooks, Orser says that this again refers to the product neutrality of VARA’s rule sets, and what VARA will govern is the activity of issuance which will include NFTs.

He explains, “To the extent that an entity or someone is issuing an NFT, VARA will determine whether the NFT issuance warrants regulation or is substantive enough to be registered under regulatory supervision within VARA. After that the consequent distribution, buying and selling of that NFT are covered in our Exchange, Brokerage and Payment and Remittance Rulebooks.”

Virtual asset mining under VARA

While VARA did not offer a rule book for virtual asset mining activity, in its Rulebook on VASPs it mentions virtual asset mining stating that all VASPs which have investments in Virtual Asset mining or staking businesses or conduct or facilitate Virtual Asset mining or staking activities [including by way of selling equipment] shall make publicly available in a prominent place on their website, up-to-date information related to, the use of renewable and/or waste energy [e.g. hydroelectric energy, flared gas] by the VASP or its Group in the course of conducting Virtual Asset mining or staking activities as well as initiatives relating to decarbonization [e.g. purchase of carbon offsets] and emission reduction of Virtual Asset mining or staking activities.

Orser clarified, “As we have maintained the principle of VARA’s framework is its ‘live’ nature which particularly applies to topics like ESG that are globally evolving, and rapidly maturing around us. We are constantly getting feedback, and suggestions from VASPs as well as other regulators that have subject matter expertise. As such we will on a quarterly basis look to include relevant advancements in some of these globally acceptable principles in order to make the end result truly borderless and interoperable.”

The End of FTX

The FTX debacle set the crypto ecosystem years behind according to experts in the industry. With the launch of VARA and the publication of its rulebooks, will disasters such as FTX happen again?

Orser believes that 2023 will see greater regulation in this industry with a focus on consolidation, international coordination, financial crime compliance and consumer protection in light of the ongoing hyper-volatility surrounding the VA industry.  He noted that, “Dubai has found strong acknowledgment from international peers for its unwavering stance. Most importantly it has been heartening to see that the industry itself is keen on having regulatory oversight, supervisory support and facilitation of responsible actors, and to this end VARA remains committed to working with the industry and peer regulators to ensure that market stability and investor protection remain sacrosanct.”

Note: This is a copyrighted interview any replication of this interview has to be as carried out with exact quotes from CEO of VARA and sourced to LaraontheBlock 

UK Nexo crypto lender to hire a150 workforce in UAE as it expands its MENA presence

UK Nexo crypto lender to hire a150 workforce in UAE as it expands its MENA presence

In a recent article published by Arabian Gulf Business Insight, Nexo Co-Founder and MD Antoni Trenchev announced that the UK entity would be opening its offices in the UAE as it expands into the MENA region.

The MENA region will grow to account for 30 percent of its total global operations. NEXO as per the article which currently has 5 million users across 200 jurisdictions will set up under Dubai’s VARA regulations as well as DIFC.

As per comments made by Trenchev 150 people will be recruited. In the article he states, “We are seeking two lines of regulation,” Trenchev said. “One is for the crypto-related activities which will be at VARA, while DIFC will be for more traditional offerings associated with wealth management.

“There appears to be a political will to create a blockchain fintech financial hub in the region but more specifically Dubai and Abu Dhabi, which is always welcoming,” he said.

“In the Middle East the rules are being developed as we go, but there is the clear desire to have the business here, whereas in the US, when you deal with the various agencies and you assess their moves, you’re not really sure whether they want to have any crypto there apart from maybe Bitcoin,” he adds.

Oman announces upcoming launch of Virtual asset regulatory framework

Oman announces upcoming launch of Virtual asset regulatory framework

The Oman Capital Market Authority has announced that it will  establish the Virtual Assets Regulatory Framework to regulate and develop the market in the Sultanate of Oman.

The Capital Market Authority (CMA), which regulates and develops the Sultanate’s financial markets for the capital market and insurance sectors, is planning to establish the new proposed regulatory framework for Virtual Assets (VA) and Virtual Asset Service Providers (VASP). 

