The United Arab Emirates (UAE) is implementing new regulations to support the development of cryptocurrency, while cracking down on digital currency scams targeting investors in the country.
Under the new regulations, individuals involved in crypto scams could face imprisonment for up to 5 years and a fine of up to AED 1 million (approximately $272k), starting from January 2, 2022.
Previously, UAE laws prohibited the promotion of cryptocurrencies without imposing penalties. However, the amendments introduced now mark a significant shift, with punishments for individuals who encourage or engage in crypto dealings that are not officially recognized in the UAE, as well as those who publish misleading advertisements or inaccurate information about any product.
The new legislation also aims to penalize those who raise funds from the public without the necessary license from relevant authorities.
Just last month, the UAE President introduced this new legislation as part of multiple legal reforms.
Similar to the global trend, crypto scams have seen a rise in the UAE, with the most recent and well-known example being the DubaiCoin scam, which falsely claimed to be Dubai’s official cryptocurrency.
It was later revealed that the project was scamming investors by gathering their data and money. In response, the Dubai Government released an official statement in May, refuting the coin’s status as Dubai’s official crypto. However, many individuals had already fallen victim to the fraud.
Kostubh Devnani, a dispute resolution lawyer at ADG Legal, stated,
“The positive news is that apart from the new laws, and UAE stepping up efforts to combat financial crime, courts in other (particularly common law) jurisdictions have been willing to grant remedies normally applicable to physical or tangible property to victims of crypto scams, such as freezing orders and orders for production of information.”
While the UAE does not recognize cryptocurrency as legal tender, there are no direct bans in place either.
Under the new law, individuals engaging in crypto-related activities such as offering, issuing, promoting, listing, and trading cryptocurrencies must obtain a license from the Securities and Commodities Authority (SCA).
This new Online Security Law, which replaces the previous law ‘Concerning Anti-Cybercrimes,’ is one of the region’s first comprehensive legal frameworks addressing the risks associated with the illicit use of cryptocurrencies and enhancing consumer protection.
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