UAE Ministry of Interior and Dubai Virtual Asset Regulator to combat virtual asset crimes

UAE Ministry of Interior and Dubai Virtual Asset Regulator to combat virtual asset crimes

The Ministry of Interior have teamed up with Dubai’s Virtual Asset Regulatory Authority to collaborate for combating virtual asset financial crimes.

As per the press release, this agreement highlights the UAE’s commitment to safeguarding its financial system while fostering leadership in the digital economy.

The MoU aims to unify efforts in information sharing on virtual asset service providers, illicit transactions, and unlawful practices. By facilitating a rapid and secure exchange of data between VARA and the Ministry of Interior, the agreement ensures that the virtual assets sector in the UAE remains secure, innovative, and aligned with international standards.

As part of the collaboration, both entities will develop joint training programs, specialized task forces, and electronic platforms to monitor and detect suspicious activities. These initiatives aim to strengthen the regulatory framework, ensuring that only compliant virtual asset service providers operate in Dubai, thereby enhancing financial system integrity and consumer confidence.

Consumer protection is high up the list for both the UAE Ministry of Interior and VARA as is the combatting of money laundering efforts, and maintaining financial stability in the UAE.

Major General Khalifa Hareb Al Khaili, Undersecretary of the Ministry of Interior, emphasized the Ministry’s dedication to integrated collaboration with national institutions to enhance security and deliver services that reflect the UAE government’s vision and global standing. He highlighted the importance of institutional cooperation to achieve shared strategic goals and develop a robust regulatory framework.

This MoU marks a significant milestone in our collective mission to build a secure and well-regulated virtual assets ecosystem, said Matthew White, CEO of the Virtual Assets Regulatory Authority. By deepening our collaboration with the Ministry of Interior, we are reinforcing measures to detect and prevent financial crimes in the virtual assets space. This partnership ensures that Dubai continues to lead by example fostering innovation while safeguarding the integrity of the emirate’s financial ecosystem. Through this collaboration, we are not only enhancing the security of virtual assets but also cementing Dubai’s position as a global hub for responsible digital finance.

During the years between 2022 and 2024 Dubai Police revealed that they had conducted money laundering financial investigation cases including $16.3 million ( 60 million AED) in virtual assets, or crypto asset cases. This did not include a case where The Dubai Economic Security Center disrupted a $49 million crypto money laundering operation. Both investigations led to a total of $65.3 million crypto money laundering investigation cases.

Dubai authorities investigated $65.3 million worth of crypto money laundering

Dubai authorities investigated $65.3 million worth of crypto money laundering

During the years between 2022 and 2024 Dubai Police revealed that they had conducted money laundering financial investigation cases including $16.3 million ( 60 million AED) in virtual assets, or crypto asset cases. This did not include a case where The Dubai Economic Security Center disrupted a $49 million crypto money laundering operation. Both investigations led to a total of $65.3 million crypto money laundering investigation cases.

Between 2022 and 2024 Dubai Police had conducted a total of 500 money laundering cases totaling $1.1 billion ( 4 billion AED).

Lt-Gen Abdulla Khalifa Al Marri, Commander-in-Chief of Dubai Police, noted that these achievements reflect the UAE’s dedication to combating money laundering and enhancing international cooperation to tackle financial crimes. “Through the UAE National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organizations Committee, the force strategically coordinates with key partners to fight financial crimes,” he said.

“Our efforts encompass human resources development and specialised training for our officials such as the International Diploma in AML and Terrorist Financing, launched in cooperation with the United Nations Office on Drugs and Crime. The programme has trained 116 professionals from relevant national organisations,” Al Marri revealed.

Lt-Gen Al Marri explained that Dubai Police has demonstrated exceptional commitment to intelligence sharing, exchanging 1,733 financial crime-related dossiers with international partners over the last three years. “These exchanges have been facilitated through organisations such as INTERPOL, Europol, and regional and Gulf networks. Additionally, Dubai Police has signed numerous Memoranda of Understanding (MoUs) with global counterparts to bolster law enforcement cooperation,” Al Marri confirmed.

