Under Law No. 4 of 2022, VAL (Virtual Assets), cryptocurrency is a “digital representation” and not recognized as a currency. They can be digitally traded or transferred or used as an exchange or payment tool or for investment purposes. 

 Many countries around the world have been trying to legislate cryptocurrency, which in its essence has still not been understood properly. Cryptocurrency, unlike official currencies, does not require a central institution, and all banking communications in such transactions are encrypted in a “distributed ledger” called a blockchain. 

Due to unknown identities in cryptocurrency transactions, money laundering and terror financing seem to be common. Anyone can likely invest through cryptocurrency in real estate with a false identity. Hence in times of criminal offences, unregulated identities can easily escape due to the unrecognized nature of the transaction.  

According to the latest statement, cryptocurrency is targeted to be regulated by the UAE government under anti-money laundering and anti-terror financing rules. The Ministry of Justice and the Ministry of Economy together with the UAE Financial Intelligence Unit (FIU) have introduced the “new reporting criteria”. 

What all transactions come under the New Reporting Criteria?

The Ministries reported that all brokers, law firms, and real estate agents are obligated to file reports to the FIU for “purchase and sale transactions of freehold real estate properties” in the UAE that includes any of the below three methods of payment (whether for the entirety of the property value or portion):

● Payments that include the use of a virtual asset

● Single or multiple cash payment(s) equal to or above Dh 55,000

● Payments where the fund(s) used in the transaction were derived from a virtual asset

New criteria for reporting real estate transactions

Some new criteria as reported by the UAE government for all real estate transactions have been listed below:

● All real estate agents, law firms, and brokers must also record the identification and other pertinent documentation of the parties engaged in the transaction.

● Private individuals and corporate entities that purchase or sell real estate in the area must comply with the reporting requirements.

Are there any risks to the economy post this law?

Sometimes due to unanticipated shifts in a recovering economy, commercial laws and rules on unstructured systems might have temporary repercussions. However, due to legality and integrity, such planned twists tend to be effective. Due to Covid-19 and a serious drop in oil prices, UAE’s economy experienced a double shock last year. 

Real estate activities are estimated to generate about 5. per cent of the UAE’s overall gross domestic product (GDP) annually. According to experts, such a law may bring a temporary slowdown in the real estate sector, producing nearly Dh 150 billion investment in just half of 2022. 

On the other hand, with the notion that any law must be looked at its long-term effects, were to combat illicit payments, money laundering, terror financing, and even malpractices by businesses, this upcoming law sounds reasonable. It also acts as a test for transaction history to be reported to FIU for future commercial offences and data storage. Hence, short-term shocks could be beneficial to in the long-term to regulate an already unregulated industry. 

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