Global Progress of Digital Asset Regulatory Framework and UAE's Encryption-Friendly Policies

Since 2023, significant progress has been made in the global digital asset regulatory framework. The European Union has introduced regulations for the encryption asset market and a pilot system for distributed ledger technology, marking an important milestone. UK regulators have also made comprehensive recommendations covering the regulation of stablecoins, issuers, custodians, and related payment systems.

The United Arab Emirates and Hong Kong have launched an innovative virtual asset licensing system aimed at attracting a new wave of regulated market participants. Notably, Hong Kong and Singapore have strengthened their regulatory frameworks, with a particular emphasis on enhancing customer and investor protection. These regions have also clarified guidelines regarding tokenized securities and digital currencies, highlighting their commitment to establishing a secure and transparent digital asset ecosystem.

Recently, with the convening of a certain international cryptocurrency conference, industry insiders have once again focused their attention on the vibrant cryptocurrency city in the Middle East. The United Arab Emirates, as one of the most cryptocurrency-friendly countries in the world, has paved a unique development path in embracing digital currencies and blockchain technology.

UAE's Encryption Regulations

The UAE is located on the Arabian Gulf and has long been a center of innovation and prosperity. In addition to its iconic modern skyline, the country is actively positioning itself for the financial future. Unlike some countries that take a cautious approach or are struggling to formulate cryptocurrency regulations, the UAE's cryptocurrency regulations embrace these digital assets with an open and welcoming attitude.

In recent years, the UAE has been continuously promoting a series of advanced initiatives, clearly indicating its intention to lead the adoption of blockchain technology and digital currencies. These initiatives cover a wide range of areas, from government-level adoption of encryption currencies to grand projects aimed at propelling the nation into the blockchain era.

A key factor in the UAE's crypto-friendly environment is the active role played by government agencies and regulatory bodies. Among them, the local financial services regulatory agency has played a crucial role in fostering an ecosystem that encourages the adoption and development of cryptocurrency and blockchain technology.

As the regulatory authority of the local international financial center, the agency has been at the forefront of the cryptocurrency revolution. In September 2021, the agency launched regulatory guidelines related to investment tokens, marking an important step towards creating a favorable framework for recognized encryption tokens. With the comprehensive regulatory reform that took effect on November 1, 2022, particularly involving recognized encryption tokens, the agency further demonstrated its commitment to providing transparency and structure for the crypto industry. This robust framework details the categories of encryption tokens and the code of conduct that companies handling these tokens should follow.

The main regulatory body in the UAE has played an important role in formulating regulations for cryptocurrency. They provide clear guidance for businesses and investors, creating a supportive environment for crypto-related activities. The UAE's ability to balance innovation and compliance makes it stand out in the global crypto space. While promoting blockchain and cryptocurrency innovation, it has also implemented strict anti-money laundering (AML) and counter-terrorism financing (CFT) measures in line with international standards.

Dubai Encryption Center

Recently, an important international cryptocurrency conference was held in Dubai. Dubai has positioned itself as a global center for cryptocurrency innovation, and this event aims to bring together the global Web3 industry, providing a platform for entrepreneurs, investors, developers, industry professionals, and global media to interact and communicate, including various independent peripheral activities such as gatherings, seminars, hackathons, dinners, and parties.

In terms of cryptocurrency regulations and initiatives, the United Arab Emirates, centered in Dubai, has made a mark on the global stage. Its progressive approach to regulating cryptocurrency and adopting blockchain technology has made it a leader in the crypto space. The Virtual Assets Regulatory Authority (VARA), established in March 2022, is responsible for overseeing and nurturing Dubai's Web3 ecosystem. Less than a year later, VARA published comprehensive regulatory guidelines tailored for Virtual Asset Service Providers (VASP). These guidelines include four mandatory rulebooks, seven specific activity rulebooks describing VASP operational protocols, and a rulebook for issuing virtual assets.

The CEO of VARA stated at a recent international blockchain conference that the agency is considering multiple measures to make the regulatory framework suitable for various market participants. One focus is to find ways to reduce compliance costs for small encryption entities. Currently, the number of companies that can afford regulatory costs is limited, so the new regulatory scheme considers allowing larger market participants to support smaller ones.

The official emphasized that Dubai's encryption ecosystem already has nearly 2,000 Web3 or encryption companies, and the purpose of regulatory measures is not to disrupt the existing ecosystem. He outlined VARA's inclusive regulatory approach, emphasizing: "This is not exclusive regulation; anyone can participate."

In addition, he emphasized the important role of regulatory certainty in attracting investment and promoting organizational development. He pointed out that although the regulatory framework may be challenging, it ultimately contributes to the maturity of the industry and facilitates long-term planning for businesses.