The Virtual Assets and Regulatory Authority (VARA) in Dubai has recently released a new set of regulations for any crypto-linked firm looking to establish a business in the country.
These regulations are a direct response to the growing popularity of privacy-focused cryptocurrencies among investors, who feel that they offer protection against government interference.
To ensure that crypto firms abide by the laws of the country, VARA has imposed a total ban on privacy-focused crypto projects and assets such as Monero (XMR) and Zcash (ZEC).
Privacy-focused cryptocurrencies such as DASH, Horizen (ZEN), Verge (XVG) and Beam have also been affected by the ban. However it is not yet clear whether third party applications—such as Tornado Cash—will be included in the ban.
The regulator has implemented a policy that crypto firms must be able to demonstrate the origin of crypto funds and assets in their systems, and licensing must only be obtained from the regulator.
The regulator has stated that anonymity-enhanced cryptocurrencies pose a threat to the country’s financial stability, and any token or cryptocurrency operating in this manner must be banned.
According to VARA, crypto firms and individuals who violate the compliance framework may be fined up to $5 million, while institutionally-tied projects may be fined up to $13 million.
However, these new rules will apply only to crypto and digital asset firms operating in Dubai. Firms based in the Dubai International Financial Centre economic zone are regulated by a separate body altogether .
Despite this, VARA insists that everyone in Dubai’s crypto market should still abide by the regulations for advertising and marketing their products and services.
Dubai has been a leader in advocating for blockchain technologies and cryptocurrencies, but this new ban could cause privacy-focused crypto projects to fall out of favor with investors.
Dubai’s implementation of new regulations on privacy-focused cryptocurrency projects aims to ensure the financial stability of the country and make sure that crypto firms comply with local laws.
The ban on privacy-focused crypto projects is a significant move—and it will be interesting to see how it impacts the crypto market in Dubai as well as other markets.
The Middle East has been an innovative region when it comes to blockchain technology and cryptocurrencies, so this new regulation could have far-reaching implications for both local investors and international investors.