Regulatory Framework Encompassing 5 Key Units and 8 Activities
The Capital Market Authority has announced the release of a regulatory framework for virtual assets, demonstrating its commitment to developing a modern and comprehensive system that aligns with the rapid growth of the virtual asset sector, enhances market efficiency, and supports responsible innovation within a clear and effective regulatory environment.
This framework serves as a specialized regulatory umbrella governing virtual asset activities, comprising 5 primary units: general requirements, business conduct regulations, alternative trading systems, anti-money laundering and counter-terrorism financing, and prudential requirements. Together, these units create a comprehensive and transparent legislative and supervisory structure for entities operating in this sector.
Furthermore, the framework expands the range of regulated activities from 3 to 8, including: trading in virtual assets as a principal, trading in virtual assets as an agent, providing custody services, arranging custody services, arranging investment transactions, offering investment advice, managing portfolios, and operating a multi-lateral trading facility. This expansion reflects the market’s evolution and the increase in business models and services related to virtual assets, enhancing the framework’s ability to accommodate a broader range of activities under clear regulatory guidelines suited to the nature of each activity.
Pivotal Step
Waleed Saeed Al-Awadhi, CEO of the Capital Market Authority, stated, “Virtual assets are transforming how financial markets operate, necessitating the evolution of regulatory frameworks at a similar pace. This framework establishes clear and comprehensive foundations for regulating virtual asset activities in the UAE, allowing innovation to thrive within a trustworthy environment that protects investors and enhances market integrity.”
The issuance of this framework marks a significant advancement in the development of the legislative and regulatory landscape for the financial sector, underscoring the authority’s commitment to keeping pace with global technological and financial developments. It provides a more advanced and flexible system for virtual assets and their related markets, supporting the sector’s growth on solid institutional pillars. Furthermore, it enables entities to operate in a regulatory environment that aligns with global trends grounded in transparency, efficiency, and effective oversight, thereby enhancing the country’s competitiveness and solidifying its status as a leading financial hub for future business and financial services.
Among its core units, the framework includes a specialized unit for alternative trading systems, which regulates trading facilities. The scope of this unit is not limited to organizing trading facilities dedicated to virtual assets but also extends to traditional multi-lateral trading facilities for securities and those specific to tokenized securities. This approach reflects the authority’s strategy in building a comprehensive regulatory framework that aligns with the evolution of market structures, responding to the convergence of traditional and digital models within a more integrated trading environment.
The framework aims to establish balanced regulatory foundations that combine innovation support, market integrity enhancement, and investor protection through clear requirements for licensing, compliance, governance, risk management, and prudential standards. This aligns with international standards and best practices, including those issued by the International Organization of Securities Commissions (IOSCO) and the Financial Action Task Force (FATF), in accordance with the principle of “matching regulatory requirements to the nature of the activity and level of risk.”