The UAE is currently one of the most advanced countries in terms of new technology included in day-to-day activities of the population and companies operating in the emirates. Dubai and Abu Dhabi are the most sought emirates for doing business in the UAE which is why the authorities here have created flexible regulations related to setting up businesses in high-tech sectors such as blockchain technology and cryptocurrency creation.
With respect to cryptocurrency, initial coin offerings (ICOs) have started becoming popular all over the world as foreign investors setting up startup gather funds through the issuance of virtual coins which are sold. Our Dubai company formation consultants can offer information on the initial coin offerings in this emirate.
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Regulations related to ICOs in Dubai
At the moment there is no legislation related to the issuance of initial coin offerings in Dubai, even if during the last 2 years the local government has enabled certain regulations related to the fintech sector. Even if cryptocurrency is recognized by the authorities and the sale of such digital tokens is not forbidden, the authorities have not created a legal framework through which initial coin offering can be controlled.
At the moment, the Central Bank in UAE and the Dubai Financial Services Authority (DFSA) only supervise transactions related to initial coin offerings, which are also known as initial token offerings or token sales.
Our company incorporation agents in Dubai can offer more information on the rules related to initial coin offerings.
Interested in opening a business in Dubai? Feel free to collaborate with one of our local specialists in terms of formalities and business registration. Our team can also provide you with support for registering to pay taxes or applying for a business license. At least 2 shareholders and one director are needed for a limited liability company, one of the most suitable structures available. Do not hesitate to contact us as soon as possible.
How can a Dubai initial coin offering be created?
The first step to having an ICO is to register a company in Dubai. However, there is a step that is skipped in this case and that is the licensing one. The issuance of any public offering is subject to licensing with the DFSA, but in the case of an initial coin offering, no license is required at this moment.
But there are some essential steps to creating ICOs in Dubai, and here we list:
- Website creation for ICOs in Dubai – specific software, graphics, and security programs will be implemented
- White paper – technical specifications and proficiency growth for ICOs in Dubai will be defined.
- Token development – Development of a blockchain platform, with specific functionalities for listing ICOs in Dubai.
- ICOs fundraising – It uses a specific platform, with advanced technology, and is accessible to customers.
Once the company is registered and the new digital currency is created, the Dubai ICO can be placed on the market for investors to buy it.
Documentation for ICOs in Dubai
Like many other countries, the UAE has no legal provisions or clear rules for issuers of ICOs in Dubai. But there are some formalities that we review here:
- Before the issuance of the ICO, trading with potential investors is done through a White Paper.
- The White Paper is the same as a prospectus of information in initial public offerings.
- Also, this document can be considered a marketing tool that provides information about the company issuing ICOs, the activities carried out, the structure of Tokens, the issuance rights as well as the conditions under which funds can be raised.
- The White Paper must be accessible to customers through the official website of the ICO issuing company in Dubai.
- The terms and conditions of the purchase of ICOs are presented and registered with the purchase of digital tokens and establish the rights of each party, the company, respectively the buyer.
- The purchase contract for ICOs must comply with the local law of the states in which they are traded.
Remember that you can talk to one of our company formation agents in Dubai and find out more about ICOs in Dubai. We are at your disposal if you want to open a company in the financial sector in the UAE.
Risk protection in ICO transactions in Dubai
The Securities and Commodities Authority is the institution that supervises and regulates the financial and commodities markets in the UAE. At the same time, this institution provides information and support to better understand what the risks are in trading with ICOs and how they can be avoided. Here are some ideas:
- Because certain ICOs are not regulated, they may be subject to certain financial risks, and more specifically fraud. SCA recommends that issuers take precautions for customers.
- ICOs issued abroad must comply with foreign legislation. But this can be a disadvantage because they cannot be tracked and verified. There are cases where funds cannot be recovered, especially if ICOs crash. And, in this case, it is suggested to implement an internal regulation to cover such cases.
- ICOs transactions on the secondary market can have volatile prices, and therefore insufficient liquidity. SCA warns against this and recommends ICO issuers in Dubai to draw up clear policies in order to provide the necessary protection and security to such transactions and implicitly to customers.
Here are some statistics about cryptocurrency in the UAE:
- The Central Bank of the UAE has announced the launch of its virtual currency by 2026.
- Total venture capital investment in virtual currency and blockchain start-ups has exceeded USD 30 billion, according to data for the first quarter of 2021.
- In 2021, the capitalization of the cryptocurrency market reached around USD 3 billion. Bitcoin reached an all-time high of over USD 65,000 in the same year.
If you need more information on initial coin offerings in Dubai or assistance in incorporating a company here or in a free zone, please feel free to contact our local representatives.