Expert Maj-Gen Khalil Ibrahim Al Mansouri, Assistant Commander-in-Chief for Criminal Investigation Affairs, highlighted the role of advanced technologies in enhancing investigative capabilities. “Dubai Police leverages cutting-edge artificial intelligence and specialized task forces to uncover illicit activities, apprehend perpetrators, and work closely with international law enforcement to combat money laundering effectively,” Al Mansouri noted.

Dubai Economic Security Centre disrupted $49 million crypto money laundering operation

The other successful operation, a collaboration between Dubai Economic Security Centre and the Public Funds Prosecution in Dubai disrupted an international organized crime network involved in money laundering operations worth $49 million (180 million AED) using cryptocurrencies. It involved 30 individuals and three companies. The network, which conducted complex money laundering operations worth AED180 million using cryptocurrencies, operated across the UK and Dubai. Investigations revealed that the network laundered cash in the UK through unlicensed cryptocurrency intermediaries present in the UK and Dubai.

Dubai Police working with crypto exchanges and Blockchain Intelligence firms

The General Department of Criminal Investigation at Dubai Police signed a Memorandum of Understanding (MoU) with BitOasis Technologies to strengthen cooperation, foster partnership ties, and enhance security efforts. The MoU aimed to bolster collaboration and exchange expertise in addressing economic crimes and exploring their future trends.

Additionally Dubai Police also partnered with Crystal Intelligence an advanced blockchain analytics and on-the-ground intelligence firm empowering financial institutions, governments & regulators in the fight against cryptocurrency crime.

Unregulated UAE based Cryptocurrency Financial services admits to fraud

Unregulated UAE based Cryptocurrency Financial services admits to fraud

UAE based but unregulated, Cryptocurrency financial services firm CLS Global, has pleaded guilty to charges stemming from a U.S. undercover operation targeting fraud in the crypto sector. USA federal prosecutors announced that CLS will admit to manipulating the market for a digital token created at the FBI’s direction.

The investigation, known as “Operation Token Mirrors,” was the FBI’s first attempt to create its own digital token and a fake cryptocurrency company as part of a broader strategy to identify fraudsters in the crypto market. CLS is one of three market makers and 15 individuals charged last year by federal prosecutors in Boston as a result of the probe.

In court filings, CLS acknowledged providing illicit services to the FBI-backed NexFundAI token, which ran on the Ethereum blockchain. Prosecutors said the firm engaged in wash trading—sham transactions intended to artificially boost the token’s trading volume and price.

Under the terms of the plea agreement, CLS will plead guilty to two fraud-related counts, pay $428,059 in penalties, and withdraw from cryptocurrency transactions involving U.S. investors. The company will also be required to certify its business practices annually and agreed to settle civil charges brought by the U.S. Securities and Exchange Commission.

Filipp Veselov, CEO of CLS Global, stated, “We recognize that there may be areas where we can improve our processes, and we are open to constructive dialogue with regulatory authorities.” The company added that it actively works to restrict engagement with U.S. clients.

This case is part of a broader DOJ crackdown on crypto market manipulation, with other firms like CLS Global, and ZM Quant also facing accusations of inflating token volumes. These firms allegedly engaged in similar practices, making tokens appear more active and valuable than they were, often selling them at inflated prices to outside investors.

Dubai authorities broke up two major money laundering operations

This comes as Dubai authorities, in collaboration with key federal authorities, have successfully broken up two major international networks conducting money-laundering operations worth a total of $174 million (AED641 million). The Dubai Public Prosecution referred an Emirati national, 21 British nationals, two Americans, a Czech national, and two companies owned by the Emirati national to the Criminal Court of First Instance at Dubai Courts. The individuals and entities face charges of possessing illicit funds of AED461 million as well as forgery of official documents and their use.

