The United Arab Emirates (UAE) is introducing new rules to promote cryptocurrency development while curbing digital currency scams targeting investors in the country.
Under the new rules, crypto scammers will face prison time for up to 5 years and a penalty of up to AED 1 million (just over $272k), starting January 2, 2022.
Previously, the UAE laws banned promoting crypto but didn’t penalize it, but now, in a first for the country, the amendments have been introduced to punish those who promote or encourage a dealing in crypto that is not officially recognized in the UAE or post misleading ads or inaccurate data about any product.
The new law will also punish those raising money from the public without a license from competent authorities.
It was only last month that the new legislation was introduced by the UAE President as part of several legal reforms.
Much like the rest of the world, there has been a rise in crypto scams in the UAE, with the most recent and publicized one being the DubaiCoin scam which claimed to be launched as Dubai’s official cryptocurrency.
It was later discovered that the project was phishing data and money from investors. The Dubai Government then released an official statement in May dismissing claims of the coin being the official crypto of Dubai, but many had fallen prey to the fraud already.
Dispute resolution lawyer at ADG Legal Kostubh Devnani said,
“The positive news is that apart from the new laws, and UAE stepping up efforts to combat financial crime, courts in other (particularly common law) jurisdictions have been willing to grant remedies normally applicable to physical or tangible property to victims of crypto scams, such as freezing orders and orders for production of information.”
The UAE does not recognize crypto as a legal tender, but there are no direct bans on cryptocurrencies either.
In fact, those engaging in crypto-related activities such as offering, issuing, promoting, listing, and trading of cryptocurrencies are required under the new law to be licensed by the Securities and Commodities Authority (SCA).
The new Online Security Law that replaces the previous law ‘Concerning Anti-Cybercrimes’ is one of the first comprehensive legal frameworks in the region to address the risks associated with the illegal use of cryptocurrencies and enhance consumer protection.