Is Dubai Racing ahead of other crypto-friendly nations?

Many countries that were previously hailed as a modern, forward-thinking jurisdiction have now tightened their regulatory grip in the crypto markets by issuing new guidelines. The European Union recently passed legislation related to crypto tracing which has harboured a lot of criticism from the key players of the industry.

Estonia, which was once a crypto friendly nation, has now introduced legislation which would include more rigid and stringent regulations hence making it difficult for market players. The country has also put a halt in issuing new licenses for crypto companies to carry out their operations in Estonia.

Similarly, Singapore recently tightened its regulatory grip in the crypto markets by issuing new guidelines which includes preventing cryptocurrency exchanges from advertising their services to the public. After the Monetary Authority of Singapore (MAS) prohibited cash-to-crypto interfaces, crypto ATM operators were compelled to shut down their equipment. This news came as a shock to the crypto industry in Singapore as the country has always been a crypto friendly nation. It was one of the main reasons why start-ups in the Singapore crypto industry grew rapidly. However, these businesses are now encountering barriers and are finding it difficult to operate.

India, which happens to be one of the largest crypto markets in the world with an immense amount of people who indulge in crypto trading, is also facing hurdles due to its taxation policies. During Budget 2022-23, Finance Minister Nirmala Sitharaman suggested taxing crypto assets at 30 per cent beginning April 1. She also recommended a 1 per cent TDS on payments of more than Rs 10,000 in virtual digital assets (VDAs) each year, as well as taxes on such presents in the hands of receivers, beginning July 1. On March 24, the administration suggested tightening taxes rules by prohibiting any losses from being offset against earnings from other VDAs. On the tax issue, the community had requested some assistance. The crypto tax legislation, however, became law on March 25, and the crypto community's requests for modifications were not granted.

The financial centre of the UAE — Dubai, has passed its first cryptocurrency regulation law and has joined countries such as Singapore, the US, the UK, El Salvador, and others. Dubai, which is already a renowned location for the crypto and web 3.0 communities, may have helped the business greatly by regulating the use of cryptocurrency in their region. The Virtual Assets Regulating Authority (VARA) is a separate entity within the Dubai World Trade Centre Authority that will be in charge of overseeing the regulation, governance, and licensing of cryptocurrencies, NFTs, and other virtual assets.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai commented regarding the approval of virtual digital assets law and establishment of Dubai Virtual Asset Authority to overlook the execution of the legislation. The regulatory body will also ensure transparency and adequate protection for the investors.

Main objectives of VARA:

- Monitoring and evaluating virtual asset trading

- Regulating the issuance of new cryptocurrency tokens

- Ensuring that stringent protective requirements are in place

- Keeping track of transactions

The VARA is also responsible for the transfer of virtual assets, management services, exchange services, administering virtual asset platforms, and virtual asset custody.

Despite the higher start-up costs, several entrepreneurs have moved their base to crypto-friendly arenas such as Dubai that embrace and value cryptocurrency rather than conducting business in countries where the laws are not harmonious with the crypto industry. Dubai was among the first to legalise cryptocurrency which bestows upon it a first mover advantage. Therefore, many crypto firms across the globe, developers, and founders are currently attempting to relocate to Dubai. Its sandbox approach is one of its selling points. Dubai's connectivity to various countries, as well as its open and fair taxation structure, contribute to its success. The regulatory body VARA will also ensure transparency and adequate protection for the investors, which is something that entrepreneurs in the crypto industry expect from the city along with ease of conducting business and a strategic geographical location which would keep them closer to their home country.

Investors anticipate these regulations to be adaptable and business friendly. A crystal-clear regulatory framework would also provide them with the competitive advantage they need to plan their firms' expansion in the crypto market.

The way forward

With Dubai being the latest crypto hub in vogue, the move of regulating the cryptocurrency industry has enticed various businesses across the globe to accept the city as the land of opportunities. This has resulted in various entrepreneurs to move from countries such as India and Singapore. Dubai would constantly have to strive to create a favourable ecosystem for such businesses to make money and to have a thriving global economy.