Blockchain, of recording any transaction of economic value. This


Blockchain, developed in response to the emergence of cryptocurrencies, is an ever growing list of records that irreversibly
stores all details of transactions, once a transaction has been completed it
forms part of the blockchain permanent database. The blocks are linked and
secured using cryptography, ensuring
that they remain tamper-proof and safe from hacking: The data can be easily
distributed, but neither duplicated nor modified; thus these transactions are
impenetrable and inerasable.

Blockchain serves as an open
distributed database managed by a peer-to-peer network that records
transactions between two parties on a connected system of registers. Such
transactions do not necessarily need to be of the financial variety as the
system is capable of recording any transaction of economic value. This system
is decentralized and the records are public and easily verifiable, allowing for
transparency and incorruptibility.

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Blockchain technology can
simplify business operations hence dramatically reducing expenses, mistakes,
and delays caused by traditional methods for reconciliation of records. Additionally,
greater transparency and ease of auditing could lead to decreased AML regulatory
compliance costs.

Unlike traditional banking, Blockchain
requires minimal human involvement in processing and is not controlled as a
single entity with the records existing in a shared and continuously updated
database. Interestingly, Blockchain technology is virtually incorruptible, as
any attempt to alter the records would require an enormous amount of computing
power to gain access to every computer on the Blockchain network in order to
successfully override the database.

What are Cryptocurrencies and Bitcoin?

Cryptocurrencies are a type of digital currency with a value dependent on people agreeing
to trade goods and services in exchange for a higher amount of the currency
under their control, and believing others will do the same. Blockchain
technology was developed in response to the emergence of cryptocurrencies and
acts as a database that records and contains evidence of all transactions
between users.

The unprecedented success of cryptocurrencies can be attributed to the security
and anonymity it provides to users. Bitcoin, considered the original
cryptocurrency, has paved the way for an emergence of cryptocurrencies since
its release in 2009. To date there are over 900 different types of
cryptocurrency that can be used for buying or selling with other
currencies,  purchasing goods and
services from providers who are willing to accept digital currency, investing in
various assets or retaining the currency as an investment in itself.

Bitcoin (BTC), synonymous with the word cryptocurrency, is perhaps the most
well-known of all virtual currencies.  It
allows users to exchange online credits for goods and services. Bitcoin was
first created by an unknown person operating under the alias of Satoshi
Nakamoto. When first introduced, the idea of a digital currency was a
completely foreign concept with many people feeling that a non-physical
currency not regulated by a central bank or government entity was doomed to

Bitcoins are traded from one personal digitalized ‘wallet’ to another. The
wallet consists of a small personal database that you store in your system,
phone or your tablet. Globally, there are dozens of online Bitcoin exchanges
and brokers.

2-       Blockchain operations in

The GCC in general, but more specifically the UAE, is moving towards a
more technology based economy. Regional governments have already started to
experiment with blockchain technology and its potential use in both the public
and the private sectors.

a-       Block Chain Council


In an effort to stay ahead of the curve, the Global Blockchain Council was
established in Dubai to adopt
the latest technologies and innovation practices on a global scale. The council
is composed of 46 members, all of whom have the potential to become key players
in the Blockchain industry. Council members include a host of government
entities, international companies, leading UAE banks, free zones, and other international
Blockchain technology firms, including Microsoft, Du, SAP, IBM, Cisco, TECOM,
Dubai Holding, Dubai Multi Commodities Centre, EmiratesNBD, Smart Dubai Office
and Dubai Smart Government.

Dubai Blockchain


The Dubai Blockchain Strategy,
launched by His Highness Crown Prince Sheikh Hamdan, was the result of collaboration
between the Smart Dubai Office and the Dubai Future Foundation with the mission
to continuously explore and evaluate the latest technology innovations in an
effort to further improve the lifestyle of the city’s residents.