As per the press release, this move highlights the Sultanate’s growing recognition and the CMA’s proactive approach to develop the digital assets and fintech industry in Oman.

This important initiative in Oman was announced during a public stakeholders engagement session held at the CMA recently and being led by the CMA. By regulating and developing the virtual assets industry, the CMA aims to provide an alternative financing and investment platform for issuers and investors, while mitigating the risks associated with this asset class.

The CMA is in the process of defining a comprehensive and facilitative regulatory framework, which will include a new regulation to cover all virtual assets activities, a licensing framework for all VASP categories and a supervisory framework to identify, assess, and mitigate ongoing risks. The aim of this new regulation is to establish a market regime for virtual assets that includes rules to prevent market abuse, including through surveillance and enforcement mechanisms.

The proposed new regulatory framework is envisaged to cover activities such as crypto assets, tokens, crypto exchanges, and initial coin offerings, among others. The regulation for virtual assets in Oman is important, as it will provide a clear and secure framework for the growth of the virtual assets industry. The move towards digitalization and the adoption of virtual assets aligns with the Sultanate’s Vision 2040 of a digitally transformed economy and financial sector, while attracting foreign investments into Oman.

The CMA has also appointed XReg Consulting Limited, an international policy and regulatory consultancy specializing in virtual assets, and Said Al-Shahry and Partners, Advocates & Legal Consultants (SASLO), an Omani law firm, to advise and assist the CMA. This collaboration brings together expertise in policy, law and technology to assist in the creation of a comprehensive regulatory framework for virtual assets in Oman.

Back in  June 2022 Oman Capital Market Authority  issued its new Securities Law (46/2022) which  stipulates that the authority can “Agree to application of technologies, virtual digital investments or any products or services in the areas related to the provisions of this law, as set out in the Regulation.”

Oman was only one of the first countries in the region to allow crypto mining , mining its first Bitcoin in December 2022.    While The Oman Water and Waste Water Services Company ( OWWSC), member of Nama Group, trialed a stablecoin linked to the Oman Riyal. The company signed an MOU with Oman based Digital Digits, the creators of Easy coins and Connected Chains to trial “ Hasalah” a stablecoin Wallet.   

UAE Securities and Commodities Authority publishes UAE Virtual asset regulation resolution

UAE Securities and Commodities Authority publishes UAE Virtual asset regulation resolution

UAE Securities and Commodities Authority (SCA ) publishes the Cabinet Resolution No. (111)of 2022 regarding the regulation of virtual assets and their service providers and has noted which entities it will regulate and the penalties that can reach $2.7 million. 

As per the resolution, the regulation of virtual assets and their providers will be overseen in the UAE by the Securities and Commodities Authority, as well as the Central Bank of the UAE. It will also include local licensing authorities that include free zones, and financial free zones. 

As per the resolution virtual assets are defined as a digital representation of the value that can be traded or transferred digitally, can be used for investment purposes, and does not include digital representations of paper currencies, securities or other funds.

The activities that fall under virtual assets include the provision of virtual asset services in the UAE. 

As for virtual assets service providers , they are any legal person practicing one or more activities related to virtual assets or the related processes for the benefit or on behalf of a person, such as the operator of the virtual assets platform, the broker of virtual assets and the custodian of virtual assets, and any other activities in accordance with the provisions of this Resolution.

The resolution defined Virtual Assets Platform as a digital platform for listing, trading and transferring ownership of virtual assets, conducting related clearing and settlement processes, and storing and saving information and data through distributed ledger technology or any other similar technology.

According to the resolution it aims to develop the legislative system of the virtual assets sector in the State, its related activities and service providers in a way that defines and guarantees the rights and duties of all related parties. 

The resolution will also regulate the virtual assets sector in the State and its related activities and service providers and will be compliant with all all provisions of the Federal Decree-Law No. (20) of 2018 concerning Combating Money Laundering Crimes, Combating Financing of Terrorism and Financing of Illegal Organizations, as amended, and its executive regulations and applicable legislations related to the sector.