In another successful operation, a collaboation between Dubai Economic Security Centre and the Public Funds Prosecution in Dubai disrupted an international organized crime network involved in money laundering operations worth $49 million (AED180 million) using cryptocurrencies. The Dubai Public Prosecution has referred the case involving a network of 30 individuals and three companies to the Money Laundering Court at Dubai Courts. The network, which conducted complex money laundering operations worth AED180 million using cryptocurrencies, operated across the UK and Dubai. Investigations revealed that the network laundered cash in the UK through unlicensed cryptocurrency intermediaries present in the UK and Dubai.

The accused, identified as two Indian nationals and one British national, orchestrated the scheme, which included proceeds from illegal activities such as drug trafficking, fraud, and tax evasion in the UK. A meticulously planned operation led to the arrest of the accused and the freezing of bank accounts used for money laundering activities.

The success of these complex operations was made possible through the combined efforts of the Public Funds Prosecution in Dubai, Dubai Economic Security Centre, Dubai Police’s Anti-Money Laundering Unit, the UAE Financial Intelligence Unit, Dubai Customs, and the International Cooperation Department at the UAE Ministry of Justice.

His Excellency Essam Issa Al Humaidan, Attorney General of Dubai, commended the Public Prosecution, law enforcement agencies, and partnering local and federal agencies for conducting coordinated meticulous investigations that led to the successful dismantling of the sophisticated international money laundering networks. He underscored the significance of these efforts in tackling complex financial crimes, protecting the national economy, and enhancing financial stability. His Excellency reaffirmed Dubai’s commitment to enforcing anti-money laundering laws, combating organized financial crime, and strengthening international cooperation to uphold global financial integrity.

Dubai Police succeed in addressing 500 money laundering cases

Dubai Police successfully addressed 500 money laundering cases from 2022 to 2024, underscoring their vital role in the UAE’s efforts to combat organized and transnational crime. Working closely with international law enforcement agencies, these efforts have led to investigations involving over AED 4 billion, including $16 million (AED 60 million )in virtual assets.

Lieutenant General Abdulla Khalifa Al Marri, Commander-in-Chief of Dubai Police, highlighted that these accomplishments reflect the UAE’s ongoing commitment to fighting money laundering and strengthening global partnerships to tackle financial crimes.

Zand Bank now a licensed crypto custodian in UAE

Zand Bank now a licensed crypto custodian in UAE

UAE based Zand Bank, an AI powered digital bank, has received a full VASP license from Dubai’s virtual assets regulatory authority (VARA) allowing it to offer crypto custodial services. The license allows Zand to offer crypto and digital asset custodial services to institutional investors and qualified investors.

Zand, the AI-powered bank for the digital economy and first fully licensed all-digital bank in the United Arab Emirates was founded to support the digital economy and bridge the gap between Traditional Finance (TradFi) and Decentralized Finance (DeFi).

Mohamed Alabbar, Chairman of Zand, commented: “This approval from VARA is a milestone for Zand and the UAE’s digital economy. It reflects our commitment to bold innovation and sustainable growth. Our mission is to establish Zand as a cornerstone of the UAE’s evolving financial landscape, contributing to the nation’s ambition to be a global financial powerhouse.”

Michael Chan, CEO of Zand, added: “We would like to extend a heartfelt token of appreciation to VARA for their continued support of Zand. Our Digital Asset Custody service is a significant step in UAE banking. By providing institutional-grade security for digital assets, we are equipping our clients with the tools they need to thrive in the digital economy. The upcoming launch of Zand’s AED-backed stablecoin will further enhance our ability to integrate TradFi and DeFi, reinforcing our leadership in this space.”

Zand Bank has been chosen by several crypto exchanges and brokers who are working in the UAE as their digital banking partner. With Zand’s new crypto custodial license, VARA would have licensed three crypto custodians, Zand, Hex Trust, and Komainu.

Zand Bank has been growing its presence and offering within the UAE and GCC region. It has signed several partnerships over the past year, the last being with Paymentology.