The strategy’s aim is to give an
economic edge to all sectors and position Dubai as a leader in global

In fact, the city of
Dubai is, somewhat ambitiously, aiming to become the world’s first economy to
have and operate with its own cryptocurrency by the year 2020.

The Dubai Blockchain Strategy is
built on three pillars:


Government Efficiency: The new strategy
will contribute to increased government efficiency by promoting widespread
digitalization including, a paperless digital layer for all city transactions. Official
documents such as visa applications, bill payments and license renewals will be
transacted digitally under the new strategy thus reducing carbon emissions, processing
times and costs.


Industry Creation: The Dubai Blockchain
Strategy will introduce a system for enabling citizens and partners to create
new businesses using the shared ledger technology. Industries expected to benefit
include: real estate, fin-tech and banking, healthcare, transportation, urban
planning, smart energy, digital commerce and tourism.

Leadership: Dubai
will open its Blockchain platform for global counterparts to enhance safety,
security and convenience on a global level.  


Many Government entities in Dubai
have already begun to test the water and roll out blockchain technology including
the Dubai Land Department, the Dubai Department of Economic Development,
Department of Naturalization and Residency and the Dubai Municipality.


Emcredit, a subsidiary of Dubai
Economy, and the UK-based Object Tech Group Ltd will work together to develop
and implement emCash, an encrypted digital currency operating with blockchain
technology, which people can use to pay for various government and non-government
services in Dubai.


The Dubai Land
Department (DLD) has achieved another technical milestone by becoming the
world’s first government entity to adopt Blockchain technology. The
first-of-its-kind initiative in the global real estate sector, was launched
under the slogan “Simple, Secure, Fast”.

The Blockchain
database records all real estate contracts including lease registrations, and
links them with the Dubai Electricity & Water Authority (DEWA), the
telecommunications system, and other property-related bills.


The Department of
Naturalization and Residency Dubai (DNRD) aims to facilitate procedures for
residency using biometrics systems and Blockchain technology.


The Dubai Economic Department (DED), meanwhile,
signed memorandums of understanding with both Otonomos
and MarketIQ to produce an innovative licensing procedure using the Blockchain
technology and Big Data, in an effort to reduce processing time for
applications by 80%.

Smart Dubai

Agreements were further signed between Smart
Dubai, Avanza Solutions and Consensys to standardize government services
payment gateways using Blockchain, and to create a cryptocurrency for Dubai.

Dubai Municipality

Dubai Municipality has signed memorandums of
understanding with Renca and Winnow to legalize the 3D printing of building
material in order to promote 3D printing in the construction industry, and to
encourage the deployment of the Internet of Things (IoT) to reduce food waste
across the hospitality sector.

Cryptocurrencies and Bitcoin operations in UAE.

In the region, Bitcoins can
be bought and exchanged through Dubai based BitOasis, a secure platform
offering the trade of cryptocurrencies and storage services for the MENA region.

Bitcoin is often purchased as a
long-term investment, which is bought and held in the hope that its value will
increase dramatically over time. Early adopters have been well rewarded, but
there remains plenty of volatility.

An attractive feature of online
exchange platforms like BitOasis is the option to buy fractions or “bits”
instead of a whole Bitcoin, with investment starting from as little as $10 on
some sites. Transaction fees typically range from 0.2 to 1 per cent of the
currency bought, plus bank transaction charges.

Bitcoins are stored in a “digital
wallet”, either in the cloud or on computers, which can be directly linked to a
purchaser’s bank account facilitating payment via bank transfer, mobile
payments or with a Visa or MasterCard, or at Bitcoin ATMs such as one based at
Dubai Media City.

Bitcoin supporters claim that
because it is not controlled by any central bank, the currency is not subject
to any inflationary pressures. However, Bitcoin cannot be considered a
fool-proof investment, recently it suffered a 12% decrease in value as South
Korean, Finance Minister Kim Dong-yem announced government plans to consider a
ban on cryptocurrencies. Many exchange houses are looking to bitcoin to help
reverse a decline in global remittances, for instance, UAE Exchange invested in
two blockchain-based companies, Loyyal and Bankchain, in the first half of 2017
and is in talks with a third.

