Competition is hot between jurisdictions competing to be the hub for virtual assets, and the UK is taking steps with this aim in mind.
Last month, the UK Government announced plans to see stablecoins recognised as a valid form of payment, to introduce a ‘financial market infrastructure sandbox’ to enable firms to experiment and innovate, to establish a Cryptoasset Engagement Group, to look at ways of enhancing the competitiveness of the UK tax system, and to work with the Royal Mint on creating an NFT.
Speaking on these plans, Chancellor of the Exchequer, Rishi Sunak has said:
"It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country."
"We want to see the businesses of tomorrow – and the jobs they create - here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term."
"This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation."
Dubai is also looking to develop regulation that will attract crypto firms. Dubai's landmark legislation, the Virtual Assets Law No. 4 of 2022 ("VAL"), which came into force 11 March 2022, and its newly established regulatory authority, the Virtual Assets Regulation Authority ("VARA"), is a step towards its aim of becoming one of the leading hubs for virtual assets.
VARA's objectives are to promote Dubai as the global destination of choice for digital assets, to attract virtual investment into Dubai, such as investments in the crypto sphere, and to provide legal, financial and administrative infrastructure to protect consumers and investors in virtual assets alike.
VARA will enforce the requirements of the VAL, is permitted to restrict or suspend any activities or licences under the VAL and can issue any necessary fines in case of any breach of the VAL. It will also suggest, adopt and regulate any necessary future rules and regulations that come to light as and when VARA progresses with the implementation of the VAL guidance.
At present, the VAL defines virtual assets very broadly: "a digital representation of value that can be digitally traded, transferred or used as an exchange or payment tool or for investment purposes, including virtual tokens and any digital representation of any other value determined by VARA in this respect". The definition does not expressly state which virtual assets, such as cryptocurrency or NFTs, are included or excluded. The broad and expansive nature of the definition will give VARA a degree of discretion in determining the applicability and classification of a virtual asset.
We discussed these developments with Jason Corbett, managing partner of Silk Legal, who works with clients in Dubai and regularly advises on fintech and blockchain matters. Jason comments "There are no doubts that the newly issued VAL is a good step in the right direction for the crypto community in general and the Dubai one more particularly. We look forward to reading and then advising on the much-anticipated VAL implementation regulations that are being prepared".