Following in the footsteps of the Philippines and China, the government of the United Arab Emirates (UAE) and its Central Bank plan to provide a clear regulatory framework on the usability of Bitcoin and operations of digital currency exchanges in the near future.
On Jan. 1, 2017, the Central Bank of UAE published a document entitled “Regulatory Framework For Stored Values and Electronic Payment System” with a vision of leading market adoption digital payments and fintech technologies within the UAE.
Is Bitcoin legal in UAE?
One section of the document called D.7.3 explicitly prohibited the usage of virtual currencies, disallowing digital currency transactions and trading. The document led to various controversial discussions within the UAE Bitcoin and fintech industries, as leading companies inquired the Central Bank if the bill considers Bitcoin and other digital currencies in existence.
The section read:
“Virtual Currency(s) is not recognized by this regulation. Exceptions are made to a digital unit that: a) can be redeemed for goods, services, and discounts as part of a user loyalty or rewards program with the Issuer and; b) cannot be converted into a fiat /virtual currency.”
In response, Mubarak Rashed Khamis Al Mansouri, the governor of the Central Bank of the UAE, announced that the document doesn’t, in fact, consider digital currencies like Bitcoin, trading platforms, companies and Blockchain technology.
Al Mansouri further noted that the Central Bank of the UAE is in careful consideration of legalizing Bitcoin and developing necessary regulatory frameworks for businesses and exchanges to comply with.
In late 2016, the government of Dubai also emphasized that government officials and political leaders will come together to discuss the potential of Bitcoin and Blockchain technology within the realm of finance and particularly the financial industry and ecosystem of the UAE.
A government statement read:
“The Supreme Legislation Committee in the Emirate of Dubai (SLC) has announced that it will discuss the present and future of the legislative and legal frameworks related to cryptocurrency known as Bitcoin during a workshop on ‘Virtual Currency: Fact and Law.’ In cooperation with the Dubai Electronic Security Center (DESC), the session will be held on Nov. 20, 2016, amid high-level attendance of local and federal government entities.”
A case similar to that of the Philippines
The legality of Bitcoin is nearly identical to that of the Philippines prior to the release of BSP Circular No.944, a document released by the central bank of the Philippines recognizing Bitcoin as a remittance network and legitimate payment method.
Government officials and regulators of the UAE are optimistic towards Bitcoin and seeing great potential in Bitcoin businesses, exchanges and market. UAE central bank governor, as well as other important figures within the UAE financial industry, have announced publicly on several occasions that the government is close to releasing a nationwide regulatory framework on Bitcoin to ensure the digital currency market prospers under careful oversight of the government.
This approach is also similar to the strategy of the Chinese government, which has allocated a significant amount of resources in regulating Bitcoin with practical and efficient regulations to ensure Bitcoin users remains in the exchange market and choose not to operate in black or underground markets.