Blockchain – Developments in the UAE
Blockchain technology promises vast transformative capabilities having developed from an abstract protocol to a respected technology in just a few years. Yet, despite its buzzword tendency, the full nature of these transactions still elude the vast majority, with some believing it worthy of no real regard (due in most cases to an overtly complex view of the systems surrounding the product); alternatively, imagining it as some vicious method in commandeering funds with no regulatory burden to straddle the vast amounts that some transactions yield.
At least in respect of the latter, jurisdictions have begun to establish structure surrounding blockchain transactions. While some countries, particularly China and South Korea, have outlawed the use of cryptocurrency completely, others have seen the need for adaptation of legal systems to reflect the fact that such technology, having long surpassed infancy, is now considered a firm entrenchment within contemporary transactions and business models.
Although globally regulatory framework is still playing ‘catch up’ it is important to observe the mechanisms that have been implemented in the wake of blockchain. Many jurisdictions have elected to amend existing legislation to incorporate cryptocurrency and the associated infrastructure within their law permitting certain structures to obtain license under certain conditions. Other countries have made introductory amendments to the language of their statutes as a step towards recognition.
The UAE is considered at the frontier in their implementation of blockchain technology and the regulation surrounding it. In support of the acknowledgment that financial services are at the precipice of a massive shift, the UAE is in the process of design of alternate legal models to incorporate blockchain and embrace the possibilities that surround the system.
Chief among the pioneers is ‘Smart Dubai’, an initiative by His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, which has launched the Dubai Blockchain Strategy 2020, seeking to see Dubai become the first blockchain-powered city by 2020. Smart Dubai aims at creating an open platform for promotion of the three pillars of government efficiency, industry creation and international leadership.
In support of Smart Dubai, the Dubai International Financial Centre (DIFC) has announced its ambition to create the world’s first Court of Blockchain, which aims to build upon existing dispute resolution services while aiding verification of Court judgments for cross-border enforcement.
In addition, the Dubai Multi Commodities Centre (DMCC) has formalized their membership to the Global Blockchain Council and has defined, and recognized, cryptocurrency as a type of commodity offering license in trade of cryptocurrencies.
Digital innovation is a hallmark of Dubai, setting example for the region and other cities across the globe however the UAE wholly is unique. The UAE houses multiple free trade zones that offer individual jurisdictions, each permitting various commercial opportunities under one framework. This position welcomes ease of adaptation and promotes innovation for companies and investors alike.
The Abu Dhabi Global Market (ADGM) has led the way in legislative changes with its publication of guidance on, and regulation to, crypto asset activities. The regulations seek to address the risk associated with crypto assets including the potential for money laundering and financial crime by ensuring proper governance, oversight and transparency is observed.
The ADGM represents a ‘sandbox’ approach allowing for promising products to be tested with live cases in a controlled and regulated environment. In this way, the ADGM provides for experimentation as to the possible requirements in regulatory oversight. By allowing the technology to be tested in real time it invites the adaptation of compliance while simultaneously preventing hindrance that may otherwise result where regulations are installed.
It is clear that use of blockchain technology is a certainty in our future transactions. While an air of mystery may still surround the technology as a whole, it is worthy to note that the complexities involved in operation of the internet, our emails and our smart phones are also not always fully known to the user, yet - does not absolve our reliance on such technologies.
While the technology in blockchain looks to be new – its use and integration in jurisdictions such as the UAE signify a directional involvement and inclusion in the years to come. It certainly bears consideration as a mechanism worthy of pursuit and the options available in the UAE make for a tempting realization.
Should you wish to learn more about blockchain and available options in the UAE please do not hesitate to contact us for further information.