● The industry of Blockchain and Cryptocurrency, after gaining significant impact over
the economics of the world, has reached a very crucial point. The global market is not
evolving fast enough to deferring large financial for blockchain and Cryptocurrency
and preventing major companies to support their claims. Some of the development
had made investors progressively familiar with this fact that they must not take any
using or buying digital currency decisions for granted.
● Undoubtedly, economic experts are confident about the hidden potential and power
of this Cryptocurrency. Everyone is aware of the fact that it can bring solutions to
many real-time issues and will earn its place in our everyday lives.
● However, some popular events occurred in 2018 had turned the global eyes to the
Middle East in regards to the development of Cryptocurrency. The event that earned
the first place in the list is the launch of Emirates Blockchain Strategy 2021 in UAE in
April 2018. This event highlighted the aim of the government – to switch 50 percent
of their transactions onto the blockchain. With this significant change, UAE will be
capable of saving 77 million working hours every year and 11 billion in transaction
costs.
Introduction
Middle East

● Two Popular Jurisdictions in the Middle East
● There are two jurisdictions present in the Middle East that have sought to codify
regulations of crypto exchanges, white label cryptocurrency exchange companies,
crypto assets, and related businesses.
 The Abu Dhabi Global Market (ADGM) – A free zone in the Emirate of Abu Dhabi in
the United Arab Emirates
 The Kingdom of Bahrain
Introduction
Middle East

● ADGM has managed to be the first regulator in the region and has issued Guidelines
on Regulation of ICOs and virtual currencies on 9 October 2017. And on 25 June 2018,
this jurisdiction has also issued guidelines on Regulation of Crypto Asset Activities.
● The ADGM is currently licensing crypto-asset exchanged and has managed to become
the first jurisdiction in the UAE to permit such a license.
● However, opening a crypto-asset exchange in the ADGM is time-consuming,
complicated, and expensive. ADGM aims to set the highest standard for crypto-asset
regulation in the Middle East.
● The authorization fee for crypto-asset exchange is $125,000. Additionally, license
holders have to pay $60,000 per year as a supervision fee.
 ADGM
ADGM

● Middle East Bahrain has already launched several initiatives, including Central Bank of
Bahrain Regulatory Sandbox (launched in May 2017), and Bahrain FinTech Bay – a
fintech ecosystem established on 30 Aug 2018.
● In February 2019, Bahrain managed to become the first Middle Eastern country that
published regulations on crypto assets in the form of a crypto module of the Bahrain
Rulebook’s Central Bank. This Bahrain or directive governs matter regarding
compliance, licensing, risk mitigation, security, and issues licenses for several
regulated crypto asset services.
● Now, let’s discuss crypto regulations in different regions.
 The Kingdom of Bahrain
Bahrain

● Crypto Regulatory Sandbox– 30 companies are approved by the Central Bank of
Bahrain (CBB) for its regulatory sandbox; half of them are Cryptocurrency service
providers including exchanges. The Bahraini Regulatory Sandbox permits companies
to test their technology-based innovations solutions that are relevant to fintech or
the financial sector.
● In Bahrain, the governor of the Central Bank has issued a warning against
cryptocurrencies like bitcoin. A significance parliamentary session took place in the
Shura Council, the governor of the Central Bank announced that the bitcoin is not
recognized by any sort of financial institution. He also declared that using bitcoin in
Bahrain is not legal; nonetheless, Bharani citizens have the right to make investment
in cryptocurrencies outside the limits of Bahrain.
 Trading Ban – No
 Banking Ban – NO
 Tax Haven Region- No
 Best Place for License- No
 Bahrain
Bahrain

● Crypto Regulatory Sandbox: In January 2018, the Central Bank of Egypt also issued a
warning against the buying and selling of the cryptocurrencies, like bitcoin. The major
reason behind the issuance of this warning was the highest risk associated with
Cryptocurrencies. The Central Bank of Egypt declared an EGP 1 Bill Fintech fund and
regulartory sandbox (Innovative Financial Technology Application Lab for new
applications). The Central Bank of Egypt also stated that commerce within the Arab
Republic of Egypt is limited to the authorized paper currencies permitted by the Bank.
 Trading Ban – only allows licensed Cryptocurrency companies
 Banking Ban – NO
 Tax Haven Region- No
 Best Place for License- No since many regulatory laws are still unclear
 Egypt
Egypt

