Authorities are ready to issue federal licenses to local virtual assets service providers
In a bid to embrace the fintech sector, the United Arab Emirates is getting ready to issue national licenses to virtual asset service providers (VASPs) by the end of the first quarter and attract more industry players into the country, according to government officials.
The move is expected to broaden the presence of crypto giants like Binance and Kraken, and will allow to compete with rival financial hubs like Hong Kong and Singapore, where the regulatory framework for digital assets is in full swing.
In advancing the legislation, Abu Dhabi is considering strategies adopted by the US, UK and Singapore, as well as taking a note of the Financial Action Task Force guidance. The government believes proper regulation can diminish threats associated with virtual assets, rather than a complete ban.
The oversight will be based on a hybrid approach. The Securities and Commodities Authority will handle regulation propped by the central bank, while local financial institutions and free zones can lay out routine licensing requirements.
With $26 billion yearly transaction volume (from July 2020 to June 2021), the UAE crypto market is relatively small in global terms, lagging behind Turkey and Lebanon, but the growth potential is huge, expanding by 1,500% from a year before, as Chainalysis data shows.