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  • Part 5

    • Article (11): Authority Over Licensees and Registrees

      1.

      The Central Bank may take all measures and actions it deems appropriate in relation to a Licensee or Registree for achieving its objectives and discharging its functions, and may particularly take one or more of the following actions, if a material violation to the provisions of this Regulation has occurred:

      a)

      The Central Bank may require the concerned Licensee or Registree to take necessary actions to rectify the situation immediately;

      b)

      The Central Bank may appoint a specialized expert, or a Central Bank employee, to advise or guide the concerned Licensee or Registree or oversee some of its operations, for a period specified by the Central Bank. The concerned Licensee or Registree shall pay remuneration for such appointee if he is an expert from outside the Central Bank;

      c)

      The Central Bank may appoint a manager where the Central Bank is of the view that the management of a Licensee cannot be relied upon to take appropriate steps to rectify a situation. The main objectives of appointing a manager to take control of the management of a Licensee are:

      (i)

      to provide for the control of the affairs, business and property of a Licensee until such time as the Central Bank is satisfied that its concerns in relation to that Licensee have been addressed; or

      (ii)

      to safeguard the assets and maintain the business of the Licensee until a liquidator can be appointed;

      d)

      The Central Bank may take any other action or measure, or impose any penalties it deems appropriate, in relation to a Licensee or Registree.

      2.

      Where the Central Bank provides a Non-Objection Registration to a Virtual Assets Exchange Platform Operator, the Central Bank will coordinate with the relevant Local Licensing Authorities before and when taking any measures or actions under Article (11)1.

    • Article (12): Restrictions on Payment Tokens

      1.

      All Payment Tokens issued by a Dirham Payment Token Issuer shall be denominated only in Dirham.

      2.

      All Payment Tokens issued by a Foreign Payment Token Issuer shall be denominated only in a Foreign Currency.

      3.

      A Payment Token Issuer may not (and may not arrange that another person shall) pay to or for the benefit of a Customer:

      a)

      interest related to the length of time during which the Customer holds a Payment Token; or

      b)

      any other benefit related to the length of time during which the Customer holds a Payment Token,

      with respect to Payment Tokens for which the Payment Token Issuer performs Payment Token Issuing.

      4.

      The Central Bank may place a limit(s) on:

      a)

      the total volume or value of Payment Tokens which a Dirham Payment Token Issuer may sell or transfer, or restrict the sale or transfer of further Payment Tokens by that Payment Token Issuer;

      b)

      the total volume or value of Payment Tokens which a Foreign Payment Token Issuer may sell or transfer to Persons in the UAE, or restrict the sale or transfer of further Payment Tokens by that Payment Token Issuer to Persons in the UAE;

      c)

      the total number of Customers, or restrict the onboarding of new Customers, to which a Dirham Payment Token Issuer may sell or transfer its Payment Tokens;

      d)

      the total number of Customers in the UAE, or restrict the on-boarding of new Customers in the UAE, to which a Foreign Payment Token Issuer may sell or transfer its Payment Tokens;

      e)

      the total volume or value of Payment Tokens which a Payment Token Conversion Provider may buy, sell or admit to trading on its platform; and

      f)

      the total number of Customers to which a Payment Token Conversion Provider or Payment Token Custodian and Transferor may provide services, or the on-boarding of new Customers by that Payment Token Conversion Provider or Payment Token Custodian and Transferor.

      5.

      If the Central Bank determines that to do so is necessary to achieve its statutory objectives, the Central Bank may impose any other restrictions on a specific Licensee or Registree, or across Licensees and Registrees.

      6.

      If the Central Bank determines that to do so is necessary to achieve its statutory objectives, the Central Bank may designate any Virtual Asset to be a Payment Token whether or not it is sold or transferred by a Payment Token Issuer, and may impose any one or more of the restrictions set out in Article (12)4 in relation to such Designated Payment Token.

      7.

      If the Central Bank imposes any restriction set out in Article (12)4, the Licensed Payment Token Service Provider, Registered Foreign Payment Token Issuer, Registered Foreign Payment Token Custodian and Transferor or Registered Payment Token Conversion Provider must:

      a)

      provide the Central Bank with daily reporting evidence verifying its compliance with such restriction(s); and

      b)

      maintain policies and procedures to ensure that any breach of such a restriction is rectified promptly.

    • Article (13): Regulatory Capital Requirement for Licensed Payment Token Issuers

      1.

      A Licensed Payment Token Issuer must maintain at least:

      a)

      Initial and ongoing capital of fifteen (15) million Dirhams; plus

      b)

      additional ongoing capital of at least 0.5% of the Fiat Currency face value of outstanding Payment Tokens.

      2.