The resolution also seeks to protect investors in virtual assets from illegal practices.

The virtual asset regulation will cover all entities within the UAE including free zones, except for those within financial free zones such as ADGM and DIFC, which work with entities offering digital securities and digital commodity contracts. 

There is an exception for entities working in the virtual assets for payment purposes, and stored value facilities. They will fall under the jurisdiction of the Central Bank of UAE. However virtual asset platforms are not included under Central Bank jurisdiction.

As per the decision no one can engage in virtual asset activities unless they are licensed. The UAE Securities and Commodities Authority will offer licenses for the following activities:

a. provision of Virtual Asset Platform operation and management services;

b. provision of exchange services between one or more forms of virtual assets;

c. provision of Virtual Asset transfer services;

d. provision of brokerage services in trading operations in Virtual Assets;

e. provision of Virtual Asset custody, management, and control services; and

f. provision of financial services related to offering and/or selling by the issuer to the Virtual assets, or participating in providing those services.

Licensed entities must meet minimum requirements such as not being a sanctioned or on terrorism lists especially those concerned with combating money laundering and combating the financing of terrorism and illegal organizations, and not be subject to any criminal investigations within or outside the State during the submission or study of the application for registration, and that no final judicial judgment has been rendered against him in the crime of money laundering, financing terrorism, or financing illegal organizations;

In addition the entities seeking license need to implement technical systems that are able to protect investor data in accordance with international best practices, current technology and/or cybersecurity standards. 

These entities also need to meet the capital requirements and conditions, credit guarantees, insurances, compliance management systems and other rules in accordance with the executive resolutions issued by the Authority.

Finally the UAE SCA has the authority to suspend listing or trading virtual assets, or the technologies used by these services providers, or the operation of virtual asset platforms. 

The authority can impose financial fines not exceeding AED (10,000,000) ten million AED equivalent to $2.7 million.

This is the first time that the UAE has endorsed its onshore virtual asset regulations, it will now be time to see who can meet these regulations and who will not. 

WEF to support UAE’s Blockchain and AI enabled Trade Tech Initiative

WEF to support UAE’s Blockchain and AI enabled Trade Tech Initiative

At Davos, the UAE government signed an MOU with WEF (World Economic Forum) to support UAE’s new Blockchain and AI enabled Trade Tech initiative. The initiative is designed to accelerate the digitization of international supply chains, enhance customs procedures, and improve developing countries’ access to the global trading system and, as a result, spur a new era of trade growth.

From the UAE’s side, the MoU was jointly signed by Dr. Thani bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade, and Mohamed Ali Al Shorafa, Chairman of the Abu Dhabi Department of Economic Development (ADDED), and Prof. Klaus Schwab, WEF Founder and President.

The agreement will support the UAE’s efforts to deliver the initiative’s four key components: a global forum to gather trade, industry and technology leaders to share best-practice; an annual research report into the trade tech landscape, real-life applications and emerging trends; a regulatory sandbox to enable companies and startups to experiment with trade-tech innovations; and an incubator for promising startups in the trade tech space.

Dr. Al Zeyoudi said, “The Trade Tech Initiative is a crucial step in modernizing global trade, using the tools of the Fourth Industrial Revolution (IR 4.0) to reduce the cumbersome and inefficient paper-based processes that continue to dominate supply chains. We believe it is essential to harness the benefits of advanced technology to catalyze global trade  using artificial intelligence to automate customs processes and warehouse management to deploying blockchain to revolutionize trade finance, cross-border payments, and know-your-customer procedures, the potential for enhancement is limitless.”

He added, “International buy-in and regulatory frameworks are essential for these ideas to take root and our partnership with the World Economic Forum is a vital first step in realizing the goals of the Trade Tech Initiative. In 2024, the UAE will host MC13, the leading decision-making body of the World Trade Organization, and we are determined to build consensus over the next 12 months to begin pioneering a new era of fully digitized, operationally efficient global trade.”

