Requirements for a cryptocurrency license in the UAE

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Obtaining a cryptocurrency exchange license in the UAE is a mandatory procedure for conducting cryptocurrency activities legally. The country is known for its favorable attitude towards virtual assets and foreign investors. Overall, the conditions for foreign businesses in the UAE are convenient. Discounts on taxation can be expected if the requirements of the regulator regarding physical presence and anti-money laundering measures are met.

Cryptocurrency licenses in the UAE - what is it

In the UAE, transactions involving cryptocurrencies are not prohibited. This is confirmed by the legal definition of digital assets and existing legislation in the field of taxation.

The country has a rather complex legal situation. Each emirate sets its own laws if the issue is not regulated at the federal level. Dubai, Abu Dhabi, and Ras Al Khaimah have their own branches of justice. The capital market and monetary regulation are governed by the Central Bank of the UAE (CBUAE) and the Securities and Commodities Authority (SCA). Additionally, each emirate has its own free economic zones (FEZs), which are to some extent independent of federal laws.

CBUAE has recognized and regulated cryptocurrencies since 2017. Currently, at the federal level, the Crypto Asset Activity Regulation (CAAR) (SCA Decision No. 23 of 2020) is in effect. CAAR sets the rules for a wide range of market participants. For tokens that are not covered by CAAR, the SCA conducts additional consultations.

A cryptocurrency activity license allows for the legal provision of services related to the exchange and storage of digital payment instruments, facilitation of transactions for individuals and legal entities, as well as initial coin offerings (ICOs). Obtaining a cryptocurrency license in the UAE is a mandatory requirement for companies intending to engage in cryptocurrency-related businesses.

Cryptocurrency licenses in DMCC (Dubai)

In Dubai, federal legislation regulating work with crypto assets is in effect. At the emirate level, Law No. 4 of 2022, applied to services using virtual money provided in Dubai, including FEZs, except for the DIFC, has been adopted.

The enactment of the law led to the establishment of a special authority responsible for the management, regulation, and licensing of cryptocurrency - VARA. This is the world's first independent regulator of virtual assets, which performs the following functions:

  • Provides a regulatory framework to protect investors;
  • Maintains a high level of risk assurance;
  • Promotes innovation in the cryptocurrency sphere in the emirate of Dubai;
  • Compiles and publishes a list of licensed virtual asset service providers in Dubai;
  • Issues licenses for activities related to virtual assets.

Another part of cryptocurrency business licenses in the United Arab Emirates is issued by the DIFC in Dubai and the ADGM in Abu Dhabi. The DIFC operates under the supervision of the Dubai Financial Services Authority (DFSA) - the regulator of the FEZ. The DIFC has its own legislative system, which corresponds to British law. Registration in the DIFC will allow for the legal conduct of activities, benefiting from a variety of legal advantages.

Advantages of the UAE for cryptocurrency trading

The UAE is among the top four countries in the world most ready for cryptocurrency adoption (the top three places are occupied by Hong Kong, the USA, and Switzerland - fairly expensive jurisdictions for doing business). The open, understandable, and relatively favorable legislation towards market participants provides freedom to work with cryptocurrencies, the ability to attract capital, and earn on blockchain technology infrastructure.

Advantages of the UAE for cryptocurrency business:

  • No capital requirements for certain types of activities (for example, licenses are issued directly to companies developing information solutions for working with crypto assets and providing IT security for the market, advertising crypto products, acquiring assets with personal funds, except for brokers and exchanges).
  • Ease of opening and conducting business. The UAE has a high level of financial infrastructure and business development. A company can be registered remotely, facilitated by the transition of many procedures online.
  • Possibility of 100% foreign ownership. For business registration in FEZs, there is no need to involve a local partner.
  • Growing economy and stable political situation. This creates conditions for forming a favorable business environment and attracting investors.
  • Legality of cryptocurrencies. The UAE government, as part of its economic diversification strategy and reducing dependence on oil revenues, welcomes innovations, including digital currencies.
  • Favorable tax system, absence of most of the fees paid by businesses in Russia. Funds can be freely withdrawn to accounts outside the UAE. However, it is necessary to comply with legislation requirements regarding the prevention of money laundering obtained through criminal means.
  • No restrictions on hiring foreign employees. But for some types of companies, there is a requirement to demonstrate that employees are sufficiently qualified.