Paymentology and Zand will enable fintech entities to thrive by offering a range of specialized services, including BIN-sponsorship, virtual IBANs, and Client Money Accounts. These services are designed to help fintech entities launch and scale faster, providing them with the infrastructure to bring their solutions to market efficiently.

The timing aligns with the UAE government’s push to establish a strong digital economy through the UAE Digital Economy Strategy, which aims to double the sector’s contribution to the nation’s GDP from 9.7% (April 2022) to 19.4% over the next decade.

Additionally, IDA, a Hong Kong-based stablecoin issuer, also partnered with UAE Zand Bank, to offer cost-effective and efficient cross-border transactions across the Belt and Road regions and BRICS Plus. As per the press release both entities aim to provide businesses with streamlined 24/7 digital payments.

Updated Dec 14th with quotes

The Regulatory authority of ADGM in UAE publishes digital asset amendments consultation paper

The Regulatory authority of ADGM in UAE publishes digital asset amendments consultation paper

The Financial Services Regulatory Authority (FSRA) of ADGM has published Consultation Paper No. 11 of 2024 setting out proposed amendments to its regulatory framework for Authorized Persons conducting Regulated Activities involving Virtual Assets in ADGM and to seek feedback on potential changes to that framework.

The proposed amendments include revisions to the process by which Virtual Assets are accepted for use within ADGM and refinements to capital requirements and fees. The paper also seeks feedback on several questions, including questions relating to staking and other emerging business models involving Virtual Assets.

One of the proposed amendments is that now the scope of the Regulated Activity of Providing Custody under FSMR currently
encompasses Financial Instruments, VAs and Spot Commodities. As outlined above, all VAs held in custody must be AVAs. The FSRA is asking for feedback on whether authorized persons can engage in providing custody to other than AVAs and hold a broader range of digital assets. They are also asking what other digital assets could be held.

    Feedback is also sought on the criteria to be applied in determining whether non-ADGM issued Fiat-Referenced Tokens should be accepted within ADGM. The paper also proposes to expand the scope of investments in which Venture Capital Funds may invest.

    As per the consultation the FSRA does not intend to restrict acceptance to FRTs issued only by issuers located in ADGM (“Domestic FRTs”). However, the FSRA notes that FRTs issued by issuers outside ADGM (“Foreign FRTs”) may not be subject to standards as
    stringent as those applied to Domestic FRTs. Given this, Foreign FRTs approved as Accepted FRTs for use within ADGM will be
    categorised as such to distinguish them from Domestic FRTs, which are subject to FSRA standards.

    The consultation adds, all Authorized Persons that use Foreign FRTs in conducting Regulated Activities will have to disclose to their Clients that such Accepted FRTs are not subject to the FSRA’s requirements for issuers of Domestic FRTs.

      The consultation period will close on 31 January 2025.

      The new consultation paper came out on the same day that ADGM issued its fiat-referenced-tokens framework, better known as its stablecoin regulations.

      The new framework expands the suite of digital assets already offered by ADGM regulatory authority.
      As per the press release, the framework introduces several key components that establish robust standards for FRT issuers to ensure financial stability and investor protection such as reserve assets, governance and integrity, transparent disclosure, prudential safeguards and redemption rights.


      The framework makes FRT issuance a distinct Regulated Activity within ADGM’s comprehensive financial services regulatory regime. It has been designed to be risk-proportionate while ensuring FRT issuers operate in a safe and prudent manner.


      Emmanuel Givanakis, CEO of the ADGM FSRA stated, “Our FRT framework is a significant milestone in ADGM’s evolution as a progressive international financial centre. Through extensive consultation with industry stakeholders, we have created a regime that balances innovation with strong regulatory oversight. This framework provides the regulatory certainty that industry participants need while maintaining high standards of financial stability and investor protection. We believe this positions ADGM as a premier jurisdiction for responsible FRT issuance and shows our commitment to fostering responsible innovation in financial services.”

