Dubai’s Virtual Assets and Regulatory Authority (VARA) has barred the issuance of privacy-focused crypto assets like Zcash (ZEC) and Monero (XMR) in the region, according to new guideline measures published on Feb. 7.
“Anonymity-enhanced cryptocurrencies prevent the tracing of transactions or record of ownership through distributed public ledgers and for which the virtual asset service provider [VASP] has no mitigating technologies or mechanisms to allow traceability or identification of ownership.”
Crypto community member Matt Hussey said Dubai’s privacy coin ban “kind of defeats” its friendly regulatory environment for crypto.
Before Dubai’s ban, authorities in other countries like Japan had enacted a similar move in 2019. At the time, privacy coins were popular among ransomware groups.
Besides that, Huobi delisted seven privacy coins in 2022 to remain compliant with regulators.
Dubai introduces crypto regulations for VASPs
Meanwhile, Dubai’s VARA also introduced several regulations to guide crypto firms’ operations in the country.
According to the new regulation, any crypto company looking to operate in the region must secure licensing before it can begin operation. The authorities said any entity investing $250 million or more in cryptocurrency must also register with VARA.
Meanwhile, VARA said individuals who breach its market conduct rules could be fined up to 20 million Dirhams ($5.4 million), while institutions face up to 50 million dirhams ($13.6 million) in fines.
VARA’s supervision and authorization fees ranged from 40,000 dirhams($11,000) to as high as 200,000 dirhams ($55,000).
The new rules will only apply to VASPs operating in Dubai. Crypto firms in Dubai International Financial Centre (DIFC) free zone will not be affected as they work under a different regulator.
However, the regulator noted that all market participants, including those not licensed by VARA, must comply with marketing, promotions, and advertising regulations.
VARA said it intends to promote the Emirate as a “regional and international hub” for virtual assets. The regulator added that it wants to increase awareness and facilitate innovations in the industry.