Cryptocurrency is a virtual currency. It is operated through a blockchain technology application. This virtual currency a certain number of coins or tokens are issued by the company. These tokens or coins are the sources through which a value is recognized by the group of users.
Cryptocurrencies such as bitcoin are converted into normal currency. Legally the virtual currency is an asset which has the power of money. The owner of the crypto currency has underlying value for the asset. These may be considered as securities sometimes but not always.
For virtual currency there is no legislation which is unified and applied. The initial classification for Cryptocurrency was given by the European Central Bank in the year 2012. Later, in the year 2013, the US Finance Crime Enforcement Network had classified Cryptocurrency. These entities have considered that cryptocurrency are assets and should not be considered as real currency.
The technology of the blockchain system is applied through the decentralized mechanism. Cryptocurrencies are a form of secured ledgers based technology which are operated on a peer basis. The database is shared through public and sometimes private networks in which the participants are in centralized form and may be in decentralized form.
The participants of the cryptocurrency Dubai, have a real copy of the ledger and every cryptocurrency transaction gets encrypted & validation is done by the network of unalterable blocks’. Transactions of cryptocurrency are evaluated and the validation is done through the e-sign among the participants.
There are no regulations for the cryptocurrencies and it indicates that there is no security for these virtual currencies. These transactions are so insecure that they are categorized as anti-money laundering cases. The US regulations and the European Union regulations accept and follow this within their territories. The nations in the rest of the world have their own regulations which accept virtual currencies. The countries which deal in virtual currencies provide authentication according to their regulations which are not universally accepted.
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Cryptocurrency in the UAE
Similar to the rest of the world, the use and exchange of the crypto currencies in the UAE is still at the outset. However, the UAE central bank which provides regulatory framework for the Stored values & E-payment mechanism indicated precisely that ‘virtual currencies and their related transactions thereof are completely prohibited. On the other side, the UAE & Saudi Arabia have recently issued the plan to accept an implementation of their own crypto currency which shall be used and their regulation would be in the region.
In the year 2017, the authorities of the Dubai Financial Services have given a statement across the nation which was addressed to the investors of the Dubai International Financial center. The financial authority is not regulating these virtual currencies and it declared that these are high risk investments.
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Even today across the UAE, there is no clarity nor a clear vision on this phenomenon. Cryptocurrency remains by definition as virtual currency, a mechanism of digital units which is a medium of exchange and has a stored value. There are no concrete regulations for the crypto currency nor there is any clear indication of them.
The venezuela government to escape the US financial embargo had issued the world’s first cryptocurrency. It was named as petro. It becomes a challenging task where it is difficult to control virtual transactions and the situations would become even worst where money laundering and terrorism financing are global concerns.
There are various concerns surrounding the cryptocurrencies such as ownership rights of cryptocurrencies, block-chain system, laws related to contract, dispute resolution system, taxes system from the cryptocurrency transactions and associated profits from the virtual currency transactions.
The UAE is spending more resources, talent and energy in simplifying the virtual currency and understanding the reality of virtual currencies and providing a regulatory framework. Virtual currency will not replace fiat currency. The authorities have warned investors of crypto currency that they should be ready to lose their investments and face any unforeseen consequences in the future.