Are there other cryptocurrencies improving and
innovating the system in UAE?

In the UAE, there are some
trading platforms and cryptocurrencies of significance that are having an
impact on the market, these include:


The ArabianChain, a local
cryptocurrency to enable secure payments and money transfer, was founded in
February 2016 and began trading in the market in April 2017. ArabianChain is
the first company in the region to develop a public and decentralized platform
for smart contracts on blockchain. The platform is particularly innovative as
it also delivers workshops and educational sessions in an effort to increase
blockchain competency within organizations and aiding companies in the MENA to
successfully integrate blockchain technology.


The Dubai-based OneGram jointly
with GoldGuard, a gold trading platform, launched a sharia compliant cryptocurrency
that is completely backed by gold. The company has already launched an Initial
Coin Offering (ICO) offering, which aims to raise more than US $500 million in

This new type of cryptocurrency
uses blockchain technology to create a digital currency that is intrinsically
linked to one gram of gold. The idea is that currency, backed by physical gold,
guarantees safety and transparency for the buyer. The coin will be listed on a
few digital currency platforms and some analysts have said OneGram is the
closest coin that has ever come to knocking bitcoin off its pedestal because
unlike Bitcoin, the coin always has a base price bring at least equal to the
current price of gold.



Money Trade Coin.

Money Trade Coin, has taken steps
to position itself as leader in cryptocurrency knowledge, launching its coin,
the Money Trade Coin Trading platform and exchange, and including the
Cryptocurrency E-Academy, aiming to educate the young generations about the benefits
of using and trading digital currencies along with an Online Service E-Portal.
The management is aiming to set-up other businesses such as E-commerce and
E-travel desk all based on the Money Trade Coin.

Money Trade Coin, coupled with an
ultra-secure wallet, claims to be first fully secured cryptocurrency, which
implements the highest standards of compliance with relation to the KYC and AML.

5-       Which are the areas of concern
about Blockchain and cryptocurrencies?

The challenges to the wider
adoption of these technologies include: cyber security; regulatory uncertainty;
lack of physical representation of the coin; mistrust of bitcoin related
technology due to dark-web and criminal connotations; high energy consumption
needed to complete transaction; questionable capability for smart contracts to accurately
execute complex instructions; fear of disruptive potential that can often lead
to adoption resistance; privacy and data-security on public blockchains and
software compatibility issues.

These innovating technologies are an attractive investment vehicle, but
it comes with high risks because at the moment it is an unregulated market
offering no protection.

Legal Aspects in the UAE.




Bitcoin is not screened by any governmental agency nor
does it pass through any bank or financial institution, this creates
significant challenges concerning government regulators and current laws.

Bitcoin’s “monetary policy” is written into its code:
New money is issued every 10 minutes, and the supply is limited, a hard money rule is applied
similar to the gold standard.

The UAE Central Bank published the
“Regulatory Framework for Stored Values and Electronic Payment Systems” on
January 1st, 2017 to promote consumer protection and financial
stability. However, on February 1st 2017, the Governor of the UAE
Central Bank issued a statement clarifying that “these regulations do not apply
to bitcoin or other cryptocurrencies, currency exchanges, or underlying
technology such as Blockchain,” as well as adding that virtual currencies are currently
under review by the Central Bank and new regulations will be issued as
appropriate based on evolution of concepts and adoption rates.

waiting for new regulations to be issued addressing cryptocurrencies, one key question
that needs to be addressed, is Bitcoin a currency or a Commodity?

