Dubai Bans Privacy Cryptocurrencies Under New Crypto Rules

The Virtual Assets Regulatory Authority (VARA) of Dubai released its much-anticipated regulation guidelines for the local cryptocurrency industry on Tuesday, February 7th, 2023. The guidelines establish ten core principles for the industry, including licensing requirements, anti-money laundering obligations, marketing protocols, and a ban on anonymity-enhanced cryptocurrencies, such as Zcash and Monero.

Dubai defines anonymity-enhancing cryptocurrencies as "a type of virtual asset that hinders the tracing of transactions or ownership through its use of distributed public ledgers, and for which there are currently no available technologies or mechanisms for service providers to trace or identify ownership." Due to the anonymous nature of these cryptocurrencies, the government has put in place regulations to oversee their use and transactions.

Per the regulations, virtual asset businesses must obtain a license from VARA, and large proprietary traders investing a minimum of $250 million in cryptocurrencies must register with the authority. The VARA also has the power to revoke licenses in the event of a violation of directive or insolvency and set fees for services provided.

Violations of the regulations can result in fines of up to $5.4 million for individuals and $13.6 million for businesses involved in virtual assets. The VARA's regulations will apply not only within Dubai but also to its special development and free zones, excluding the Dubai International Financial Centre, which another body regulates.