Agile Crypto Regulations in the UAE
According to the 'Pathways to the Regulation of Crypto-Assets' report by the World Economic Forum, the UAE's enviable regulatory environment around Crypto-assets possesses qualities such as malleability and multi-layer approaches to growth. This pliant attitude allows for an appreciation of the crypto-asset system's development.The Swiss Financial Market Supervisory Authority (FINMA) has taken a leaf from the UAE book, introducing three major types of tokens: payment, utility and asset tokens. Adding layers to this, the regulations for these tokens allow those who possess them to adjust their type, depending on the time and circumstance. Additionally, FINMA has recently elaborated with ancillary advice that furthers their categorization and implementation.
Rather than creating and enforcing regulations, Agile Regulation insists on a dynamic approach which acknowledges that drawing up legislation is not just done by regulators, but is a mutually collaborative effort including many different stakeholders. For example, Sandboxes located in the EU, India, as well as the UAE are highlighted in the manifesto, allowing for the examination of new ideas while continually renewing regulations depending on how the field and business climate progresses. While this system is very useful, it does face a number of obstacles - including the task of bringing together organisations that are often wary of involvement with anything new.
The results unveiled by the paper had singled out the Agile Regulatory Framework as the highest ranked according to scores assigned in regards to innovation capability, certainty for businesses, access to needed data, and analysis of enforcement; in contrast, the U.S.'s "Regulation by Enforcement" framework was appraised positively only for its enforcement effectiveness. This look into the different regulatory systems and the ranking of them sheds light on how countries should approach their crypto-asset laws. These findings are invaluable in guiding countries in the right direction.
In the UAE, bye-laws for crypto assets have been sanctioned and advisors consulted over the implementation of disruptive tech like DeFi and DAOs. To stay away from difficulties concerning token codification, some territories are entirely embracing tokens as they exist in their regulations; just like Liechtenstein, where it is known as the "token container model". Thus, it should be understood that the authoritative of tokenization has no valid impact of its own. For the purpose of providing worth or liberty, the token depends utterly on existing legislations like those within the financial sector. For virtual coins and utility tokens, formal legislation is expected in order to guarantee their functionality.
The Virtual Assets Regulatory Authority in Dubai has put forth a comprehensive scheme that distinguishes various measures of direction to fast-track new products, modern technologies, and novel business models that demand control. This necessitates administrative and legal personnel to cooperate with the sector and its users to reap the benefits while monitoring any related hazards. But unfortunately, watchdogs worldwide are faltering. Take, for instance, anti-money laundering (AML) oversight of crypto-assets, a 2021 Bank for International Settlements (BIS) poll unveiled that monitoring was still in its infancy globally. It was reportedly proclaimed that "In spite of a few countries being at different stages of implementing, supervision is still a work in progress broadly, with few really engaging in oversight. That being said, a patchy landscape of discipline makes up the puzzle of multi-national crypto-assets and their connected regulatory risks." Moreover, the application of FATF's travel rule also faces many limitations. According to a June 2022 report issued by FATF, the lack of technical solutions compatibility and inconsistency cross jurisdictions are still a major concern.
The World Economic Forum research identified some troubles with decentralized enforcement systems, identifying the likelihood of it taking numerous years to arrive at a shared standard. As a resolution to the issue, they put forward the idea of a unified comprehension of crypto asset classifications and activities, the selection of good practices, a uniform baseline of regulatory criteria, and progression towards enlarged availability of data and entities. Subsequently, the WEF's Blockchain and Digital Assets unit will make a start on their collaborative attempt to assess the various local norms, and examine the impacts of their execution. Establishment of contact with the public and private players will be critical for ascertaining direct awareness.
At the Qatar Economic Forum, a variety of opinions were shared on the potential for international regulation of cryptocurrencies. Peter Smith, Co-Founder and CEO of Blockchain, discussed his opposing stance, arguing against international regulations due to the decentralized cross-border nature of such currencies. He sees implementation of global laws to be particularly challenging, and instead proposed that nations should take a 'wait and see' posture, one emphasizing caution rather than a rushed effort. Smith believes that forming sweeping regulations in such a scenario would potentially be futile.
