UAE's Emirate Ras Al Khaimah to Launch Exclusive Free Zone for Crypto Companies

Ras Al Khaimah, one of the United Arab Emirate's (UAE) seven Emirates, announced its planning of launching the world's first free zone for digital and virtual asset companies, called RAK Digital Assets Oasis (RAK DAO).

According to the government's statement, the free zone will be dedicated to digital and virtual assets service providers in emerging technologies, such as the metaverse, blockchain, utility tokens, virtual asset wallets, nonfungible tokens (NFTs), decentralized autonomous organizations (DAOs), decentralized applications (DApps) and other Web3-related businesses.

The RAK DAO will be a "purpose-built, innovation-enabling free zone for non-regulated activities in the virtual assets sector". Applications will open in the second quarter of 2023, the statement said.

"We are proud to further the UAE's position as a primary destination for innovation with the launch of RAK Digital Assets Oasis," said Sheikh Mohammed bin Humaid bin Abdullah Al Qasimi, chairman of the RAK International Corporate Centre (RAK ICC), the operator of the new free zone. "We are building the free zone of the future for companies of the future. As the world's first free zone solely dedicated to digital and virtual asset companies, we look forward to supporting the ambitions of entrepreneurs from around the world."

Free zones or free-trade zones are areas where entrepreneurs have 100% ownership of their businesses and have their own tax schemes and regulatory frameworks, except for the UAE's criminal law. Drawing up the new free zone's steps, Dubai-based crypto lawyer Irina Heaver believed "RAK DAO will start with non-financial activities first, then may introduce the financial activities at a later stage."

Heaver said: "[Entrepreneurs] won't be able to launch a crypto exchange just yet, which is an ESCA-regulated financial activity."

The UAE has been investing heavily in developing its encryption-related infrastructure and optimizing regulatory measures to attract more foreign crypto companies and investors.

Last March, Dubai passed its Dubai Virtual Asset Regulation Law, which aims to create a legal framework in line with international standards to protect investors. It also established the Virtual Asset Regulatory Authority (Vara) as an independent body to regulate the sector throughout Dubai, including special development zones and free zones, but excluding the Dubai International Financial Centre.

Also, the Financial Services Regulatory Authority (FSRA), the regulator of The Abu Dhabi Global Market, published guiding principles on its regulatory approach to virtual assets, outlining its requirements for the asset class and service providers in crypto sector.

Notably, the Central Bank of the UAE does not currently recognize cryptocurrencies as legal tender.