      As per the framework, an Accepted Fiat Referenced Token means a Fiat-Referenced Token that, in the opinion of the Regulator, meets the requirements that permit a regulated activity to be carried on in relation to it.
      The FSRA defined a Fiat-Referenced Token as a digital asset, the transfer and storage of which is achieved through the use of distributed ledger or similar technology, which can be used as a medium of exchange with a stable store of value, by referencing a fixed amount of a single fiat currency; and enabling the holder to redeem the token in exchange for the amount of the fiat currency referred to from its issuer upon demand.
      The fiat referenced token can be used for remittance payments, and payment transactions, including transfers, payments for services, direct debits, credit transfers between bank accounts, including standing order, and others.

      The FSRA’s risk management guidance includes decentralized infrastructures

      The FSRA’s risk management guidance includes decentralized infrastructures

      The Financial Services Regulatory Authority (FSRA) of ADGM has published its Information Technology (IT) Risk Management Guidance (Guidance), providing a comprehensive and holistic framework for managing technology risks in ADGM’s financial sector which references to decentralized infrastructures which are used by virtual asset exchanges.

      The FSRA Guidance reflects extensive industry engagement, following the publication of the FSRA’s Discussion Paper on IT Risk Management and an industry briefing held in February 2024. During this engagement, the FSRA received positive feedback from stakeholders on the Guidance.

      It comprises four key sections that identify best practices for IT risk management that entities regulated by the FSRA should consider adopting:

      Establishing a Culture of Effective IT Risk Management – covers governance and controls for IT risk, including incident management, audits, and management of IT third party service providers.
      Managing an IT Environment – addresses IT asset management, IT infrastructure, systems lifecycle, resilience, and cyber incident response.
      Interacting Securely – focuses on system access controls, cryptographic key management, and secure online transactions.
      Leveraging Business Embedded Technologies – explores emerging technologies including algorithm-driven solutions like generative artificial intelligence, and decentralized infrastructure solutions such as virtual asset platforms.


      The Guidance is aligned with best practices outlined by international standard-setting bodies and financial regulators. The regulatory body of ADGM expects regulated entities will implement the best practices in a manner that is proportionate to their size, complexity, and business activities.

      Emmanuel Givanakis, CEO of the ADGM FSRA said: “As technology continues to transform financial services, robust IT risk management becomes increasingly critical. This Guidance reinforces our supervisory focus on IT risk and cybersecurity while supporting innovation in digital finance. It provides practical direction for senior executives, compliance officers, and IT practitioners to strengthen their risk management frameworks. This initiative reflects our commitment to building a resilient and progressive international financial centre in Abu Dhabi.”

      ADGM regulatory authority releases consultation paper for security tokens, stablecoins and more

      ADGM regulatory authority releases consultation paper for security tokens, stablecoins and more

      UAE ADGM regulatory authority, the Financial Services Regulatory Authority (FSRA) has published a consultation paper No.10 to propose amendments on various regulations including those related to virtual assets. The amendments discuss, Digital security tokens, commodity tokens, stablecoins, and utility tokens.

      As per the announcement, The proposed miscellaneous amendments result from the FSRA’s desire to simplify, clarify and correct certain requirements where appropriate and necessary, but are also in response to the FSRA’s experience of operating such legislation in practice.

      The consultation period will close on 10 December 2024.

      Digital Securities

      In terms of virtual assets under the title “Regulation of Digital security offerings, virtual assets under the FSMR (ICO Guidance) and its Guidance on Regulation of Digital Securities activity in ADGM, it deals with the FSRA’s treatment of virtual assets and the financial activities that can be conducted in relation to them within ADGM.

      The FSRA has defined Virtual Assets in the FSMR, as Digital Securities, which means digital or virtual tokens that have features and characteristics of a Security under the FSMR (such as Shares, Debentures and Units in a Collective Investment Fund).

      As such all financial services activities in relation to Digital Securities, such as operating primary / secondary markets, dealing / trading / managing investments in or advising on Digital Securities, are subject to the relevant regulatory requirements under the FSMR.

