The UAE Central Bank has issued new anti-money laundering and counter-terrorism financing guidelines for financial institutions that deal with virtual assets, such as cryptocurrencies and non-fungible tokens (NFTs).
The new guidance aims to enhance the regulatory framework and combat money laundering and terrorist financing in the rapidly growing sector.
Strengthening the Regulatory Framework
The new guidance, which will be made effective within a month, applies to various licensed financial entities, including banks, exchange houses, payment service providers, hawala providers, insurance companies, and agents.
The primary objective of these guidelines is to address the risks associated with dealing with virtual assets and their providers, including due diligence for licensed financial institutions when dealing with these customers and counterparties.
Additionally, the guidelines provide clear definitions of virtual assets and virtual asset service providers, laying the groundwork for industry-wide consistency in interpretation and application.
Governor Khaled Mohamed Balama of the UAE Central Bank highlighted the significance of the new guidance, emphasizing its contribution to strengthening the supervisory and regulatory frameworks in combating money laundering and the financing of terrorism.
The UAE has consistently committed to fostering a secure and regulated digital asset industry. Earlier this year, Dubai established a dedicated regulator, the Virtual Assets Regulatory Authority (VARA), to oversee the digital asset sector.
Meanwhile, the Securities and Commodities Authority (SCA), a federal agency based in Abu Dhabi, started accepting license applications for cryptocurrency services.
These initiatives reflect the UAE’s proactive approach to creating a favorable regulatory environment for digital assets while maintaining the highest security and compliance standards.
Addressing Cryptocurrency Risks
The new guidance is expected to positively impact the crypto and NFT market in the UAE, as it will provide more clarity and certainty for investors and service providers.
By aligning with the Financial Action Task Force (FATF) standards, the UAE will enhance its reputation as a global leader in regulating the digital asset industry.
The new guidance may also encourage more innovation and adoption of crypto and NFT technologies in the UAE, as it will reduce market entry barriers and risks.
The UAE has already witnessed a surge in interest and activity in the crypto and NFT space, with several projects and platforms launching or expanding.
For example, BitOasis, a Dubai-based crypto exchange, recently announced that it had secured an in-principle approval from SCA to operate as a regulated virtual asset service provider.
Meanwhile, Palm NFT Studio, a new platform for NFT creation and distribution backed by ConsenSys, launched in Dubai with partnerships with artists such as Damien Hirst.
The new guidance will likely stimulate the growth and development of the crypto and NFT sector in the UAE, as it will provide more confidence and trust for users and providers of these emerging technologies.