Al Shorafa stated, “The UAE has a strong track record in developing and deploying innovative technologies to enhance efficiencies in the trade process. A typical example is our Advanced Trade & Logistics Platform (ATLP), the one-stop-shop for all trade operations. The emirate utilizes advanced technology such as AI-powered systems to enable traders facilitate their import and export transactions. We believe The UAE’s new Trade Tech Initiative further strengthens our efforts to enable traders to export and import seamlessly by accelerating the digitization of supply chains, and enhancing customs procedures.”

Concurrently UAE’s Minister for Foreign trade H.E. Thani Al Zeyoudi stated in an interview with Bloomberg, “Crypto will play a major role in the United Arab Emirates’ global trade moving forward.

Minister Thani Al-Zeyoudi, commenting on the crypto sector, said, “Crypto will play a major role for UAE trade going forward. The most important thing is that we ensure global governance when it comes to cryptocurrencies and crypto companies.”

 Al-Zeyoudi went on to suggest that as the UAE works on its crypto regulatory regime, the focus will be on making the Gulf country a hub with crypto-friendly policies that also have sufficient protections in place. He explains, “We started attracting some of the companies to the country with the aim that we will build together the right governance and legal system needed.”

UAE has not granted a single operational virtual asset license VARA and UAE Minister announce

UAE has not granted a single operational virtual asset license VARA and UAE Minister announce

As HE Omar Sultan Al Olama, Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications participated in the WEF session ‘Finding the right balance for crypto’  announcing that the UAE has not licensed a single crypto exchange, concurrently the Dubai based Virtual Asset Regulatory Authority (VARA)  affirmed this on its website in its latest announcement.

Al Olama told audiences at WEF, that the regulations in UAE are not light. There are extensive regulations at VARA. He affirmed, “ UAE has not issued a single licensed crypto exchange in UAE neither Binance nor FTX.” He explained that there is a four step process  and to date, “no one was able to onboard any customers even last week.”

Concurrently VARA stated on its website, “VARA has not granted any operating permits to date this is a four stage licensing process” VARA’s website explained, that the VARA regime is founded on the principles on enforcing responsible market participation backed by a future-proofed and responsive regulatory framework that remains technology agnostic; that collectively deliver socio-economic stability; robust consumer protection; and jurisdictional resilience.”

As such there are four stages to regulation at VARA, the first is Provisional permit; graduating to a 2-step [(2) Preparatory + (3) Operating] Minimum Viable Product (MVP) license; and culminating at the (4) Full Market Product (FMP) license.

The fourth stage takes into effect after regulations have been tested within the regime. As such according to VARA every Virtual Asset Service Provider [VASP] must go through all 4 stages in this current environment, wherein VARA expects to evaluate, observe, and only then authorize suitably qualified entities to undertake any market servicing activities under its licensing regime.

VARA then clarifies that at this stage the only licenses that have been issued are Stage Gate (1) Provisional or (2) MVP-Preparatory to enable VASPs to fulfill all pre-conditions, and undertake readiness steps establish offices, onboard employees with work visas, secure domestic bank account etc. prior to being in a position to undertake any market operations.

So VARA affirmed that no VARA licensee has, to date, been awarded an MVP-Operating permit.

Each VASP that is awarded an MVP license must comply with the [MVP License Conditions Document] issued by VARA, and strictly adhere to the licensing conditions outlined in the appended letter. One of the MVP conditions is that VA activities during this phase may only be provided to qualified and/or institutional investor segments.

Mass retail consumers are strictly prohibited until the Stage Gate (4) FMP license approval has been secured. [Virtual Assets and Related Activities Regulations 2023] will stipulate relevant licensing conditions and requirements.

