UAE’s Securities and Commodities Authority Implements Comprehensive Regulations for Crypto Assets
The UAE’s Securities and Commodities Authority (SCA) has implemented a regulatory framework for cryptocurrency activities to ensure orderly market development and safeguard public interests.
Scope and Application of the Regulation
The SCA’s regulations encompass a broad spectrum of crypto assets, including those classified as securities or not, provided they are listed on organised markets. Exclusions include items regulated by the UAE Central Bank, such as stored value facilities and “Payment Tokens” like stablecoins backed by fiat currency.
Security Designation and Underlying Regulations
When a crypto asset is deemed a security, it must adhere to existing SCA regulations applicable to securities. The SCA employs a thorough assessment to determine whether a crypto asset qualifies as a security, considering factors such as contractual rights against an issuer or a pool of assets.
Specific Rules for Crypto Assets
The SCA has implemented specific rules for crypto assets:
- Minimum Disclosure Standards: Investors must receive comprehensive information about the risks associated with crypto asset investments.
- Technology Governance and Security: Rules mandate adherence to internationally recognised technology governance and security standards, ensuring robust and secure software features.
- Custodian and Fundraising Platform Obligations: Custodians and fundraising platforms face specific approval requirements due to the unique risks they pose in the crypto market.
- Exchange Rules: Crypto exchanges must comply with existing regulatory requirements for securities and commodities, with additional emphasis on custody, settlement, participant conduct, and security standards.
- Financial Crime Controls: Strong anti-money laundering measures and controls against market abuse are essential, following international standards set by the Financial Action Task Force (FATF).
Licensing and Requirements for Licenses
To engage in financial activities involving crypto assets, obtaining a license from the SCA is mandatory. The licensing process follows the standard procedure with specific modifications for crypto assets.
Fees and Minimum Capital Requirements
The following table outlines the fees and minimum capital requirements for different crypto asset license categories mandated by the UAE’s Securities and Commodities Authority (SCA).
| License Category | Application Fee (AED) | License/Renewal Fee (AED) | Cancellation Fee (AED) | Minimum Capital Required (AED) |
|---|---|---|---|---|
| Exchange | 10,000 | 200,000 | 10,000 | 5,000,000 |
| Fundraising Platform Operator | 10,000 | 200,000 | 10,000 | 2,500,000 |
| Custody Services | 3,000 | 500,000 | 1,000 | 5,000,000 |
| Brokerage | 5,000 | 50,000 | 1,000 | 1,000,000 |
Cancellation of Incomplete Applications
Applications failing to meet requirements within the specified period risk cancellation without fee refunds by the SCA. The Authority may retain the right to impose restrictions or temporarily suspend licenses in the public interest.
Conditions for License Cancellation and Post-Cancellation Obligations
The SCA may cancel a license for non-compliance with licensing requirements, non-payment of prescribed fees or fines, breach of regulatory obligations, provision of incorrect information, or due to voluntary or involuntary liquidation. Following cancellation, the licensee must settle all prior transactions and provide a guarantee until all obligations are fulfilled.
Licensees and their personnel are required to promptly furnish requested information, adhere to technological governance standards, ensure secure software features, comply with exchange rules, maintain strong anti-money laundering measures, and control market abuse in accordance with international standards.