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The UAE is putting finishing touches to federal crypto licenses for VASPs to operate within a fully-regulated crypto zone in the Arab nation.
The United Arab Emirates (UAE) is reportedly preparing to issue crypto licenses in a bid to become a global crypto hub. On Thursday, February 17th, a UAE government official stated that the federal licenses would soon become available to virtual asset service providers (VASPs). The Middle Eastern nation has set a time target of the end of the first quarter for this.
By issuing these licenses, the UAE is looking to attract some of the biggest crypto companies in the world. Furthermore, the Securities and Commodities Authority (SCA) is also in the final stage of establishing a framework that allows VASPs to operate in the country. In addition to this, the UAE government will create an enabling environment that supports crypto mining.
UAE Looks to Adopt Hybrid Approach for Its Crypto Licenses
For its crypto-enabling oversight initiative, the UAE opts to take a hybrid approach after considering approaches used by the US, UK and Singapore. The country also considered guidance from the Paris-based Financial Action Task Force.
According to developments, the SCA will handle regulation alongside the Middle Eastern Country’s central bank. In addition, local financial centers would now be able to establish their own day-to-day procedures based on licensing. However, for this to occur, an application process and due diligence from the UAE government needs to take place first. Any details arising from this would depend on the entity’s intended setup – mainland or within a commercial free zone.
In a bid to become a more attractive destination to crypto-focused businesses, the UAE completed a risk assessment on virtual assets late last year. This exercise involved 14 public-sector agencies and 16 private-sector actors. The Arab nation’s reasoning behind this is to ascertain the proper regulation needed to negate risks associated with crypto. Some of these risks include illegal finance schemes, which the UAE government says VASPs may be used to facilitate.
Some of the financial free trade zones in the UAE have already issued permits for VASPs. For instance, Dubai, a member of the seven emirates constituency, has awarded 22 licenses through its Dubai Multi Commodities Center. In addition, the Dubai Silicon Oasis Authority also has at least one. However, the Dubai International Finance Center, which serves as a hub in the Middle East for most Wall Street Banks, currently has no issued permits. Meanwhile, Abu Dhabi, another emirate, has six licenses through its Abu Dhabi Global Market.
Binance Among Those Looking to Grow Presence in the UAE
The world’s largest crypto exchange platform by trading volume, Binance Holdings Ltd, is also looking to branch out in the UAE. Back in December 2021, Binance signed a corporate agreement with the Dubai World Trade Center after the latter announced plans to establish a favorably-regulated crypto zone.
Having a nationwide licensing system for virtual asset platforms could also enable the UAE to better compete with rival financial centers. These include Singapore and Hong Kong, which are also reportedly establishing their own fully-regulated crypto environments.