VARA adds that when it publishes its full market regulation, it will enable borderless economic opportunity across the global VA industry, protecting investors and market participants, backed by active enforcement of all regulatory requirements beyond security and cross-border compliance including those pertaining to custody and segregation of client money; prudential requirements (viz. insurance and liquidity cover); FATF compliance, market manipulation and/or abuse prevention.

In terms of Virtual Assets Exchanges, VARA has awarded Binance (MVP Preparatory License Issued) while Bybit, Crypto.com, Equiti, GCEX, Huobi, and OKX have provisionary approval and started the process.

In terms of Virtual Assets Payment Services, Zamp has applied and have provisional approval. 

In terms of Virtual Assets Broker – Dealer services those who have applied and been granted provisional approval include BitOasis, CoinMENA, MidChains and Scallop

Virtual Assets Issuance Services include Calvin Cheng Web3.0 Holdings, Hike, Monstera, Prypto, Woonkly Labs, and Xfinite

While under Virtual Asset Custodians only Hex Trust (MVP Preparatory License Issued) and Komainu (MVP Preparatory License Issued)

Virtual Assets Management/ Investment Services: Amber Group, BRE Holdings, Brevan Howard, Fintonia Group, NineBlocks, NOIA Capital, TPS Capital and Q9 Capital have all been granted provisional approvals, first stage. 

Al Olama also noted at the WEF session that the job of a regulator is to try and be proactive and to protect people as much as possible whenever people adopt a technology. He states, “In UAE we have a young population so we need to ensure that we regulate fast because youth are early adopters. He added, “The UAE wants to protect talent since we aim to be the country with the highest per capital talent on earth.”

According to him there are other sides of crypto such as Web3 and UAE wants to attract Web3 and Blockchain talent. Blockchain is a technology of the future given that traceability cannot be removed. This according to H.E. Al Olama is a positive thing for the world as it is easier to trace someone who transacts through Bitcoin than through hard cash.”

He ascertained that regulators across the board need to work together. First bad actors should not be able to move from one place to another, and the same incidents should not be repeated tomorrow.

In terms of DeFi Al Olama believes it is is evolving and is least regulated. He states, “ We want to jump into each vertical on its own, the only issue we have is that while the UAE government can move fast  if we work with other governments as teams and we all scrutinize  every single vertical it is better as we cannot wait for next catastrophe.”

UAE to issue stablecoin for payments legislation soon and maybe even DeFi

UAE to issue stablecoin for payments legislation soon and maybe even DeFi

As per a recent PWC Crypto regulation report 2023, the UAE has finalized its crypto regulation, includes AML/ CTF Money laundering and counter terrorist financing rules as well as its travel rule and has already prepared the stablecoin regulation for payments which is awaiting final legislation. ( refer to graph page 8 of report).

For those not familiar with the travel rule, it is a Bank Secrecy Act (BSA) rule [31 CFR 103.33) which requires all financial institutions to pass on certain information to the next financial institution, in certain funds transmittals involving more than one financial institution.

This PwC Global Crypto Regulation 2023 report provides an overview of the crypto regulation landscape, with a focus on financial services. It offers insights into how the regulatory frameworks are developing across the world and seeks to identify how this may impact relevant industry participants and virtual service providers within the financial services sector.

The report notes that UAE authorities are assessing their approach to areas including stablecoins and wider DeFi.

In addition as per the report, the Central Bank of UAE is establishing its position in communicating permissible virtual asset activities to local banks. These include opening accounts for Virtual Asset Service Providers (VASPs) better known as crypto exchanges. 

 UAE Securities Commodities Authority with its Decision on Crypto Assets Activities Regulation (CAAR), regulates the offering, issuing, listing and trading of crypto assets in onshore UAE. This includes the initial coin offering exchanges, marketplaces, crowdfunding platforms, custodian services and related financial services based upon or leveraging crypto assets.

In December 2022 the UAE Cabinet updates some of its legislations including those pertaining to virtual business and virtual assets allowing them to be regulated onshore.

