The phrase "cryptocurrency" has been in the headlines for almost a decade. Bitcoin (BTC) was the first cryptocurrency to be released, and it set a new high in March 2021. It is a decentralized type of money that eliminates the need for traditional financial transactions, which are now carried out with the assistance of banks and officials. As a result, there is no bank or government backing for Bitcoin. It simply makes use of peer-to-peer technology. Despite the fact that the legality of Bitcoin is unknown, it has grown in popularity and spawned a slew of alternative cryptocurrencies.
Is Bitcoin legal in UAE?
The United Arab Emirates, which embraces all technological advancements, has implemented Blockchain Technology for transactional purposes. It announced the Emirates Blockchain Strategy 2021 and the Dubai Blockchain Strategy, with the goal of adopting Blockchain technology to perform 50% of government transactions by 2021. In 2018, the Blockchain Strategy was unveiled. Under this, each customer will get a unique ID that has their details on the security chain. The details and data in this secure blockchain are difficult to hack, steal, or change, making it ideal for large-scale transactions and secure documents.
However, there are currently no restrictions in place in the UAE regarding cryptocurrencies or virtual currencies. While the UAE government promotes its own cryptocurrencies, such as Emcash, the legality of Bitcoin remains a mystery. Despite the lack of a unified regulatory framework for virtual currencies, the European Central Bank, and the US Financial Crimes Enforcement Network both stated in 2012 and 2013 that virtual currencies will not replace fiat currencies, or traditional currencies, but will instead serve as an investment. In addition, the Central Bank of the UAE (CBUAE) stated in 2020 that cryptocurrencies are not lawful under the Stored Value Facilities (SVF) Regulation.
It further claimed that cryptocurrencies would be recognized as virtual assets, similar to how they are recognized by EU and US regulators, but not as a currency comparable to the UAE dirham.
Though the official law for Bitcoin and other cryptocurrencies is that they must be treated as literal virtual currencies, there are various exchange centers in the UAE that allow people to buy Bitcoin at a rate of 133209.61 AED per Bitcoin (BTC) as of June 1, 2021. In actuality, purchasing bitcoin is simple: the investor simply needs to open an account with a reputable cryptocurrency exchange and obtain a crypto wallet to store the virtual money.
Bitcoin, like any other cryptocurrency, remains a virtual asset for the time being, allowing investors all over the world to invest in it and experience volatility comparable to other financial products. However, when it comes to the currency that may be used to make purchases, UAE institutions are skeptical of the idea and regard it as a high-risk choice. As a result, virtual currencies will be classified as virtual asset schemes under UAE Central Bank regulations in 2020. Overall, integrating virtual currencies into normal commerce may take some time.
Advantages of Bitcoin
Below discussed are the advantages of Bitcoin
Fast Transactions
One of the major issues with fiat currency is that transactions can take days or even weeks to complete. With the, this is not the case. You'll get your money right away, whether it's 10 a.m. or 2 a.m.! There are no middlemen, which means less time spent waiting and less hassle. You can visit the Bitcoin Loophole webpage for further information. If you want to send Bitcoin to a friend in another nation, all you have to do is type in his bitcoin address and send; there are no limits, and this transfer cannot be reversed (unless the other party decides to do so).
Lower Transaction Fees
Imagine having to spend more than $35 every time you want to take money out of your own bank account. If you withdraw more than $1000, you may be required to pay that fee. Bitcoin transactions, on the other hand, have no fees for transfers of any value; all you pay is a tiny charge to miners (to process the transaction). Don't worry, this has been kept to a minimal minimum as well.
Decentralization
Bitcoin transactions are unaffected by governments or financial organizations due to their decentralized nature. This makes it a good choice for those who are opposed to the system or who require additional privacy. Users' information can be hijacked using typical payment systems like PayPal or credit cards, giving hackers access to their full financial records and allowing them to perform fraudulent transactions. However, due of BTC's unique blockchain technology, these issues will never arise.
Inflation
Another major issue with traditional payment methods is that they can cause inflationary pressures. Because of its decentralized structure, there are no limits on how much bitcoin may be mined, resulting in a market with a fixed supply of BTC. This means you'll never have to worry about your digital assets decreasing in value due to time, because bitcoin is only restricted by the quantity of bitcoins in circulation, not by any other constraints!
Bitcoin is Safe
In today's world, the security of fiat currency is in question, with cyber-attacks occurring all over the world at the touch of a hacker's keyboard. When it comes to bitcoin, however, every transaction is recorded on an open distributed ledger, which means that if someone tries to make unauthorized changes, the entire BTC community will be informed! As a result, bitcoin transactions are extremely safe.
Tax Status of Bitcoin in UAE
Despite the fact that Dubai and the UAE have obviously embraced blockchain, the legal and tax position of Bitcoin in Dubai remains a mystery.
There was an apparent inconsistency between the UAE central bank's prohibition on "virtual currencies" and Emcash, which is slated to be the official state cryptocurrency of Dubai. However, the head of the central bank later emphasized that the ban does not apply to cryptocurrency.
Buying and selling Bitcoin is considered a "tolerated practice" in the UAE, While Bitcoin is not explicitly allowed in the region, those who trade in it will not be prosecuted.
The Dubai Financial Services Authority has issued a public warning about the high risk of cryptocurrencies, but has refrained from regulating them.
The taxation position regarding cryptocurrency is currently uncertain, However, a regulatory framework for crypto-related businesses was announced in 2018. The operation of such businesses necessitates the acquisition of a license. More legislation is in the works, and it is hoped that the legal status of Bitcoin in Dubai will be clarified soon.
Conclusion
UAE is set to become a regional, if not global, leader in the use of blockchain technology. However, this should not be taken to imply that all things crypto are permissible. We at Dhanguard advise our valued clients interested in purchasing Bitcoin in Dubai and the UAE to do their own research on local taxation laws and other cryptocurrency regulations.