Cryptocurrency is a term that has been in the news for almost a decade now. The first cryptocurrency that was launched is Bitcoin (BTC) which broke the highest record in March 2021. It is a decentralised form of cash that eliminates the necessity of the traditional way of financial transactions being carried out now with the help of banks and officials. Therefore Bitcoin is not backed by any bank or government. It just runs on peer-to-peer technology. Though the legality of Bitcoin is undefined, it has gained massive popularity giving rise to several other such cryptocurrencies.
The most asked question about cryptocurrencies is, Is it legal in the UAE?
UAE, which embraces every change in technology has also adopted Blockchain Technology for transactions. It launched Emirates Blockchain Strategy 2021 and Dubai Blockchain Strategy with an aim to conduct 50% of the government transactions using Blockchain Technology by 2021. This Blockchain Strategy was launched in 2018. Under this, each customer will get a unique ID that has their details on the security chain. The details and data in this secured blockchain are hard to hack or steal or edit which overall is highly secured to run vast transactions and secure documents.
However, currently, there are no regulations with respect to cryptocurrencies or virtual currencies in the UAE. While the UAE government is encouraging its own cryptocurrencies like Emcash, the legality of Bitcoin is still vague. Though there is no unified legislation on the virtual currencies, the European Central Bank and the US Financial Crimes Enforcement Network has announced in 2012 and 2013 respectively that these virtual currencies will not replace the fiat currencies which means the traditional currencies but will mostly act as an investment. Also, in 2020 The Central Bank of the UAE (CBUAE) clarified that it has not legalised cryptocurrencies under the Stored Value Facilities (SVF) Regulation. It also stated that the cryptocurrencies would be acknowledged as virtual assets similar to EU and US regulators but not as a currency next to the UAE dirham.
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Though the official rule regarding Bitcoin or other cryptocurrencies is as the literal virtual currency, there are several exchange centres that allow UAE residents to buy Bitcoin where 1 Bitcoin (BTC) = 133209.61 AED as of June 1, 2021. In fact, buying bitcoin is easy where the investor should get an account at a well-known cryptocurrency exchange and get a crypto wallet to store the virtual currency.
The status of bitcoin or any other cryptocurrency remains as a virtual asset only for now making the investors globally invest in it and experience fluctuations similar to other investment products. But when it comes to the currency which can be used to make purchases, the banks in UAE are not open to the concept and consider it as a highly risky option. Thus making the virtual currencies considered as the virtual asset scheme as per the Central bank of UAE’s regulation in 2020. On the whole, to have virtual currencies in the mainstream transactions choice may take time.