Scope of application of blockchain investment:
The regulation applies to any person who among other things:
- Promotes, issues digital assets to a person in the UAE or cross-border basis.
- Provides services, operates an exchange for digital assets or runs a platform for “fundraising” for digital assets issuance in the UAE
- Carries other financial activities within the 26 SCA-regulated activities list
Helpful key concept definition:
The ICARs brought a clear definition related to the key concept such as “digital assets”, ” digital asset custody services”, “crypto asset fundraising platform” except the “Security token” which could be
1. Equity tokens (share allowance for investors), 2. Tokenized fund units (They are units of funds that entitle the holders for dividends) 3. Asset Tokens (real-world asset, such as land, art or even property and equipments, mostly they are backed for real estate projects) 4. Debt Tokens (Act as loans)
Security Tokens may only be offered or issued in the UAE by an offeror incorporated in the UAE, (this is not clear, however, it may refer to foreign companies which have a presence in the UAE, i.e. a subsidiary or a branch). Qualified investors require submission of a notification to the SCA
Recognition of currencies:
SCA will maintain a register of recognised digital currencies or commodity tokens, the security token defined above are excluded.
Digital asset exchanges:
Only qualified investors upon approval from SCA are eligible for digital exchange which are subject to the market abuse laws and regulations.
Blockchain investment or Digital tokens fundraising platforms:
A fundraising platform may not offer trading service to investors unless licences by the SCA. Otherwise for establishing an equity based crowdfunding platform There is a subscription limit of AED 50,000 per issuance.
To mitigate the risk of financial crime, SCA licensed digital asset firms should assign a high risk rating to clients who deal with crypto assets. And to help establish a legitimate transactions, tracing measures are a must.
The new draft ICARs is far from perfect, but is a first step in the right direction towards the consolidation of the SCA’s fragmented regulations.
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