Dubai Bans Privacy Cryptocurrencies with New Regulations

Dubai is positioning itself as a hub for virtual assets by attracting more than 500 cryptocurrency companies to its digital asset ecosystem. The city’s Virtual Assets Regulatory Authority (VARA) aims to create a favorable regulatory environment, giving Dubai an edge over local competitors and establishing it as a regional and international hub for virtual assets.

VARA Releases Its Regulation Guidelines

The Virtual Assets Regulatory Authority (VARA) of Dubai released its much-anticipated regulation guidelines for the local cryptocurrency industry on Tuesday, February 7th, 2023. The guidelines establish ten core principles for the industry, including licensing requirements, anti-money laundering obligations, marketing protocols, and a ban on anonymity-enhanced cryptocurrencies, such as Zcash and Monero.

Dubai defines anonymity-enhancing cryptocurrencies as “a type of virtual asset that hinders the tracing of transactions or ownership through its use of distributed public ledgers, and for which there are currently no available technologies or mechanisms for service providers to trace or identify ownership.” Due to the anonymous nature of these cryptocurrencies, the government has put in place regulations to oversee their use and transactions.

Per the regulations, virtual asset businesses must obtain a license from VARA, and large proprietary traders investing a minimum of $250 million in cryptocurrencies must register with the authority. The VARA also has the power to revoke licenses in the event of a violation of directive or insolvency and set fees for services provided.

Penalties and Due Diligence

Violations of the regulations can result in fines of up to $5.4 million for individuals and $13.6 million for businesses involved in virtual assets. The VARA’s regulations will apply not only within Dubai but also to its special development and free zones, excluding the Dubai International Financial Centre, which another body regulates.

Dubai is determined to establish itself as a leading destination for virtual assets by offering a supportive regulatory framework to attract businesses to the city. Despite the demanding due diligence process, the city is committed to ensuring a transparent and secure environment for virtual asset transactions, making it an attractive destination for companies looking to enter the industry. 

Regulations set standards for the industry, ensuring that virtual asset businesses operate transparently and securely, which can attract more investments and drive innovation in the crypto space. Understanding the impact of these regulations is crucial for the growth and stability of the crypto market.

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