Guidelines on Regulation of Virtual Assets and VASPs

Guidelines on virtual asset activities subject to licensing and the requirements for applicants and licensees, including technology governance, security, key and wallet storage and source of funds, written for Decision No. 26/Chairman of 2023, since repealed.

Summary

The Guidelines on the Regulation of Virtual Assets and Virtual Asset Service Providers explain how the Securities and Commodities Authority (now the Capital Market Authority) licensed and supervised virtual asset activities onshore in the UAE, outside the financial free zones. They cover which activities need a licence, the capital each licence required, the technology, custody, disclosure and AML expectations, and the application process. They were written for a regime that has since been replaced, so they now serve as background.

The guidelines were issued under Cabinet Resolution No. 111 of 2022, the Authority's Rulebook (Decision No. 13 of 2021) and Decision No. 26/Chairman of 2023 on the virtual asset platform operator (paragraph 1). They apply to virtual assets for investment purposes, while payment virtual assets fall to the Central Bank (paragraph 9). Digital securities, digital commodity derivatives, non-investment tokens and NFTs, mining software and loyalty programmes are excluded (paragraph 11). The licences available were platform operator, safe custody, financial consulting, portfolio management, broker and dealer (paragraph 15).

Paragraph 19 sets paid-up capital by activity, as Appendix 1 of Module 2 of the Rulebook then required. A platform operator needed AED 1 million plus six months' operating expenses, or AED 5 million plus six months' expenses if it also carried on other VASP activities. Custody required AED 4 million plus six months' expenses, consulting AED 500,000, portfolio management AED 3 million, brokerage AED 2 million and dealing AED 30 million. Licensees had to commission annual third-party audits of their systems, holdings and custody (paragraph 34), reconcile client funds daily (paragraph 72), and comply with FATCA and CRS (paragraph 84). No virtual asset could be traded unless a licensed platform had accepted it and it was registered with the Authority (paragraph 98). Licensing ran through pre-application meetings, application, initial approval and a category seven licence (paragraphs 205 to 209).

Decision No. 26/Chairman of 2023 was repealed by Decision No. 04/Chairman of 2026, so current requirements must be checked against the 2026 regulation.

Who it applies to

Applicants for and holders of virtual asset licences issued by the Securities and Commodities Authority (now the Capital Market Authority) for activities in the UAE outside the financial free zones: platform operators, custodians, consultants, portfolio managers, brokers and dealers in virtual assets.

Contents

English official text in 72 provisions. Open the full text or jump to a provision:

1. 1 — Securities and Commodities SCA “SCA” issues these guidelines under The
2. 3 — These guidelines specify SCA’s approach to regulating the use of virtual assets
3. 5 — Unless otherwise specified or the context requires otherwise, the terms
4. 6 — Technological innovation is transforming the financial services industry. The
5. 7 — These guidelines focus primarily on the SCA’s regulatory treatment of virtual
6. 8 — Virtual Assets are not issued or guaranteed by any regulatory body, and fulfill the
7. 9 — As stated in the definition, virtual assets are divided into two parts, which are
8. 10 — The chart and table on the following pages illustrate the SCA’s regulatory
9. 12 — The virtual assets ecosystem can enable users to create, store and transfer
10. 13 — The table below sets out the key risk areas, and the relevant mitigations for each
11. 14 — Based on the Cabinet Resolution, the definition of virtual asset activities subject
12. 15 — Based on the Cabinet Resolution, virtual assets activities were regulated in
13. 16 — In order for the license applicant to be permitted to practice any virtual assets
14. 17 — The basic rules and obligations for entities wishing to obtain a license to
15. 18 — Module 1, (General Provisions), of Rulebook of the Financial Activities and
16. 19 — Module 2, (Licensing and Accreditation.), of the Rulebook relating to
17. 132 — Article (3) of the Chairman of the SCA›s Board of Directors› Decision No. (26/
18. 134 — The bodies licensed for the virtual assets safe custody activity («the virtual
19. 135 — In accordance with the approach followed concerning the activities carried
20. 136 — There are three general types of arrangements of safe custody of the virtual
21. 137 — The entities providing the services of virtual assets safe custody according to
22. 138 — With respect to the Type 3 non-custodial wallets described above, the wallet
23. 139 — A licensed body that keeps or controls the accepted virtual assets, on behalf
24. 140 — In this regard, the virtual assets platform operator who provides an integrated
25. 141 — The virtual assets services providers who intend to work only as brokers
26. 142 — The body that is licensed as a virtual assets services provider whose license
27. 144 — Keeping the data related to the date, time, purchase and sale price, and
28. 154 — The financial consulting company in virtual assets and its financial analysts are
29. 157 — The financial consulting company in virtual assets and its financial analysts are
30. 163 — The prohibition contained in Clauses (159 ,158 ,157) applies to everyone
31. 165 — The use of virtual assets is a topic which raises numerous regulatory concerns
32. 166 — The Financial Action Task Force (FATF) has identified some of the key risks
33. 167 — On 22 February 2019, the Financial Action Task Force (FATF) acknowledged
34. 168 — On 21 June 2019, the Financial Action Task Force issued guidance on the
35. 169 — Furthermore, the purpose and scope of the Financial Action Task Force
36. 172 — In addition to the above, taking into account the risks associated with money
37. 173 — When considering the FATF’s recommendations, applying the rules of
38. 174 — This principle requires virtual asset service providers to fully understand and
39. 175 — The FATF expects countries, supervisory and regulatory authorities, financial
40. 177 — Identifying and understanding the impact that a licensed body (such as
41. 178 — Correspondent foreign financial institutions (including virtual asset service
42. 179 — With the increasing use of encryption and blockchain technologies in financial
43. 180 — The people concerned are requested to take appropriate steps to identify
44. 181 — Understanding the virtual assets industry: Licensed bodies, their management
45. 182 — Comprehensive risk assessment: When conducting a risk assessment, a
46. 183 — Client Assessment: The SCA expects virtual asset service providers to carry
47. 184 — Due Diligence Policies and Procedures: All virtual asset service providers
48. 185 — Indirect dealing and verification of the client’s identity: In the case of indirect
49. 186 — Use of new technology: Licensed bodies can use new technology such as
50. 187 — Verification and risk mitigation techniques: The Securities and Commodities
51. 188 — Collection of additional information: The Securities and Commodities
52. 189 — Governance Structure: Virtual asset service providers are required to
53. 190 — Use of technologies and solutions: The SCA expects virtual asset service
54. 191 — Transaction control and ‘know your transaction’ procedures: Virtual
55. 192 — Liability: The Securities and Commodities SCA expects virtual asset service
56. 193 — Selection of technical solutions: While the SCA does not recommend
57. 194 — Virtual Asset Compliance Control Program: Virtual Asset Service Providers
58. 195 — Appointment of a Money Laundering Reporting Officer (MLRO): Virtual
59. 197 — Establishing contact with the Financial Information Unit: Before commencing
60. 198 — Development of advanced transaction control systems: Virtual asset service
61. 199 — Virtual asset service providers are required to thoroughly examine related
62. 200 — This principle requires virtual asset service providers to provide ongoing and
63. 201 — Virtual asset service providers are required to follow effective record-keeping
64. 202 — Transaction recording and Access to Information: The SCA recognizes that
65. 203 — Cash transaction controls: The SCA indicates that cash transactions in
66. 204 — Due Diligence in day-to-day operations: All virtual asset service providers
67. 206 — Before submitting an application, the license applicant is expected to
68. 207 — Following discussions, and after the SCA feels reasonably satisfied that
69. 208 — The SCA will conduct an in-depth review of the application and supporting
70. 209 — Having confirmed that the license applicant has met all the conditions
71. 210 — Taking into account the increased risks associated with activities related to
72. 211 — For more information about the fees structure for VA activities you can visit

Key provisions

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