How to Obtain a Cryptocurrency License in the UAE

In Dubai, regulated and unregulated licenses are issued for cryptocurrency businesses (the required type is determined by the type of activity). For example, to engage in software development for the cryptocurrency market or promotion (advertising) of crypto projects, an unregulated license is sufficient. Regulated business activities in the UAE include:

  • ICO issuance;
  • brokerage activities;
  • cryptocurrency funds, exchanges, and exchanges.

To obtain a license for unregulated activities, documents must be submitted, and for regulated ones, special requirements of the regulatory body must be met.

Cost of a License in the UAE

The cost depends on the type of license, the type, and volume of the intended operations. For example, the license fee for a commercial license starts from 10,000 AED. Additionally, fees for initial approval, name approval, notarization of the memorandum of association are paid. The license fee is paid annually, while other expenses are one-time.

The approximate cost of obtaining a cryptocurrency license is from $55,000 (including all expenses). To conduct business, not only a license is needed, but also share capital, funds for office rent, and coverage of other expenses. Each item needs to be considered. Specialists at The Level Consulting will help calculate the exact license cost and optimize your expenses.

AML Legislation in the UAE

The law on combating money laundering, obtained from the commission of a crime, applies throughout the UAE, including free zones and special territories (such as the DIFC with almost completely autonomous legislation). AML applies to all transactions between individuals and legal entities exceeding 55,000 AED. Brokers, realtors, exchanges, and other market players are required to notify the government of such transactions.

Compliance with AML legislation is a mandatory requirement for obtaining a license. This obliges companies to bring internal policies and regulations into compliance with the requirements of the law. For example, a business must have an official accounting system and submit annual reports. It is also necessary to implement a KYC program. This is the Central Bank's policy aimed at thorough verification of information about counterparties.

How to Open a Crypto Company in the UAE This Year

To open a crypto business, it is not enough to obtain a license. The company must be registered in the prescribed manner. It is necessary to rent an office and hire employees, register with the tax authority, open an account in a bank, and obtain residency for individuals holding key positions. The registration procedure and requirements vary depending on the type of activity and the chosen free zone - contact The Level Consulting experts for detailed advice.

How to Order a Cryptocurrency License in the UAE

To obtain a cryptocurrency license, you need to fill out and submit an application to the regulator. After preliminary approval, additional documents need to be prepared: a business plan, office lease agreement, diplomas, recommendation letters, and employment records of key employees, confirmation of AML and KYC policy implementation. The process takes from 1 to 4 weeks. To simplify the license acquisition, use intermediary services. Experts at The Level Consulting will provide detailed information on all the nuances of registering a cryptocurrency business in the UAE.

Requirements for a Cryptocurrency License

The main requirements for acquiring a cryptocurrency license are:

  1. Registration in a Free Zone that issues licenses for crypto businesses.
  2. Contribution of share capital. For example, to open an exchange, a capital of 5 to 50 million AED is required.
  3. Preparation of a financial model for the next 3 years, economic justification, disclosure of information about the company's organizational structure, and key employees.
  4. Risk management provision, development and implementation of KYC policy, compliance with AML legislation.
  5. Compliance with SCA and CBUAE procedures: opening and closing financial years within specified deadlines, provision of financial statements, appointment of an auditor. Economic presence in the UAE is also required.
  6. Confirmation of employee qualifications. In certain niches, it is necessary to confirm that employees have relevant experience and education for their positions.

To register a cryptocurrency business in Dubai, it is necessary to proceed systematically. Determine the type of activity, the type of intended operations, and their volume, choose the organizational and legal form and Free Zone, ensure compliance with the regulator's requirements. Considering that legislation in the cryptocurrency regulation sphere is still being formed, it is quite difficult to do everything quickly and without errors. To save time and minimize risks, contact The Level Consulting - we provide services for business support in the UAE from scratch.

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