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Dubai has cemented its place as a global financial powerhouse. Its strategic location between the East and the West makes it more attractive for multinational companies. Dubai has adopted crypto-friendly regulations in the past few years to diversify its economy and increase its competitive advantage in the global market. So, what do miners need to know about Dubai’s crypto-mining rules?
How has UAE’s crypto regulation evolved?
Crypto regulations play a crucial role in the evolution of the Bitcoin mining sector. China was the dominant player before the government banned crypto mining in 2021. The ban paved the way for the US with a 35.4% hash rate, Kazakhstan at 18.1%, and Russia at 11.23% to take over. But the Bitcoin mining landscape is ever-evolving, with emerging players like the UAE keen to tap into the new industry. UAE citizens and residents have engaged in home Bitcoin mining for several years and reaping from subsidized electricity tariffs. In 2018, the UAE set up a committee to study cryptocurrency’s economic implications. The study revealed that cryptocurrency offered new opportunities to diversify and expand the UAE’s economy.
In 2020, the Securities and Commodities Authority (SCA) issued the Crypto Assets Activities Regulation (CAAR) to regulate the offering, listing, and trading of crypto assets in the UAE. The CAAR covers ICOs, exchanges, marketplaces, virtual asset platforms, and crypto services. In 2022, Dubai introduced the Virtual Assets Law, which defines Bitcoin and other cryptocurrencies as virtual assets. It reinforces the trading and use of cryptocurrencies. Dubai launched the Virtual Asset Regulatory Authority (VARA) in 2022 to enforce the Virtual Assets Law.
The UAE has seven emirates, including Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah, Umm Al-Quwain, and Ras Al Khaimah. Each has rules in areas where there is no federal law. Dubai and Abu Dhabi have played a crucial role in the evolution of UAE’s crypto mining sector and laws. Abu Dhabi’s Zero-Two partnered with Phoenix Technology in 2021 to build a 200 MW hydro-cooled mining farm. In Feb 2023, Zero-Two collaborated with Marathon Digital to establish two mining sites. The UAE has laid the foundation for a prosperous future for crypto miners.
What do crypto miners need to know about Dubai’s regulations?
According to estimates by the Hashrate Index, the UAE has around 400-MW Bitcoin mining capacity. At a 30 J/TH average energy efficiency, UAE Bitcoin miners can generate about 13 EH/s. This figure translates to 3.7% of Bitcoin’s global hash rate. The UAE is the leading Bitcoin mining country in the Middle East. UAE’s adoption of favorable crypto rules can catapult the nation to a top-tier player in the global crypto-mining market. Here are 3 things crypto-miners need to know about Dubai’s regulations:
- Zero-tax policy: One of the reasons why Dubai is attractive for crypto miners is UAE’s zero-tax policy, applicable in over 30 free trade zones. It defines Bitcoin miners as export-oriented companies. Crypto miners in Dubai can leverage the zero-tax option by registering their mining operations in a free trade zone to avoid corporate tax, VAT, and import duties. It can help Bitcoin miners increase profit margins.
- AML laws: Cryptocurrency is decentralized, increasing the risk of misuse for sanctions evasion, fraud, terrorist financing, and money laundering. In 2017, the Central Bank of the UAE (CBUAE) adopted a law stating that all digital assets transactions are to be made through authorized exchanges. The law also required the transactions to comply with CBUAE’s anti-money laundering regulations. Ensure your crypto mining operations adhere to AML laws.
- Licenses: VARA oversees the licensing of all crypto-related activities. Ensure you get a license from VARA before trading cryptocurrencies or engaging in Bitcoin mining in Dubai. Dubai’s Financial Services Authority (DFSA) and Multi Commodities Centre (DMCC) regulate specific business activities and trade zones. Check whether you’ll need a license from the DFSA or DMCC.
Dubai is a pro-business region with crypto-friendly regulations. So, registering a company or getting a license is quick and easy. However, you’ll need corporate documents, AML and KYC policy, lease agreement, and relevant credentials to hasten the process.
Bottom Line
Dubai is a progressive crypto-mining hub thanks to its relaxed regulatory approach. Crypto miners in Dubai should adhere to licensing and AML laws. They can leverage the zero-tax policy to increase profits. Dubai also has a fast-growing Bitcoin mining hosting sector, which caters to crypto miners in the UAE and globally.
