Accounting for Crypto in Dubai, UAE
Since Cryptocurrency is not an equity or debt security, it cannot be treated under the same accounting rules as cash. Still, a lot of experts would consider IAS 38, which specifies intangible assets for cryptocurrencies, to be a suitable norm.
Law No. (4) of 2022 Regulating Virtual Assets in the Emirate of Dubai
1. The Federal Law No. (4) of 2000, along with its revisions, established the Emirates Securities and Commodities Authority and Market.
2. Federal Law by Decree No. (14) of 2018 Regarding the Central Bank of the United Arab Emirates and Governing Financial Institutions and Services, as well as its Modifications;
3. Federal Law by Decree No. (20) of 2018 Concerning the Prohibition of the Financing of Terrorism and Illegal Organizations and the Countering of Money Laundering Crimes, as well as its Implementing Bylaw and Amendments;
4. Federal Law Concerning the Protection of Personal Data by Decree No. (45) of 2021;
5. Law No. (13) of 2011 and its revisions governing the conduct of economic activities in the Emirate of Dubai;
6. Law No. (9) of 2015 Regarding the World Trade Center in Dubai;
7. Law No. (26) of 2015, which governs data exchange and dissemination within the Emirate of Dubai;
8. Law No. (32) of 2015 Concerning the Government of Dubai’s Official Gazette;
9. Law No. (1) of 2016 Concerning the Government of Dubai’s Financial Regulations;
10. Law No. (8) of 2016, which governs the government of Dubai’s grant of law enforcement capacity;
11. Establishing the Dubai Digital Authority under Law No. (1) of 2021;
12. The Dubai International Financial Center Law No. (5) of 2021;
13. The Emirati of Dubai’s Decree No. (22) of 2009 pertaining to Special Development Zones; and
14. The laws creating and overseeing free zones within the Emirate of Dubai,
Virtual Assets
A value representation in digital form that can be invested in, traded, transferred, or utilized as a mechanism for payments or exchanges. Virtual Tokens and any other digital representation of value as decided by VARA are included in this. (The Regulatory Authority for Dubai Virtual Assets.)
Virtual Assets Platform
A virtual asset service provider manages a decentralized or centralised digital platform that facilitates the sale, purchase, trading, offering, issuance, and safekeeping of virtual assets. Additionally, the platform enables the clearing and settlement of traded virtual assets through the use of distributed ledger technology.
Distributed Ledger Technology
A digital database, either public or private, whereby virtual asset dispositions are produced, preserved, shared, and documented. This allows a synchronized network of nodes, accessible from various sites and places, to confirm the ownership and existence of virtual assets. The “blockchain” technology is one example of this.
Authorization
A document from VARA granting permission to a Virtual Asset Service Provider to carry out the Activity or to an Individual to carry out any business, activities, or services involving Virtual Assets as approved by VARA.
Digital Asset Wallet
A digital application, or any other digital or electronic media, that is used to manage and transfer the Virtual Assets that belong to a beneficiary and to handle all of the transactions that are carried out on the beneficiary’s behalf to move virtual assets between accounts.
Advantageous
An individual, either natural or legal, who gains ownership of a virtual asset upon its transfer to their virtual asset wallet and after it has been verified and documented via distributed ledger technology.
VARA's Financial Year and Accounts
• In accordance with the applicable internationally recognized standards, VARA shall adhere to the regulations and guidelines of commercial accounting when maintaining its accounts and records.
• Every year, VARA’s Financial Year begins on January 1 and ends on December 31; however, the first Financial Year begins on the day this law is enacted and ends on December 31 of the subsequent year.
Acts Prohibited
In addition to being prohibited from engaging in any project or task that could put VARA in a conflict of interest or make it more difficult for it to carry out its legal obligations, VARA is also not permitted to possess or issue Virtual Assets.
Money from VARA
All money that third parties owe VARA is considered Public Money. These money will be regarded as obligations owed to the government, and their collection will follow the guidelines set forth by the Emirati legislation currently in effect.
Termination of Operations or Virtual Asset Transactions
Any of the following actions and measures may be taken by VARA for any purpose relating to serving the public interest or regulating virtual asset trading and transactions in the Emirate:
• any internal rules or policies established by a Virtual Asset Service Provider may be restricted, suspended, reinstated, or their execution may be halted in line with applicable laws, bylaws, and resolutions that have been approved by the Board of Directors;
• any virtual asset service provider’s activity may be suspended in compliance with applicable laws, bylaws, and board of directors resolutions.
Penalties and Administrative Violations
- The Board of Directors will pass a resolution outlining the offenses against this law, the resolutions passed in its observance, and the appropriate penalties that shall be imposed on offenders.
- VARA may impose any of the following sanctions on an offender in addition to a fine:
1. putting the permit on hold for a maximum of six (6) months;
or
2. canceling the commercial license by rescinding the permit and working with the Emirate’s appropriate commercial licensing authorities.