In September, the Securities and Commodities Authority (SCA) and Dubai's Virtual Assets Regulatory Authority (VARA) entered into a cooperation agreement aiming to harmonize their regulatory frameworks and increase the UAE's appeal to international virtual asset service providers (VASPs).
The regulatory position prior to the cooperation agreement required VASPs operating in the Emirate of Dubai to obtain a licence from both VARA and the SCA. The agreement now creates a unified licensing framework for VASPs whereby a VASPs operating within or from the Emirate of Dubai are required to secure a licence from VARA only. Upon obtaining this licence, the licenced VASP will now automatically be registered with the SCA, authorising them to extend their virtual asset services across the rest of the UAE. VASPs intending to operate outside of the Emirate of Dubai must obtain a licence directly from the SCA. The UAE’s financial free zones, the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), are exempt from the regulatory oversight of both the SCA and VARA concerning virtual assets. The DIFC and the ADGM operate under their respective independent regulatory frameworks, maintaining separate licensing regimes.
The structured approach created by the SCA and VARA ensures clarity in their respective regulatory responsibilities and streamlines the licensing process for VASPs. The cooperation agreement establishes mechanisms for joint supervision of VASPs, including coordinated monitoring and sanctioning. It also enables the exchange of information between the regulators, promoting transparency and consistency in regulatory practices.
The agreement between the SCA and VARA is a significant development in the UAE’s virtual aspect sphere and marks a pivotal advancement in the UAE's regulatory approach to virtual assets. By harmonizing licensing processes and supervisory mechanisms, the UAE is reinforcing its commitment to fostering a secure, innovative, and investor-friendly environment. This strategic alignment not only enhances the nation's competitiveness in the global virtual assets market but also sets a precedent for regulatory collaboration in the evolving digital economy.