UAE Central Bank Governor Deems Bitcoin ‘Unofficial’

On October 24, 2017, the United Arab Emirates (UAE) Central Bank declared that bitcoin is an unofficial currency, saying that it lacks adequate supervision.

UAE Central Bank Governor Mubarak Rashed Al Mansouri attributed this decision to volatility in the bitcoin ecosystem, driven by the reluctance of certain countries to integrate bitcoin-based commerce into their infrastructures. "Some nations have announced that they are not using Bitcoin, and consequently its value sharply plummeted," opines Al Mansouri. "In addition, it can be easily used in money laundering and in funding terror activities." According to Al Mansouri, there has yet to be any issuance of licensing to regulate the use of bitcoins on a local scale.

Earlier this year, Al Mansouri had indicated that digital currencies were under review by the central bank, which published regulatory measures in January 2017 prohibiting "all Virtual Currencies (and any transaction thereof).” Al Mansouri later clarified that the January ban did not encompass bitcoin or blockchain systems.

"These regulations do not cover ‘virtual currency,’ which is defined as any type of digital unit used as a medium of exchange, a unit of account, or a form of stored value. In this context, these regulations do not apply to bitcoin or other digital currencies, currency exchanges, or underlying technology such as blockchain."

It should be noted that there is no current indication that the UAE intends to stifle blockchain development, which has been implemented in various regional projects. Despite central bankers’ concerns over the validity of bitcoins, regulators have taken a nuanced approach; supportive regulatory measures for the model of crowdfunding through token offerings, or ICOs, were issued by the Financial Regulatory Authority of Abu Dhabi in October 2017.

While the UAE is still researching digital currencies, Al Mansouri asserted that they are "currently under review by the Central Bank and new regulations will be issued as appropriate."