UNITED ARAB EMIRATES Law and Practice Contributed by: Arnold Krutilins and Gabrielle Margerison (nee Lowe), White & Case LLP
Onshore UAE The CBUAE regulates “payment tokens” (stablecoins) under its PTS Regulation, which establishes a licens - ing and supervisory framework for payment token issuance, payment token conversion, and payment token custody and transfer. In summary, key stablecoin features and requirements under the PTS Regulation include: • Reserve of Assets: Payment token issuers must maintain and manage a “reserve of assets” backing the payment tokens, and are subject to require - ments on the management and safekeeping of the reserve (including where and how it may be held, and circumstances in which the CBUAE may require reserve assets to be held as cash with the CBUAE). • Redemption at Par: Token-holders are entitled to request redemption, and the regime contemplates redemption against the “reserve of assets” and redemption of payment tokens in fiat currency at par value (subject to the detailed rules and any applicable conditions). • Disclosures and Operational Controls: Issuers must document and disclose the issuance and redemp - tion mechanics and associated risks, and comply with governance, compliance, technology risk and financial crime requirements under the CBUAE framework. Dubai (Excluding DIFC) In Dubai (excluding the DIFC), stablecoin-type instru - ments may fall within VARA’s framework depending on structure and activity. VARA’s updated rulebooks (Version 2.0) include a Virtual Asset Issuance Rule - book and define concepts including “fiat-referenced virtual assets” (“FRVAs”) and “reserve assets” within the issuance regime. Importantly, the VARA Issuance Rulebook provides that the issuance of an FRVA pur - porting to maintain a stable value in relation to the value of the AED will not be approved under the VARA issuance regime and will remain under the sole and exclusive regulatory purview of the CBUAE. DIFC In the DIFC, the DFSA’s crypto token regime uses the term “fiat crypto tokens” to refer to stablecoins. Fol -
The VA Decision defines a virtual asset as a digital representation of value that can be digitally traded or transferred and can be used for investment purposes. This does not include the digital representation of fiat currency, securities or other assets. To the extent that an NFT does not represent a physical asset, it appears to fall under this definition. NFTs also fall within the definition of virtual assets provided by the DVAL, which defines a virtual asset as a digital representation of the value that can be digitally traded or transferred, or can be used as an instrument for exchange, payment or investment pur - poses, including virtual tokens, and any digital repre - sentation of any other value specified by the VARA in this regard. As such, those that intend to provide virtual asset services related to NFTs in the emirate of Dubai (excluding the DIFC) will be required to comply with the obligations set out under the DVAL and its supplementary regulations and Rulebooks, including obtaining a licence from the VARA. The DFSA General Rulebook Module determines that a token will constitute an NFT where it: • is unique and not fungible with any other token; • is related to an identified asset; and • is used to prove the ownership or provenance of the asset. In contrast to the VA Decision and the DVAL, under the DFSA’s regime, NFTs are considered excluded tokens, which means that their use is not regulated in the DIFC, except under certain circumstances. While certain FSRA AML/CTF requirements will apply to NFTs in the ADGM, NFTs themselves currently remain outside of the FSRA’s regulatory oversight. 10.13 Stablecoins Stablecoins are regulated in the UAE, although the applicable regime depends on: (i) the use case (pay - ment v investment); and (ii) the specific UAE jurisdic - tion (onshore UAE, Dubai (excluding DIFC), DIFC or ADGM).
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