The Securities and Commodities Authority (SCA), which oversees financial markets in the United Arab Emirates (UAE), announced this week that it has begun accepting license applications for cryptocurrency services.

This follows the approval of regulations governing the market and is another step towards making the UAE an 'Oasis' for digital asset companies.

Virtual Asset Service Providers Licensing Begins in UAE

In 2022, the UAE Cabinet passed Resolution No. 111, which granted the SCA authority to issue decisions governing virtual asset transactions and license virtual asset service providers (VASPs).

All UAE-based companies offering virtual asset services, except those licensed to operate in economic-free zones, must adhere to the SCA's decisions and submit their license applications. In Dubai, companies must apply to the Virtual Assets Regulatory Authority (VARA) and seek SCA approval through a standardized process designed to streamline licensing.

"Article 3 of the regulations prohibits virtual asset trading in the UAE unless the assets are listed on the official virtual asset platform operators licensed by the SCA or the relevant authority," the SCA commented in an official statement on its website.

Article 4 outlines the functions of virtual asset platform operators, while Article 5 details their obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term in seven areas, including operational efficiency, resilience, integrity, transparency, professional conduct, virtual asset protection, compliance, discipline measures, systems and procedures, and access regulation.

Article 6 empowers the SCA to request documents or data from virtual asset platform operators and to perform supervisory, investigative, oversight, and inspection functions. Grievances against SCA decisions can be filed according to Article 7, following established controls.

Legislative changes have been made to the Financial Activities Rulebook, introducing new financial activities, such as virtual asset brokers, custodians, and platform operators.

RAK Digital Assets Oasis Opens its Doors

In February, it was announced that Ras Al Khaimah (RAK), one of the emirates that constitute the UAE, would establish the world's first free economic zone dedicated entirely to virtual assets and digital firms.

This zone, named RAK Digital Assets Oasis, will provide a dedicated area exclusively for service providers of digital assets and cryptocurrencies working in emerging sectors like Blockchain, NFTs, DApps, DAOs, and Web3-related ventures. The Oasis has now opened for applications and is the only free zone of its kind globally.

"We are building the free zone of the future for the companies of the future," Sheikh Mohammed bin Humaid bin Abdullah Al Qasimi, the Chairman of RAK Digital Assets Oasis, commented.

"As the world's first free zone solely dedicated to digital and virtual asset companies, we look forward to supporting the ambitions of entrepreneurs from around the world with our progressive, supportive, and quick-to-adapt approach and our innovation-enabling environment," the Chairman added.

The UAE's expanding significance in the realm of cryptocurrency is evident from the surge in digital asset firms seeking local licenses. For instance, CAPEX.com, a leading retail brokerage brand, was granted in-principle approval for a cryptocurrency license by Abu Dhabi Global Markets (ADGM), the country's regulator, in November 2022.

Previously, licenses of a similar nature were secured by the cryptocurrency exchange, Kraken, the social trading platform, eToro, SEBA Bank which is focused on cryptocurrency, and the world's largest crypto exchanges, Binance and Crypto.com.