Over the past few years, Dubai has established itself as a city with a thriving economy. Dubai is often regarded as a hub for technological innovation, so it’s no surprise that the city is aiming to become the next crypto capital. Dubai has been promoting the growth of the crypto industry by establishing a regulatory framework that attracts both talent and crypto companies to the city.
New regulations are making Dubai a worldwide crypto safe haven, swiftly rivalling Singapore and Hong Kong.
Overseeing Cryptocurrency Instead Of Curbing It
The cryptocurrency market has no doubt been gaining incredible traction over recent years, and therefore, many governments are slowly but surely realising the need to navigate towards cryptocurrency regulations. The UAE has chosen to regulate the sector in a friendly manner rather than opting for a heavy-handed approach.
Dubai’s approach towards crypto regulation appears to be more about overseeing crypto rather than curbing it. The regulation of crypto assets undoubtedly contributes to Dubai’s rising image of having a diverse investment environment and being at the forefront of financial innovation.
How Is Dubai Positioning Itself To Be The Next Crypto Capital?
Shortly after China tightened down on digital assets in 2021, Singapore was seen as a promising choice for the crypto capital. Singapore proved to be incredibly slow with granting crypto licences. The crypto industry has, however, now moved on, as many firms seek a more crypto-friendly regulatory system in the UAE.
Dubai’s crypto-friendly regulation has already attracted various industry giants since launching its licensing program.
Cryptocurrency Regulation In Dubai
In September 2021, the UAE’s Securities and Commodities Authority (SCA) and the Dubai World Trade Centre Authority (DWTCA) signed an agreement to support crypto asset trading and related financial activities within DWTCA’s freezone.
This agreement created a framework for DWTCA to provide the appropriate permissions and licences for financial activity using crypto assets. According to the agreement, SCA shall manage, monitor, and inspect firms operating within DWTCA’s freezone.
The Dubai World Trade Centre free zone, located in the city’s core business sector, was established in 2015. It offers infrastructure for start-ups, small and medium-sized businesses, and major corporations, such as office buildings.
Sheikh Mohammed Bin Rashid, the ruler of Dubai, announced in March 2022 that the emirate passed its first law governing virtual assets. Law No. 4 of 2022 on the Regulation of Virtual Assets (VAL), establishes the Dubai Virtual Assets Regulatory Authority (VARA).
“Dubai will provide the most advanced virtual asset ecosystem in terms of organisation, governance and security,” said Sheikh Mohammed Bin Rashid, the ruler of Dubai.
“Approving the virtual asset law and establishing the Dubai Virtual Asset Regulatory Authority is a vital step that establishes the UAE’s position in this sector, a step that aims to help the sector to grow and protect investors,” added Sheikh Mohammed Bin Rashid.
This groundbreaking law underlines Dubai’s aim to become one of the leading jurisdictions for blockchain entrepreneurs and investors by creating a legal framework for enterprises linked to virtual assets, including crypto assets and Non-Fungible Tokens (NFTs).
Through this regulation, a number crypto companies have chosen to relocate their headquarters to Dubai. Crypto exchange ByBit, recently announced that it will transfer its worldwide headquarters from Singapore to Dubai, following key industry heavyweights Crypto.com, FTX, and Binance in establishing a presence in the city.
The Taxation Of Cryptocurrency In Dubai
We’re likely to see many other crypto companies and talent around the blockchain, Web 3.0 and crypto industry moving to Dubai in search for better opportunities.
A big reason for both companies and individuals looking to move to Dubai is the income tax benefits. Dubai offers zero percent personal income tax and corporate tax rates have been restricted to oil companies and foreign banks.
This means that there is no income tax for both individuals and companies involved in the crypto industry. Unlike other countries, income in the form of digital assets is not treated as a capital gain in Dubai.
Most other countries treat income in the form of digital assets as a capital gain and are, therefore, required to pay hefty capital gains tax. Furthermore, individuals also often require extensive record-keeping of all transactions. This is not the case in Dubai.
Various people working in the crypto industry are often payed their salaries in crypto and are forced to convert them to fiat currency, causing them to be subject to hefty income tax of 30 percent in countries such as India. This is why Dubai is being viewed as a crypto tax haven.
If you are a tax resident of Dubai and you actively trade or invest in cryptocurrency, you will not be subject to personal income tax or capital gains tax as they are both fixed at zero percent.
Since there is no income or capital gains tax, crypto investors or users will not have to file a tax return. This tax exemption covers crypto operations including, buying, selling, staking, trading, algorithmic trading, DeFi, mining, selling NFTs, etc.
Because of the zero percent income tax in Dubai, people don’t need to keep records of all their crypto transactions to show their capital gains or capital losses.
The Adoption Of Cryptocurrency Payments In Dubai
Dubai is not only proving to be a crypto tax haven, but the city is also proving to be a hot-spot for cryptocurrency payments. Imagine not having to use traditional money to purchase for your meal at a restaurant, your luxury hotel stay or even a brand new car. There’s no need to imagine, that’s all in the past. Dubai boasts incredible adoption of crypto payments:
Real Estate
Damac, a luxury real estate developer located in Dubai, will soon accept cryptocurrency payments, joining the recent influx of companies wagering that Dubai will become the next crypto capital. Damac will accept payment in the form of both Bitcoin (BTC) and Ethereum (ETH) for the sale of their properties.
Dining
Did you know you can now use cryptocurrency in Dubai when dining out? The days of carrying money in your wallet are over. There are currently at least 14 restaurants in Dubai that are getting ahead of the trend and accepting crypto payments. From coffee, to cake, to fine dining, whatever your heart desires, you can pay for it in crypto.
Airline Tickets
Emirates, a Dubai-based airline, has revealed plans to accept Bitcoin as a viable method of payment for flight tickets. Along with the launch of non-fungible tokens (NFTs) to be traded on the airline’s website, the move is part of the airline’s new strategy to widen its capabilities of engaging with existing passengers while drawing new consumers to its services.
Luxury Cars
Dubai is home to some of the most expensive supercars, it only makes sense that people can choose to buy these cars in whatever means they choose, including cryptocurrencies. Throughout the city, there are various car dealerships and online marketplaces that sell luxury vehicles and accept various forms of payment, including cryptocurrency.
Dubai is no doubt the epicentre of evolution, especially when it comes to technological advancement. Data suggests that the cryptocurrency market, including blockchain technology, DeFi, NFTs are all set to thrive in Dubai, and with its plethora of opportunities, Dubai is just getting started. Will Dubai become the next crypto capital? It seems very likely, it’s easy to see the great investment opportunities that may unravel in Dubai over the next few years.
Please note, this article is not intended to be investment advice. Please always do your own research before investing in any digital asset.
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