As for the rest of the GCC and Arab countries, the report notes that Bahrain has implemented crypto regulations and AML/CTF  yet has not implemented neither the travel rule nor stablecoin regulations for payments.

Jordan, Kuwait, and Oman have not initiated a crypto regulation process, while KSA and Qatar have prohibited cryptocurrencies.

It is interesting that while the report for example considers that Oman has not initiated the crypto regulation process, Oman had announced in 2021 that it was launching through the Central Bank a high level Oman cryptocurrency task force to study the economic advantages and disadvantages of authorizing the use of cryptocurrencies in the country.

In January 2022 Oman capital markets Authority announced a tender for specialized companies to assist in setting up a legislative and regulatory framework for virtual assets and licensing supervision and regulations of Virtual assets service providers within the Sultanate of Oman. Since then no other announcements have been made.

Both Bahrain and Oman have allowed crypto payments to be made in the country through virtual asset providers. Oman based, cryptocurrency broker, Easy Coins launched its trial of Tether USDT on the Tron Blockchain. Accordingly Easy Coin users in Oman can now purchase TRC20 USDT. At the end of 2021 there were 43 thousand registered crypto wallet addresses in Oman.

In the meantime even stablecoins are being trialled in Oman. The Oman Water and Waste Water Services Company (OWWSC), member of Nama Group, to trial a stablecoin linked to the Oman Riyal. The company signed an MOU with Oman based Digital Digits, the creators of Easy coins and Connected Chains to trial “ Hasalah” a stablecoin Wallet.

While in Bahrain EazyPay, a payments solution provider partnered with Binance’s Binance Pay to launch a regulated and approved crypto payments service offering in the Kingdom.

The Kingdom of Saudi Arabia crypto traders and investors are growing despite the ban on cryptocurrencies and the Central Bank of Saudi Arabia has created a division to study implementation of virtual assets and CBDCs. In 2022, Qatar announced the introduction of its blockchain blueprint for the country.

So while regulations are essential for the growth of crypto ecosystem, and the UAE is leading in this regards, it doesn’t mean that crypto is not being utilized in other countries regardless of their regulatory status. 

Central Bank of Morocco ends 2022 with launch of draft crypto bill

Central Bank of Morocco ends 2022 with launch of draft crypto bill

On December 20th, the Central Bank of Morocco represented by its governor Abdellatif Jouahri announced in Rabat Morocco that the draft crypto bill to regulate the use of cryptocurrencies is ready.

The announcement was carried out at the press briefing following BAM’s 4th and final quarterly meeting of 2022. Jouahri stressed that the full draft is ready to put in place a proper regulatory framework.

Jouahri stated, “Discussions are to be held with all stakeholders, including the Moroccan Capital Markets Authority (AMMC) and the Insurance and Social Security Supervisory Authority (ACAPS),” 

“We proceeded to a specific definition of the cryptocurrency and prepared a general public survey that details the specifics and use of this virtual currency in Morocco,” he added.

In June 2022, The Central Bank of Morocco, Bank Al Maghrib, announced during its second quarterly meeting that it would be introducing a cryptocurrency bill soon. Abdul Latif Al Jawhari, Governor of Central Bank of Morocco noted that the crypto CBDC committee created in February 2022 is putting in place an appropriate regulatory framework to combine innovation, tech and consumer protection.

He also noted that the crypto bill is being benchmarked against global experiences with IMF and World Bank. He also noted that this regulatory framework will also update the legislation on the fight against money laundering and terrorist financing.

In March 2022, during a session with media He revealed that the Central Bank of Morocco had created a council headed by him to oversee the required regulations for both cryptocurrencies and CBDCs. He stated, “We are in discussions with the Central Banks of friendly nations such as Switzerland, Sweden, and France as well as international financial institutions such as the IMF and World Bank to learn from their expertise and experience.”

Despite the fact that the Moroccan government considers crypto illegal in the country, Morocco has the highest number of crypto owners within the Arab region, followed closely by Egypt. 2.38 percent of Moroccan population own crypto.