If Bitcoin is deemed a commodity, then the UAE Securities
and Commodity Authority has
jurisdiction over
local bitcoin exchanges while if it is deemed a currency, it would fall under
the regulatory authority of the UAE Central bank. Further, and if it ends up
being considered a commodity, it may become subject to VAT. The UAE authorities
have yet to clarify their position on the matter.

b-      Blockchain.

The launch of the Global Blockchain Council
and the adoption of the Dubai Blockchain Strategy demonstrate the position of
the Dubai Government in recognizing the potential of Blockchain based

The Dubai Supreme Legislation Committee
further stated that the UAE “should be among the first in the region and the
world to establish a legislative framework and a financial and organizational
structure for this technology.”

c-       Smart Contracts


Amongst the various applications of the blockchain
technology are smart contracts. Smart contracts probably have the most
potential to alter the way companies do business.

As Blockchain can process transactions, not just simply store transaction information, they can serve as a
platform for “smart contracts”. These contracts are electronically drafted,
executed and performed, eliminating the possibility of fraud or downtime by
either party. It is a self-executing agreement and once created it produces its
outputs autonomously. The more sophisticated the code, the more automated,
self-executing, and smarter the contract.

form of legal agreements suffer from several imperfections such as the inherent
ambiguities in legal prose, the time-consuming process of signature pages
between parties, possibility of being slowed down by human effort, the costs of
creating contracts or performance where third-party input is required and the
inefficient storage of legal documents.

technology may provide much needed relief to some of these problems. However,
some difficulty still lies in the fact that smart contracts cannot be easily
rectified. In a scenario whereby a bug gets in the code or incorrect details
are entered at the time of submission it is unclear how it can be rescinded.
Traditionally, contracts are rescinded in court but in the case of smart
contracts it remains to be seen how it can be rescinded or if it must be
performed regardless of the irregularities.


UAE Federal Law No.1 of 2006 on
Electronic Commerce and Transactions appears to allude to
“smart contracts” in its Article 12 as it states that “Contracts between
confidential electronic mediums that include two or several electronic
information systems, designed and programmed in advance to perform so, shall be
deemed valid, enforceable and giving its legal effects even in the instance of
no personal or direct interference of any physical person,” adding that,
“conclude contracts between a confidential electronic information system in the
possession of physical or juristic person and another physical person is
further allowed should the latter know or is supposed to know that the system
shall conclude the contract automatically.” This is a very important first step
towards the regularization of these technologies in the UAE that complements
the UAE Governmental strategy in becoming pioneers in adopting innovative

Nevertheless, and as an emerging technology promising self-executing
contracts with little human intervention, smart contracts give rise to some
entirely new legal challenges and any attempts to subject smart contracts to existing
laws may create challenges and raise enforceability questions which need to be
addressed by the development of a legal framework under which Blockchain can be
properly adopted.

7-      What is the situation with
Initial Coin Offerings and the DFSA position regarding them?


A number
of organizations around the world have taken to digitally raising funds through
“Initial Coin Offerings” (ICOs), whereby investors pay using
cryptocurrencies or conventional currencies in exchange for a new
cryptocurrency created and issued by a company (real or virtual). This company
then uses the currency raised to hold assets and fund projects allowing
cryptocurrencies to be treated as an equity investment.


September 13 2017, the Dubai Financial Services Authority (DFSA), issued a
“General Investor Statement on Cryptocurrencies,” stating that ICOs should
be considered high risk investments due, in part, to the complex systems and
technology that support them. According to the General Statement, “they have
their own unique risks, which may not be easy to identify or understand; such
risks may increase where offerings are made on a cross-border basis.” It
further added that, “these offerings should be regarded as high-risk

The DFSA further made clear
that it does not currently regulate these types of product offerings or license
firms in the Dubai International Financial Centre (DIFC) to undertake such
activities. Accordingly, before engaging with any persons promoting such
offerings in the DIFC, or making any financial contribution toward such
offerings, the DFSA urges potential investors to exercise caution and undertake
due diligence to understand the risks involved.