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The United Arab Emirates (UAE) is updating its tax policy such that cryptocurrency-related transfers and conversions will be exempt from value-added tax (VAT).  News of the policy change emerged via the UAE’s Federal Tax Authority (FTA), which published an Arabic version of the updated tax code on Oct. 2, followed by the publication of an English version on Oct. 4.Photo by Darcey Beau on UnsplashExemption backdated to 2018British multinational consulting firm PricewaterhouseCoopers (PwC) published a review of the UAE tax code update on Oct. 4. The auditing firm noted that virtual assets are defined within the UAE tax code as a “representation of value that can be digitally traded or converted and can be used for investment purposes.”It noted that Article 42 of the update dealt with the crypto VAT exemption. The firm suggested that entities dealing with crypto should “analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery,” adding that voluntary disclosures may be required to correct previous tax returns. Additionally, a VAT exemption has been introduced on services extended to fund managers relative to licensed funds. Younis Haji Al Khoori, a UAE Ministry of Finance official, stated that the amendments have been made with a view towards easing the burden on businesses. He stated:“These amendments help minimise misunderstandings, simplify procedures, and ultimately contribute to an improved quality of life for all.”  Crypto-friendlyAbdulla Al Dhaheri, CEO of the Blockchain Center in Abu Dhabi, commented on the development on X, stating:”The UAE, driven by visionary leadership, continues to set the global standard by becoming the number 1 destination for blockchain innovation. With the elimination of VAT on crypto transfers and conversions, the UAE reinforce their commitment to building a world-leading digital economy, attracting the best talent and investment from around the globe.” The UAE, and particularly Dubai and Abu Dhabi, have taken great strides forward in ensuring regulatory clarity for the virtual assets sector over the course of the past two years. Regulatory frameworks have been put in place, leading to many participants in the crypto sector praising the regulatory stance taken within the UAE.  This latest addition has equally being welcomed within the crypto sector. Many crypto sector participants have highlighted it as a wake-up call for other jurisdictions to follow suit or see crypto enterprises move to the UAE.  The Indian authorities, in particular, have an unfavorable tax policy in place relative to digital assets, with a 1% tax deducted at source (TDS) being applied. This latest development in the UAE prompted some to consider if India would learn from the UAE’s example. Earlier this year, the Indonesian tax framework, which subjects crypto assets to both income tax and VAT, was cited as the main reason for a slump in crypto trading. A recently published report by blockchain data platform Chainalysis found that the Middle East & North Africa (MENA) region accounts for 7.5% of crypto trading volume, with the report noting that the UAE, alongside Saudi Arabia, is showing a strong interest in decentralized platforms.

Dubai Regulator Issues Reprimand to OPNX FoundersThe Virtual Assets Regulatory Authority (VARA), the regulator that concerns itself with the digital assets market in the Emirate of Dubai, has formally reprimanded the founders of digital asset exchange OPNX.Photo by Kai Pilger on UnsplashVARA issued an investor and marketplace alert on April 12 to inform investors that OPNX was not a licensed entity regulated by VARA and with that, it urged investors to be cautious. The regulator has now gone one further, this time formally writing to OPNX’s founders to reprimand them.The statement cites the following rationale for the issuance of the reprimand:”Carrying out VA (Virtual Asset) Exchange Services on an unregulated basis in and from the Emirate of Dubai; and Marketing, promoting and/or advertising OPNX services and its native token [FLEX] without the necessary permits from VARA.”Contextual backgroundThe statement goes on to provide the context for the regulator’s most recent action. VARA became aware of OPNX soliciting the public to use the exchange in February of this year. It noted that the business was actively marketing through various social media channels “without establishing warranted restrictions for residents of Dubai/UAE.” VARA went on to explain that OPNX commenced trading in April without having secured a regulatory license despite the activity warranting such a license.Cease and desistOn February 27, VARA issued OPNX with a cease and desist order, relative to the foundation of the business and the marketing and promotion of services. Thereafter, the exchange applied certain restrictions but the regulator deemed the measures to not have been applied comprehensively across all OPNX