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UAE Central Bank clarifies virtual currency ban

The authority exempts digital currencies like Bitcoin following January 1 regulatory framework that appeared to prohibit them

Bitcoin is an experimental digital currency used over the Internet
Image Credit: AFP
Bitcoin is an experimental digital currency used over the Internet gaining in popularity worldwide. For illustrative purposes only.
Gulf News

Dubai: The Central Bank of the UAE has clarified regulations released on January 1, 2017, stating they do not outlaw virtual currencies such as BitCoin.

In a statement to Gulf News clarifying the regulation, Mubarak Rashid Khamis Al Mansouri, Governor of the Central Bank, said: “these regulations do not cover ‘virtual currency’, which is defined as any type of digital unit used as a medium of exchange, a unit of account, or a form of stored value. In this context, these regulations do not apply to bitcoin or other crypto — currencies, currency exchanges, or underlying technology such as Blockchain.”

Al Mansouri added in his statement that virtual currencies are “currently under review by the Central Bank and new regulations will be issued as appropriate.”

The original regulation contained the phrase “all virtual currencies [and transactions thereof] are prohibited,” which lawyers and investors initially took to mean a blanket ban on all such currencies.

For Ola Doudin, CEO and co-founder of BitOasis, the UAE’s first digital currency exchange, the clarification was welcome news, after worrying about the implications the prohibition might have had on her business.

“We’re very glad to hear the Governor’s statement on virtual currencies, bitcoin and blockchain in light of the recent PSP regulations, and we’re optimistic about the direction the Central Bank is taking to support innovation in fintech. We are committed to working side by side with regulators to make sure we are compliant and to help promote innovation,” Doudin said in a statement to Gulf News.

Whilst commenting that the clarification was positive, Sally Sfeir-Tait, a lawyer for Clyde & Co and regulatory expert, warned that “from a legal perspective, until the regulations are amended, a clarification does not have the same legal value. I hope it does mean that, until then, the Central Bank will not take any action in respect to existing (and proposed) businesses who deal in virtual currencies.”

“At least for now, this means that those who were concerned by the apparent ban on virtual currencies like bitcoin (and the potential impact of this on fintech and blockchain initiatives) can breathe a collective sigh of relief,” said Paul Allen, head of intellectual property and technology at DLA Piper, Middle East

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