Financial consultants, bankers and investors usually fail to understand the
true concept behind investment in cryptocurrency, and yet we cannot blame them
for unsolicited information available through varied platforms. Thus, Corporate
Lawyers of Dubai will walk you through the whole path of cryptocurrency from its
emergence until now.
The term Bitcoin, Cryptocurrency and blockchain were peculiar for the world
until Satoshi Nakamoto an unrecognized inventor of Bitcoin announced in late
2008 about Electronic Cash System. The concept flooded in world's market like
rapid fire and investors around the globe built a crypt currency market for
buying and selling. UAE was also unknown and unfamiliar to this concept until
the tides of elevated profit hit the market as compared to the current picture
where world's first cryptocurrency deep cold storage entities are established
and functioning in UAE.
It is an innovation and a virtual currency that uses cryptography, a procedure
to convert legitimate information into an unbreakable code in order to track
buyers and sellers. The need for such secure communication arose and evolved in
the digital era with the aid of a secure online platform. This currency is
operated by way of blockchain technology in contrast with fiat currency where
one authority such as central bank regulates the currency. Cryptocurrency seeks
their validation from a decentralized system wherein an investor participating
in the process can seek verification. Particularly, Nakamoto benefitted the
process of blockchain technology and created the infamous Bitcoin.
Laws of UAE regulating Cryptocurrency
FSRA-ADGM (Financial Services Regulatory Authority of Abu Dhabi Global Market)
was the first in line to issues guidelines and regulations in relation to
activities of buying and selling Cryptocurrency. The guidelines were regarding
the regulation of Initial Coin Offerings (ICO) and virtual currencies wherein,
the public at large can purchase and sell Cryptocurrency. FSRA-ADGM will
determine the specific commodity on the case to case basis. The objective of
ADGM regulations if to increase transparency and to restrict money-laundering
activities and to combat financial terrorism.
Inspired by ADGM regulations, DMCC (Dubai Multi Commodity Authority) has
provided an opportunity for investors to incorporate a business of trading in
Cryptocurrency. However, companies would only be allowed to trade on their own
behalf. Accordingly, such companies can establish the world's first
Cryptocurrency deep cold storage cellar.
In an offer to become a pioneer in blockchain innovation, the UAE has propelled
the UAE Blockchain Strategy 2021, as per which half of the government exchanges
will be directed utilizing blockchain innovation by 2021. To consolidate its
vision, rules and regulations on the utilization of crypto resources, including
cryptographic forms of money, have recently been issued.
Prior to the issuance of ADGM regulations, the Central Bank of UAE in 2017
promulgates a regulatory framework regarding the Electronic Payment System
entailing all virtual currencies and transactions being restricted, setting a
high alarm in UAE market. However, post receiving an unsatisfactory review, the
governor of Central Bank clarified that the regulations would not be applicable
to Cryptocurrency. In spite of this confirmation, UAE still awaits for legalized
regulations which one may resort to in order to understand the validation of
cryptocurrency or to seek a claim against frauds in virtual currency.
Crypto Fraud and Future
The dubious behaviour and presence of Cryptocurrency in the market make it
treacherous for investors as it can turn out to be Ponzi scheme to steal money.
The basic ideology behind Cryptographic money makes it arduous to prevent theft
as any crypto asset is stolen cannot be traced and returned to the original
investor. From past a decade, we have come across numerous hacks and scams in a
crypto world wherein; Coin Check was the world's biggest crypto theft.
Cryptocurrency is a bubble or a market; we are yet to confirm that stand.
Nonetheless, it has offered the opportunity to billions of users' entrance to
the financial market who otherwise did not even had a bank account as they fail
to meet the relevant criteria to open a bank account. The current position of
Cryptocurrency in UAE is grey, and the future as of now is colourless. Numerous
nations have initiated to issue guidelines to control the buying and selling of
Cryptocurrency and to prevent the unauthorized usage and avoid financial frauds.