The new regulations implemented by Dubai’s VARA do not allow the use of privacy coins such as XMR and ZEC.
Dubai’s Virtual Asset Regulatory Authority (VARA) has banned all activities involving privacy coins such as Monero (XMR) and Zcash (ZEC).
The regulator has also imposed certain rules on the domestic cryptocurrency industry in a bid to turn the city into an “international hub for virtual assets.”
Dubai's new policy
Operations with anonymity-enhancing digital assets such as XMR and ZEC are now banned in Dubai, the financial hub of the United Arab Emirates, according to recently published documents.
The local regulator has also set licensing requirements that crypto companies need to pass before popping up in the region.
The most basic principles include anti-money laundering obligations, marketing protocols, preventing insider trading, and observing whether the asset class is used for criminal activities. Angela Ang, senior policy advisor at blockchain intelligence company TRM Labs, commented:
“Any obfuscation of the flow of funds poses a challenge to detecting illicit activity, so it’s no surprise that regulators have reacted strongly to this type of asset class and mechanism.”
The updated regime is designed to provide maximum security for local consumers and establish Dubai as a global hub for blockchain technology. The regulator previously granted temporary licenses to Binance and Crypto.com to provide services in the region, while allowing FTX to establish a regional headquarters.
The United Arab Emirates’ largest airline, Emirates Airline, has expressed its intention to accept Bitcoin as payment and use blockchain technology to track aircraft records.
Another example of Dubai’s pro-crypto stance is the luxurious five-star Palazzo Versace Dubai. It allows customers to pay for accommodation, spa services, and meals in digital currencies, with supported assets including Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB).
Not just Dubai
Japanese authorities banned privacy coins such as Monero (XMR), Zcash (ZEC), and Dash (DASH) in 2018 due to concerns that bad actors could use such coins in their illegal operations.
Some leading exchanges have also delisted these assets from their platforms. Bittrex did so in early 2021 without providing any particular reason.
Huobi Global suspended trading of seven privacy coins (including XMR and ZEC) in September 2022 “in accordance with the latest financial regulations.”