The United Arab Emirates is toughening regulatory control over digital assets because of fears of financial crimes. The Financial authority in Dubai has moved to constrain privacy tokens that don’t comply with international regulatory standards.
Dubai Regulator Moves to Ban Privacy Tokens in DIFC
The DFSA has moved to implement an update in its Crypto Token Regulatory Framework. They banned, within its International Financial Centre (DIFC), the use of privacy coins. This move results from anti-money laundering and sanctions compliance issues associated with the tokens.
The ban has wide-ranging implications and applies to trading, promotion, operation of funds, and derivatives of such assets in or from the DIFC. The new system will come into effect as of January 12.
However, the companies operating in the DIFC will be more responsible for ensuring their cryptographic assets meet the standards expected. Interestingly, this comes as the privacy tokens, including Zcash, recently gained traction on the markets.
Elizabeth Wallace, the associate director for policy and legal issues at Dubai’s DFSA, commented on the reasons for the decision in a statement:
The move comes against a different background from those developments in the United States. While the DIFC has decided on outright prohibition, members of the U.S. SEC are currently working on the prospect of a world in which privacy might be able to coexist. The U.S. SEC Crypto Task Force recently carried out a round table on ‘Financial Surveillance and Data Protections’.
UAE Announces Rules Changes for Stablecoins
In addition to privacy tokens, another aspect of the updated regime by Dubai’s DFSA is improving its definition of stablecoins. In its definition, it specifically defines “fiat crypto tokens.” This would be limited to tokens that are pegged to fiat and are backed by high-quality and liquid reserves that can satisfy claims during market dips.
Algorithmic stablecoins do not fit within this definition. Although they are not prohibited, they will be considered general crypto tokens, but they will fall under the category of general crypto-tokens and not stable coins in the DIFC structure of regulation.
Still, the UAE is forging ahead with its licensed blockchain innovation in spite of its more rigid approach to certain assets. Late last November, for example, an Abu Dhabi digital bank named Zand unveiled Zand AED, the first stablecoin in the country.
Some of the most important changes apart from the privacy tokens that have emerged in the revised regulations are that the new system is going to be industry-driven for approvals, meaning instead of the Dubai government maintaining a list of supported cryptocurrencies, the companies will be left to decide whether the coins they deal in are suitable for use.
Source: https://coingape.com/dubai-bans-privacy-tokens-over-aml-and-sanctions-concerns/
