Implications of UAE’s New Digital Assets Law

UAE’s New Digital Assets Law

In the rapidly evolving world of finance and technology, digital assets have emerged as a transformative force, reshaping the way we perceive and interact with value. From cryptocurrencies to non-fungible tokens (NFTs), the realm of digital assets is expansive and diverse, bringing forth a myriad of opportunities and challenges.

Cryptocurrencies: The Pioneers of Digital Currency

Cryptocurrencies, led by the groundbreaking Bitcoin, have disrupted traditional notions of currency and finance. Explore the origins, evolution, and impact of cryptocurrencies on global economies and financial systems.

NFTs: The Unique Tokens of the Digital Era

Delve into the phenomenon of Non-Fungible Tokens (NFTs), digital assets representing ownership of unique items, be it digital art, virtual real estate, or other digital collectibles. Uncover the cultural and economic implications of this burgeoning market.

Blockchain Technology: The Backbone of Digital Assets

Examine the underlying technology powering digital assets – blockchain. Understand how its decentralized and transparent nature not only secures transactions but also opens new possibilities for various industries beyond finance.

UAE’s New Digital Assets Law

The Dubai International Financial Centre Authority (DIFCA) has issued a consultation paper on its proposition to enact a new Digital Assets Law (DAL) and to amend a few existing DIFC regulations to oblige the legal features and outcomes of the acknowledgment of digital assets as a type of property.

Legal nature of the digital assets

The DAL expects to give legal certainty and clearness on the essential aspects of the legal nature and treatment of digital assets as a matter of property regulation, like the definition, characterization, transfer, acquisition, interference in use, and recuperation of digital assets. The draft DAL characterizes digital assets as a thing:

I. that exists as a notional amount unit appeared by the blend of the active operation of software by a network of participants and network-instantiated data, independent of a specific individual or general set of laws

II. that isn't fit for duplication

III. whose utilization or utilization by at least one person essentially biases its utilization or utilization by one or more other persons.

A  digital asset is described as being intangible property, which is neither a thing under lock and key nor a thing in real life. The meeting paper sets out a nitty gritty clarification of the purposes behind the position the DIFC has taken as regard the legal status of digital assets, which is in accordance with the position embraced by the Law Commission of England and Wales on the treatment of digital assets.

Ownership

It is suggested that the DAL will embrace the rule that control is at the base of title to digital assets and that a transfer of title requires a change of control and an aim to transfer title. The draft DAL further sets out the conditions for an individual to have control of digital assets, which incorporate the selective capacity to keep others from getting significantly all the advantage from the digital asset, the capacity to get considerably all the advantage from the digital asset, the elite ability to transfer those abilities to someone else, and the ability to distinguish oneself as having those abilities. The draft DAL obliges exemptions for the difference in control prerequisite in circumstances including demise, bankruptcy, or inadequacy, where the applicable law might provide a transfer of title without a difference in control.

When issued, the DAL will lay out a regime for the protection of digital asset owners against illegitimate interference or impairment of use by third parties, which depends on the thought of a hindrance of purpose that causes misfortune to the proprietor. The draft DAL provides for defenses to an impairment claim, like consent or the probability of consent by a reasonable individual in the owner's position. The draft DAL likewise permits an owner to recuperate control of a digital asset from an individual who has no knowledge of the owner's title.

Amendments to existing laws

The consultation paper frames the vital proposed amendments to the current DIFC laws that are essential or desirable to oblige digital assets, like the Contract Law, the Implied Terms in Contracts and Unfair Terms Law,  the Law of Damages and Remedies, the Insolvency Law and Insolvency Regulations, the Law of Obligations,  the Trust Law, and the Foundations Law. These amendments cover various aspects of private law, for example, the action for the agreed sum, rectification, rescission, electronic trade documents, bona fide purchase, agency, foreign currency conversion, priorities, and shortfall.

The draft DAL and the related draft amendments are to be perused related to the proposed new Law of Security, which integrates an amended version of the current Financial Collateral Regulations and sets out the rules for the creation, priority,  and enforcement of security rights over digital assets.