● Crypto Regulatory Sandbox: On April 22, 2018, The Central Bank of Iran declared
that it is forbidden the handling cryptocurrencies by every Iranian Financial
Institution, including credit institutions and banks. The Central Bank also banned
currency exchanges from trading virtual currencies or adopting measures to promote
and facilitate them.
● This decision made by the bank cause many difficulties for many individuals or
financial institutions who thought virtual currencies can be a solution for the business
industry and international sanctions. They also thought virtual currencies can help in
shaping the future of banking especially when such currencies are transparently and
precisely regulated so that people in the country can be stopped from trading them
fraudulently and secretly.
● Before the ban was declared, the IT chief of The Central Bank had reported that the
Central Bank had considered the adoption of a national virtual currency, either to be
made by the Bank or other entities. The major motivation for establishing such a
currency was that it could be used as a replacement for the US dollar.
 Trading Ban – Yes
 Banking Ban – Yes
 Tax Haven Region- No
 Best Place for License- No
 Iran
Iran

● Crypto Regulatory Sandbox: The supervision by Israel on regulated Financial Services
Law requires individuals that are engaging in offering services involving financial
assets to get a license from Financial Services’ Supervision. Virtual Currency is
incorporated in the definition of Financial Assets.
● A license will be issued to the citizen of Israel or any resident who has managed to
reach the age of majority, is lawfully competent, and has not been announced
bankrupt or, is not needed to dissolve in the case of a corporation.
● Some additional prerequisites for licensing comprises that the license has a minimum
amount of equity and, if a person, has not been condemned of a crime that due to its
nature makes the license incompetent to handle financial transactions.
● The Bank of Israel also issued a statement on February, 19, 2014, which warned the
public against the handling of virtual currencies. This warning was able to lay out the
risks associated with buying and selling in virtual currencies, including money
laundering, fraud, and financing of terrorism, between others.
 Trading Ban – No
 Banking Ban – No
 Tax Haven Region- No
 Best Place for License- Yes, you can easily get a crypto exchange license in Israel
 Israel
Israel

● Crypto Regulatory Sandbox: In a bid to become a leader in blockchain technology,
the UAE launched the UAE Blockchain Strategy 2021 – pursuant to which 50% of
government transactions will be conducted using Blockchain technology by 2021. The
Financial Services Regulatory Authority has become the first regulator in the UAE that
issued detailed guidance and regulations based on carrying out Cryptocurrency
related activities. The FSRA also issued supplementary guidelines to regulate ICOs and
virtual currencies.
● In 2017, The Central Bank of UAE issued stored value regulations. According to these
regulations, all types of virtual currencies and their transactions are prohibited in
UAE. All types of currencies and bitcoin that could be used as a medium of exchange
are defined as a virtual currency in the regulation of Central Bank. Nonetheless, there
is no definition for the functionality of virtual currency as a currency, security, or
commodity.
● The governor of the Central bank stated that currencies like Bitcoin do not come
under these regulations. According to the governor, a digital unit can be used as a
medium to exchange and any kind of stored value can be described as Virtual
Currency. Therefore, these regulations can not apply to bitcoin or any other
cryptocurrencies.
 UAE
UAE

 Trading Ban – No
 Banking Ban – No
 Tax Haven Region- No
 Best Place for License- Yes
● Currently, Cryptocurrency has managed to gain support in the Middle East and the
desire for the innovation of this technology is progressively growing. This region has
opportunities and the potential to become a big player in advancement in this
technology and to lead the way for its regulation that offers immense benefits to all.
● In the Middle East, a strong foundation is laid in the first ten years of blockchain
technology and Cryptocurrency. Especially, in the UAE, a skilled workforce and vast
resources will be used to drive the future of the crypto.
 UAE
UAE

● One of the most significant questions that come from permitting investments in and
the usage of cryptocurrencies is the problem of taxation. In this situation, the major
challenge arises to be how the cryptocurrencies and specific activities can be
categorized for the purpose of taxation. This is important because whether profits
made from selling or mining cryptocurrencies are categorized as capital gains or
income consistently finds out the application tax bracket.
● According to a survey, Israel has categorized cryptocurrencies differently for tax
purposes. Israel has managed to tax Cryptocurrency as an asset.
● Even though virtual currencies are not acknowledged as actual currency by the Bank
of Israel, the Israel Tax Authority has planned that the utilization of cryptocurrencies
must be defined as a “means of virtual payment” and should also subject to taxation.
● Particularly, for the main idea of income tax and value-added tax prerequisites,
virtual currency is considered as “an asset” and is taxed according to the appropriate
transaction classifications under the Income Tax and the Value Added Tax Law, 5736-
1975.
● The Israel Tax Authority needs trade transactions’ documentation including virtual
currency to facilitate authentication of their existence as well as scope.
 Crypto Taxation Outlook

● Whether you are planning for establishing a white label crypto exchange software development company or a centralized trading development
in the Middle East, you must know about compliance and taxation outlook in this region. This article will give you a better understanding of
legal regulation and taxation in the Middle East.
Final Thoughts

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