      Virtual assets as Commodities

      In addition, market intermediaries and market operators dealing or managing investments in Digital Securities need to be licensed / approved by FSRA as FSP holders (including as Multilateral Trading Facilities), Recognised Investment Exchanges or Recognised Clearing Houses, as applicable “Virtual Assets” such as non-fiat virtual currencies, crypto ‘exchange tokens.

      The Guidance also discusses virtual assets treated as commodities where only activities in Accepted Virtual Assets will be permitted.

      In terms of capital formation activities, they are not within the virtual asset framework offered by FSRA in ADGM. While Derivatives and Collective Investment Funds of Virtual Assets, Digital Securities and Utility Tokens regulated as Specified Investments under the FSMR will need to be licensed by FSRA as FSP holders.

      Utility Tokens

      When it comes to Utility Tokens, which means tokens that can be redeemed for access to a specific product or service and are not for investment, they are also not regulated.

      Stablecoins

      Fiat tokens or stablecoins, which are fully backed by underlying fiat currencies which are used as a payments instrument for the purposes of money transmission will be licensed and regulated by the FSRA as providing money services.

      RAK DAO has close to 400 companies on its premise

      RAK DAO has close to 400 companies on its premise

      Ras Al Khaimah Digital Assets Oasis (RAK DAO), a free zone created for virtual asset companies, has attracted close to 400 companies in a year and is aiming to play a big role in the gaming industry.

      “In 12 months, we welcomed just shy of 400 companies, issuing licenses to a diverse range of businesses in all the segments. Ras Al Khaimah Digital Assets Oasis is a global platform for the most exciting technology segments of our lifetime – artificial intelligence (AI), metaverse, blockchain, Web3, and many others shaping our future and of our children,” said Dr. Sameer Al Ansari, CEO of RAK Digital Assets Oasis.

      During the RAK DAO conference, Dr Al Ansari highlighted the immense size of the gaming industry, which surpasses both the music and movie industries combined. “We believe Ras Al Khaimah can play a big part in the development and growth of the gaming industry,” Al Ansari said while speaking during the conference hosted by the free zone on Friday.

      He added: “We’ve also created a thriving ecosystem that has forged partnerships with key players in the industry. This further highlights Ras Al Khaimah’s growing reputation as a hub for digital innovation in the UAE, which is now ranked third in global crypto adoption. That is a lot of progress in the last five years.”

      At the conference, RAK DAO also introduced the DAO Association Regime, a legal framework tailored to support decentralised autonomous organisations (DAOs)

      “DAOs represent a significant shift in governance, driven by smart contracts and decentralised decision-making. They are projected to grow by over 20 per cent annually in the coming years. But with decentralisation comes significant challenges, especially when it comes to interacting with the off-chain world,” explained Al An Sari.

      He added, “The regime addresses these challenges. It offers DAOs a comprehensive framework that provides legal identity and limited liability for their members. This ensures that participants are not personally liable for the organisation’s activities.”

      Describing this initiative as a game changer for the Web3 landscape, the free zone introduced two new modules: Startup DAOs, aimed at emerging projects with less than 100 members, and Alpha DAOs, designed for more established DAOs with treasuries exceeding $1 million, allowing them to scale within a robust legal framework.

      “DAOs are becoming essential to the Web3 ecosystem. Today, there are over 50,000 DAOs with treasuries exceeding $25 billion. This reflects the growing trust and reliance on decentralised governance. However, without legal recognition, many DAOs face barriers to interacting with the traditional financial systems,” he said, adding that now DAOs can open bank accounts and raise capital among other activities with greater privilege.

      “By introducing RAK DAOs, the UAE sets the global standard for how decentralized organizations can operate within the legal framework. This initiative supports not only the most digital assets here but also serves as the blueprint for other jurisdictions that are still grappling with how to regulate DAOs. Looking ahead, DAOs will play an increasingly integral role in the sectors beyond finance and technology,” added Al Ansari.

