The government of Dubai’s stated goal of becoming a financial technology center was boosted Wednesday when its Virtual Assets Regulatory Authority (VARA) released its 2023 rulebook for regulating cryptocurrency. The regulatory authority says any entity in the Emirate that issues virtual assets must comply with the rulebook, beginning with applying for a license to operate in Dubai.

The agency says the new rules are intended to attract crypto businesses, protect digital asset dealers and investors, and curb illegal practices, all in service of promoting Dubai as a regional and international hub for virtual assets, boosting its competitive edge both locally and internationally.

Helal Saeed Almarri, Director General Dubai’s Department of Economy & Tourism and Chairman of VARA’s Executive Board, said in a statement that the mission is "to establish the Emirate as the capital of the future economy anchored by metaverse, AI, Web3.0 and blockchain."

He described VARS as "the world's only independent and specialist regulator for Virtual Assets to serve as the accelerator for a truly borderless Digital Economy."

"This custom-designed construct reflects UAE’s commitment to building responsible safeguards, and Dubai’s confidence in delivering a progressive VA ecosystem that nurtures next-gen innovation," he added.

Dubai has taken steps into the blockchain space since 2019, including the Dubai Department of Economic Development moving its services to a blockchain-based registry on the Dubai Pulse blockchain platform.

Several blockchain companies have applied for and gained licenses to operate inside the Emirate, including Binance and the fallen cryptocurrency exchange FTX. In December 2021, Binance signed an agreement with the Dubai World Trade Centre Authority intending to establish a hub that could help other blockchain-related companies get licensed in Dubai.

Other cryptocurrency exchanges operating in Dubai include Coinbase, Huobi, and Kraken.

According to the new rulebook, any entity wishing to do business using cryptocurrency must seek authorization and receive a license from the regulatory authority before offering their services.

A license can be revoked, the rulebook says, for various reasons, including material violation of any law, regulation, rule, or directive, insolvency, being subject to insolvency proceedings, or failure to pay a judgment by a court within or outside of the United Arab Emirates.

VARA also clarified that the new regulations regarding money laundering include the financing of terrorism and other unlawful organizations and prohibits insider dealing (trading), unlawful disclosure, and market manipulation.

The rulebook does include some exemptions, including a professional exemption for “duly registered” practicing lawyers, accountants, or “other professionally licensed business consultants that carry out any [virtual asset] activity in a manner that is wholly incidental to their professional practice.”

Professionals looking to keep these exemptions must remain appropriately authorized by a competent professional body to operate in the Emirate and maintain professional indemnity insurance applicable to their profession.

Violating these rules, VARA says, could result in fines, civil penalties, and “other enforcement actions” against the responsible individuals.