communication channels, prompting it to issue a further cease and desist order the following month.The investor and marketplace alert followed in April as OPNX proceeded to launch its exchange. The written reprimand was then issued on April 18, “to address historical and ongoing activity conducted on an unregulated basis.” The recipients included the OPNX founders, (Mark Lamb, Sudhu Arumugam, Kyle Davies and Su Zhu) and the firm’s CEO Leslie Lamb.Given what the regulator deems to have been “a continued lack of satisfactory remedial action [taken] by the responsible parties,” it is continuing to actively monitor the situation. VARA stated that it will further investigate OPNX’s activity to assess further corrective measures that may be required to protect the market.Lack of industry supportThe digital assets industry is in no way enamored with founders Davies and Zhu. Their record has been badly blemished by the unceremonious collapse of their crypto hedge fund, Three Arrows Capital, in 2022. That failure wreaked major damage on the overarching crypto space, directly leading to the failure of other crypto businesses later that year.Prominent crypto venture capitalist Michael Arrington said of their capital raise for OPNX that it was “the saddest bulls**t I’ve heard in a long time.” It later transpired that two of the investment firms that OPNX suggested were backing the start-up refuted the claim.In response to this latest development, OPNX’s CEO Leslie Lamb told Blockworks that the business was initially launched in Hong Kong. “To confirm, we have no Dubai or UAE customers and do full KYC on all users,” she stated.

Mohammed AlKaff AlHashmi, co-founder of the HAQQ Network, has expressed the view that Indonesia has considerable potential to establish itself as Asia’s largest crypto hub. AlHashmi made the comments in a discussion with Crypto.news. HAQQ Network claims to be a scalable proof-of-stake-based blockchain, capable of high throughput. The network is fully compatible and interoperable with Ethereum. The project also focuses on the development of a Sharia-compliant Web3.  While the project is headquartered in Niqa Al Dheeb in the United Arab Emirates (UAE), Indonesia is also a significant market for the company, given that it has just received regulatory approval for the HAQQ Network’s native token from the Indonesia Financial Services Authority (OJK). Islamic Coin (ISLM) is the network’s native token. It is being offered as a Sharia compliant digital currency, with Sharia law being the Islamic legal system that governs the lives of millions of Muslims throughout the world.Photo by Nick Agus Arya on UnsplashGateway marketOffering his thoughts on the Indonesian crypto market, AlHashmi stated: “When we look at Indonesia as a market, I would say it is incomparable. It can be number one to be honest. Because I have seen statistics of growth happening in a very big volume. The volume of trade, transactions and users, I think Indonesia can be very soon one of the top 3 countries in the world.” Indonesia takes on added importance for the HAQQ Network project. The project’s co-founder sees the Southeast Asian nation as a gateway into a broader market given that it has the largest Muslim population in the world. He said that if his project is successful in Indonesia, then there will be no barrier to enter markets in other predominately Muslim nations. The entrepreneur believes that Indonesia is on the cusp of realizing its potential within the crypto sector. He said that Indonesia has a “competitive edge” when compared with other nations. Population size and rapid economic growth feed into that potential, with AlHashmi claiming that Indonesia is primed to become the largest crypto hub in Asia. Smooth regulatory processFrom a regulatory perspective, he also feels that Indonesia is outperforming other jurisdictions. The HAQQ Network project team experienced a smooth process in acquiring regulatory approval for ISLM recently. He believes that although the process was detailed, it was completed quicker than he would expect in other countries.  AlHashmi added that “regulations are flexible enough to enable project owners to do good business to protect the community as well.” Local regulator, the OJK, has expressed an interest in exploring the development of Sharia-compliant crypto assets. Earlier this month, Hasan Fawzi, OJK's executive head overseeing crypto assets supervision, told local media that the regulator is open to advancing Sharia-based cryptocurrencies.  Hasan stated: “Globally and regionally, this is a common practice. It is not unusual to create crypto assets that adhere to Sharia principles.” The OJK executive is particularly interested in tokenization of real-world assets (RWAs). He believes that if this proves to be successful, it could lead to further Sharia-complaint crypto products being launched. The OJK is currently testing tokenized RWAs within a sandbox environment.