      Dubai VARA asks VASPs to follow and comply with sanction alerts rigorously

      Dubai VARA asks VASPs to follow and comply with sanction alerts rigorously

      On September 18th 2024, Dubai’s Virtual Asset Regulatory Authority shared a circular addressed to VASPs ( Virtual Asset Service Providers) in UAE requiring them to continuously updated their sanction alerts by registering to the Mandatory registration on the Executive Office for Control & Non-Proliferation [EOCN] system for sanction alerts.

      According to the announcement, “VARA is mandated to assure market stability that is in turn contingent on every participant’s financial robustness and responsible market conduct – that collectively allow for the industry to operate on par with best-in-class international standards. The Executive Office for Control & Non-Proliferation [EOCN] was established in the United Arab Emirates in 2009 as the National Leader in the UAE to ensure the implementations of Targeted Financial Sanctions [TFS] imposed by the UAE, UN and FATF standards.”

      The Terrorist Financial Sanctions, are aimed at denying certain individuals, groups, organizations, and entities the means to support terrorism or finance the proliferation of weapons of mass destruction; and ensuring no access to funds, financial assets or economic resources of any kind as long as they remain subject to the sanction’s measures.

      As such VARA requires that VASPs and LoP holders to screen their user databases without delay [within 24 hours] each time the TFS list is updated to identify any matches against the latest list, and to ensure designated entities on the TFS list are immediately prevented access to funds owned or controlled, wholly or jointly, directly or indirectly, by the designated entity or to funds owned or controlled, wholly or jointly, directly or indirectly, by a person or organization acting on behalf or at the direction of the designated entity; and report any activity involving designated entities to the Financial Information Unit [FIU] in line with Rule III.F of VARA’s Compliance and Risk Management.

      According to the regulator, VASPs failure to comply might lead to substantial criminal and civil penalties which could include suspension, restriction, or prohibition of activity business or profession and even revocation of operational license.

      UAE Federal government exempts virtual assets and crypto from taxation

      UAE Federal government exempts virtual assets and crypto from taxation

      The UAE Federal Tax Authority (FTA) published on October 2nd 2024 the amended version of the Executive Regulation of Federal Decree Law No. 8 2017 on Value added tax and has exempted virtual assets and investment fund management.

      The amendments which are implemented following the Cabinet Decision No. (100) of 2024 will be effective from November 15th 2024.

      These amendments aim to enhance clarity, provide further details on key provisions and procedures, and align with earlier changes in the Decree-Law and other relevant tax legislation.

      When it comes to financial services, the decree noted that the management of investment funds and the transfer and ownership of virtual assets, including cryptocurrencies as well as conversion of virtual assets will be exempt from value added taxation. The exceptions on conversion of virtual assets and transfer and ownership of virtual assets are treated as effective from 1 January 2018.

      According to PWC, the UAE has defined virtual assets as digital representation of value that can be digitally traded or converted and can be used for investment purposes and does not include digital representations of fiat currencies or financial securities.

      PWC notes, “Businesses dealing with virtual assets should analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery. Voluntary disclosures may be required to correct historic returns.

      PWC adds, “In particular fund managers, funds and companies dealing with virtual assets should assess whether their services are within the scope of the VAT exemption and also analyse the impact of that on the input tax recovery.”

      According to the recent report from Henley&Partners the UAE leads in this year’s crypto adoption Index, as it is listed among top 12 countries while leading when it comes to public adoption, and innovation and technology. The report notes that one of the top reasons for UAE’s crypto growth is its low-tax jurisdiction which offers an attractive environment for crypto businesses.

      For example, when it came to public adoption of crypto, the UAE ranked second following only USA. It is the only Arab country in the top 12 for this year. As per the Index findings, the UAE stands out as a leading jurisdiction for crypto investors. Public interest is high, with a substantial portion of the population owning cryptocurrencies. This enthusiasm is matched by strong government support and a thriving start-up scene.