The Securities and Commodities Authority (SCA) announced that it started receiving license applications from companies wishing to provide virtual asset services following the approval of its board, chaired by H.E. Mohammed Ali Al Shorafa, of the decision regulating virtual asset service providers.
At last year’s end, the Cabinet issued Resolution No. 111 of 2022 Regulating Virtual Assets and Virtual Asset Service Providers, which mandated that, for the purpose of carrying out its provisions, the SCA shall have the jurisdiction to issue decisions to regulate virtual asset transactions and license virtual asset service providers.
Based on the decisions issued by the SCA board, all UAE-based companies that provide virtual asset services (except for those licensed to operate in financial free zones) are required to comply with the provisions of these decisions and file their license application with the SCA. Companies operating in the emirate of Dubai, on the other hand, should submit their license application to the Virtual Assets Regulatory Authority in addition to seeking the SCA’s approval according to uniform procedures developed to facilitate and expedite the licensing process.
The decision regulating virtual asset platform operators contains nine articles, including Article 3, which prohibits the trading of virtual assets in the UAE unless they are admitted to the official list of virtual assets of the virtual asset platform operators licensed by the SCA and/or the competent authority.
Article 4 of the decision sets out the functions of the virtual asset platform operator while Article 5 provides for the obligations of the operator in seven areas, including operational efficiency and resilience and the creation and maintenance of operational rules that must satisfy a set of standards outlined in the decision. Article 4 also deals with areas related to integrity, transparency, and professional conduct; virtual asset protection system and measures; compliance and discipline measures, systems, and procedures; rules and procedures for fair, orderly, and effective operation to regulate trading; and the regulation of access to services through the establishment of procedures that guarantee access by those authorized only.
Under Article 6 of the decision, the SCA may request from the operator of the virtual asset platform any documents or data, which should be supplied within the period specified. The article also states that the SCA shall perform supervisory, investigative, oversight, and inspection functions with regard to the virtual asset platform, its operator, and all related aspects. According to Article 7, grievances may be filed against the decisions issued by the SCA to implement the provisions of this decision in line with the controls established in this respect.
The decision included an annex on considering the appropriateness of admitting virtual assets to the official list of the virtual asset platform operators, which sets out standards that the operator should comply with when evaluating and accepting the virtual asset.
Legislative amendments have been also introduced to the Financial Activities Rulebook with respect to virtual assets. New financial activities were included, namely virtual asset brokers, custodians, and platform operators. A new category was also added for virtual asset service providers and a document was annexed to Chapter 3 of the Financial Activities Rulebook, which contains virtual asset portfolio provisions in terms of creation, management, and controls.