UAE: Virtual Asset Fraudsters to Face Imprisonment, Dh 1M Fine

  • Richard Marley
  • May 31, 2021
  • 2 minutes read
  • 281

Residents in the UAE have been advised to perform due diligence procedures prior to investing in any virtual asset. Due to the uncertainties associated with online investments, conducting enhanced due diligence (EDD) is strictly advised for minimizing risks and avoiding hefty losses. 

The absence of specific laws related to cryptocurrencies in the UAE led the founder of the law firm “Ashish Mehta & Associates” to state that federal laws which deal with combating cybercrimes can be used as a reference point when addressing unlawful activities related to virtual assets. (Khaleej Times

This advisory comes in the wake of a recent incident where a UAE resident lost savings worth Dh 15,000 by investing in ‘DubaiCoin’ (DBIX). 

DubaiCoin, an emerging virtual currency, was supposedly launched by Arabian Chain Technology. However, the firm denies any links to this asset. In a recent tweet, the company stated: 

Adding to this, the CEO of Arabian Bourse, a virtual asset trading company, stated that investors must verify related associations of a company when investing in virtual assets, such as cryptocurrencies. By conducting EDD and a thorough background check, potential gains of investors can be substantially proliferated. 

To enhance the due diligence checks, he also advised companies to clearly specify the reason for raising funds, where the funds would be invested, and to specify their payback options. 

Based on these latest developments, Article 11 of the Federal Decree-Law No. (5) of 2012 is deemed as the most appropriate for regulating virtual assets. Under this law, 

“Those shall be punished by imprisonment for a period of at least one year and a fine not less than Dh250,000 and not in excess of Dh1 million, or either of these two penalties whoever takes over a personal property, benefit, deed or its signature whether for oneself or for other persons and without legal right, by resorting to any fraudulent method or by adopting a false name, or false personation through the computer network, or an electronic information system or any information technology means.”