Introduction:
UAE has influenced technological adoption, especially in finance. Due to the rising significance of cryptocurrencies, the Securities and Commodities Authority (SCA) has implemented comprehensive regulations to ensure market stability and public interest. This article examines the SCA's cryptocurrency regulatory structure, including scope, security designation, crypto asset rules, licensing requirements, and post-license obligations.
Regulation scope and application:
Regardless of whether they are securities or not, the SCA regulations include an extensive number of crypto assets that are listed on organized markets. The UAE Central Bank already regulates certain products, such as Payment Tokens such stablecoins that are based on regular currency and stored value facilities. There are few disclosure requirements in order to make sure investors are aware of the risks and liquidity associated with cryptocurrency assets if they are not listed on organized markets. Additionally, in order to avoid misrepresentation, the law does not categorize crypto assets solely based on their specified purpose.
Security Classification and Regulations
If a cryptocurrency asset is considered a security, these securities must follow as per existing SCA regulations. In order to determine whether a crypto asset is a security, the SCA may use comprehensive evaluations such as contractual rights against an issuer or a pool of assets. This includes contractual rights against an issuer or a pool of assets. This involves investor rights and protection being ensured, with complete disclosure to investors of the consequences of the designation of the security on their rights. SCA regulations apply to crypto assets not classified as securities that are traded on organized markets or involved in UAE financial activities, excluding peer-to-peer transfers of items regulated by the Central Bank.
Specific Rules Relating to Crypto Assets:
- Minimum Disclosure Standards: Investors are to be informed of all the risks associated with crypto asset investments.
- Technology Governance and Security: Regulations require the use of internationally accepted standards of technology governance and security to ensure that the software features are strong and secure.
- Custodian and Fundraising Platform Requirements: Fundraising platforms and custodians are subject to special approval requirements due to the distinct risks they face in the crypto market.
- Trading Rules: Crypto exchanges have to adhere to the same regulations that currently govern commodities and securities, with a focus on participant conduct, custody, settlement, and security standards.
- Financial Crime Controls: Strong anti-money laundering measures and controls against market abuse are essential, following international standards set by the Financial Action Task Force.
Licensing and Arrangements for License:
Financial activity with the use of crypto assets cannot be exercised without a license from SCA. The licensing process, excluding running a crypto fundraising platform or asset exchange, follows the standard procedure with specific modifications for crypto assets. The Authority periodically publishes specific licensing requirements, and applicants should refer to these or consult the SCA's licensing division in the absence of such publications. All license applications must be submitted in the prescribed format with comprehensive supporting documents. The SCA can approve or reject the full application within 30 working days; if the authority fails to respond, this amounts to a rejection.
Fees and Minimum Capital Requirements:
The following table explains the SCA fees and minimum capital that shall be required for any crypto asset license categories imposed on different license categories. Please note, if licensed by the authority as a stock market, commodity market, or securities custodian, fees do not apply.
| License Category |
Application Fee (AED) |
License/Renewal Fee (AED) |
Cancellation Fee (AED) |
Minimum Capital Required (AED) |
| Exchange |
10,000 |
200,000 |
10,000 |
5,000,000 |
| Fundraising Platform Operator |
10,000 |
200,000 |
10,000 |
2,500,000 |
| Custody Services |
3,000 |
500,000 |
1,000 |
5,000,000 |
| Brokerage |
5,000 |
50,000 |
1,000 |
1,000,000 |
Cancellation of Incomplete Applications:
Applications that do not meet the requirements within the stipulated time are liable to be cancelled without refund of fees by the SCA. The Authority shall have reserved rights to, in the public interest, place conditions or suspend licenses. Reapplication is permissible three months after the date of initial rejection or deemed rejection.
Requirements for Revocation of License and Obligations following Revocation
The SCA has the power to revoke a license for failure to comply with the licensing requirements, non-payment of prescribed fees or fines, violation of the regulatory obligations, provision of false information, or as a result of voluntary or involuntary liquidation. Once revoked, the licensee must settle all previous transactions and provide a guarantee until all obligations are met. Licensees and their employees are required to provide the information upon request and maintain standards of quality and suitability of internal controls and corporate governance. They should also avoid conflicts of interest, have prior approval for changes in control, and notify the SCA before canceling licenses.
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About the Author
Dr. Hassan Elhais publishes analysis of UAE banking law matters, including banking relationships, finance disputes and financial obligations. For readers researching a banking lawyer in Dubai, his writing offers insight into the legal questions surrounding these topics. Explore his published work and practice-area information for further context.
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