The UAE law that could serve as an example for other nations to legalise cryptocurrencies

Chainalysis says the global rollout of this measure would help regulate the market, while protecting investors and boosting the economy
AFP/OZAN KOSE - La demanda de Bitcoin ha aumentado a nivel mundial desde el comienzo de la pandemia de coronavirus

AFP/OZAN KOSE -  -   AFP/OZAN KOSE - Demand for Bitcoin has increased globally since the start of the coronavirus pandemic

Dubai has just adopted a new law that falls under the theme of cryptocurrencies and virtual money, under the name of the Dubai Virtual Assets Regulation Law. The aim of this measure is to create an advanced legal framework capable of protecting investors in cyber money. It is also intended to create new rules to regulate the cybercurrency market and promote business growth through cybercurrency payments.

This new order has not gone unnoticed by industry professionals. Chainalysis, a blockchain data platform (cryptocurrency exchange and exploration service) claims that it is a very innovative law for this sector, so much so that many countries and areas that do not yet have clear examples of law for the cybercurrency market could adopt them and operate in a secure way. This could be established by the various governments and central banks, which he says would boost the economic growth and innovation of each country that introduces such a system.

Sucursal principal del Banco Central de los Emiratos Árabes Unidos en Abu Dabi. REUTERS/BEN JOB
Main branch of the Central Bank of the United Arab Emirates in Abu Dhabi - REUTERS/BEN JOB 

"It is an opportunity for Dubai to take the lead in this market. Right now, there are a lot of environments and conversations happening internationally about creating a best asset class approach," commented Jonathan Levin, co-founder of Chainalysis at the Global Governance Summit.

"Dubai has the potential to become a model for how this regulation of the sector should be done. It will allow for a much more tangible example that people can look to as a regulatory architecture for the sector and strike the right balance between economic growth, fostering innovation behind the sector and protecting investors and public safety," Levin continued to the press.

Edificio The Gate en el distrito financiero y de negocios del Centro Financiero Internacional de Dubai (DIFC) en Dubái. PHOTO/REUTERS
The Gate Building in the business and financial district of the Dubai International Financial Centre (DIFC) in Dubai. PHOTO/REUTERS 

Although the UAE Central Bank and other entities do not support cryptocurrencies as legal tender, and other global entities do not, their use is beginning to spread rapidly. Dubai, for this, also worked on a system to control this market and, to this end, established the Virtual Assets Regulatory Authority (VARA). It operates throughout the emirate, where it carries out its work to regulate the cybercurrency sector.

The market analysis platform claims that, in the Middle East, more than $271.7 billion in cryptocurrencies were received between June 2020 and June 2021. This represents 6.6% of global virtual currency activity. In addition, the UAE has the third highest volume of cryptocurrency transactions, with $25.5 billion, behind only Turkey and Lebanon.

The world is preparing to adapt the virtual money system, but even so, many countries still fear its full incorporation. Global institutions are always in favour of sticking with the current system, as they claim that illegal activities occur much more frequently. 

REUTERS/DADO RUVIC - Representaciones de criptomonedas, Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin
REUTERS/DADO RUVIC - Cryptocurrency representations, Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin

Data shows that, during 2021, the most crime has been committed in this area. In that year, $14 billion in illegal transactions were recorded. This is 567% more cybercrime than the previous year, according to the Chainalysis report. 

Levin, meanwhile, says that while it is a booming market right now, it will take a long time for the industry to fully fund itself. "Right now it is affecting the lives of hundreds of millions of people, but not billions. We have to get to the point where there are billions of people actually accessing cryptocurrencies in their lives for it to be fully adopted."

Emirates is increasingly becoming a potential player in the global market and thanks to its innovative measures it is entering this system. Thanks to its moves, it is helping the nation to become a benchmark in certain sectors for other countries, which are starting to look closely at what the Gulf States are doing so that they can do the same.