      A Payment Token Issuer subject to the alternative requirement for the Reserve of Assets as set out in Article (22)3 must, instead of the requirement in Article (13)1 above, maintain at least:

      a)

      initial and ongoing capital of fifteen (15) million Dirhams; plus

      b)

      additional ongoing capital of at least 2% of the Fiat Currency face value of outstanding Payment Tokens.

    • Article (14): Regulatory Capital Requirement for Licensed Payment Token Custodians and Transferors and Licensed Payment Token Conversion Providers

      1.

      A Licensed Payment Token Service Provider performing Payment Token Custody and Transfer or Payment Token Conversion shall:

      a)

      where the monthly average value of Payment Token Transfers initiated, facilitated, effected, directed or received by that Licensed Payment Token Service Provider as part of those Payment Token Services amounts to ten (10) million Dirhams or above, hold regulatory capital of at least three (3) million Dirhams; and

      b)

      where the monthly average value of Payment Token Transfers initiated, facilitated, effected, directed or received by that Licensed Payment Token Service Provider as part of those Payment Token Services amounts to less than ten (10) million Dirhams, hold regulatory capital of at least one and a half (1.5) million Dirhams.

      2.

      For a Licensed Payment Token Service Provider falling within Article (14)1(b) whose monthly average value of Payment Token Transfers referred to in Article (14)1 rises above ten (10) million Dirhams in three (3) consecutive months, the Licensee shall report this fact to the Central Bank and become subject to the higher regulatory capital requirement in Article (14)1(a).

      3.

      The monthly average value of Payment Token Transfers referred to in Article (14)1 shall:

      a)

      be calculated on the basis of the moving average of the preceding three (3) months or, where such data does not exist at the time of being granted a License by the Central Bank, on the basis of the business plan and financial projections provided; and

      b)

      take into account both Payment Token Transfers initiated, facilitated, effected or directed by a Licensed Payment Token Service Provider and those received by the provider.

    • Article (15): Regulatory Capital Supplementary Requirements (for all Licensed Payment Token Service Providers)

      1.

      The Central Bank may impose aggregate regulatory capital requirements higher than that provided for in Article (13) and Article (14) if, taking into consideration the scale and complexity of the Licensee’s business, it considers such higher requirements essential to ensuring that the Licensee has the ability to fulfil its obligations under this Regulation.

      2.

      An Applicant shall provide information to the Central Bank on the source(s) of funds that constitute the regulatory capital held under Article (13) or Article (14).

      • Capital Items

        3.

        A Licensed Payment Token Service Provider’s aggregate regulatory capital shall consist of:

        a)Paid-up capital;
        b)Reserves, excluding revaluation reserves; and
        c)Retained earnings.
        4.In addition to the capital requirement, an unconditional irrevocable bank guarantee equal to the full paid-up capital amount in favour of the Central Bank paid upon first demand, shall be submitted to the Central Bank with the application of the License. Such a guarantee must remain in place at all times.
        5.Licensee must demonstrate that its regulatory capital and other financial resources are sufficient for implementing its business model in a safe, efficient and sustainable manner, without compromising the interests of Customers.
        6.A Licensee must provide adequate details to the Central Bank on the source of funds that will be used to support the proposed business activities.
        7.A Licensee must demonstrate that it will be able to maintain sufficient regulatory capital and other financial resources to facilitate an orderly wind-down of its Payment Token business, including a smooth refunding process.

      • Deductions

        8.

        The following items shall be deducted from the aggregate regulatory capital:

        a)

        Accumulated losses;

        b)

        Anticipated losses in the first year of operation;

        c)

        Goodwill;

        d)

        Any assets encumbered to secure the unconditional irrevocable bank guarantee; and

        e)

        Any other items which the Central Bank may direct from time to time.

        9.

        If a Licensed Payment Token Service Provider is both:

        a)

        Licensed as a Payment Token Conversion Provider or Payment Token Custodian and Transferor; and

        b)

        licensed or regulated for any Virtual Asset activities by SCA or any Local Licensing Authority,

        any regulatory capital it holds pursuant to requirements imposed by SCA or any Local Licensing Authority shall not contribute towards satisfying the regulatory capital requirements in this Article (15).

    • Article (16) Assessment of Controllers and Senior Management

      1.

      A Person shall not become a Controller or member of Senior Management of a Licensed Payment Token Service Provider without obtaining prior approval from the Central Bank.

      2.

      The Central Bank shall grant an approval under Article (16)1 if it considers that the proposed Controller or member of Senior Management meets all fit and proper requirements specified by the Central Bank.

      3.

      The Central Bank may attach conditions to its approval under Article (16)1 of a Controller, including but not limited to:

      a)

      conditions restricting or preventing the Person’s disposal or further acquisition of shares or voting powers in the Licensed Payment Token Service Provider; and

      b)

      conditions restricting or preventing the Person’s exercise of voting power in the Licensed Payment Token Service Provider.

    • Article (17): Principal Business

      1.

      The exclusive business of a Payment Token Issuer shall be the performance of the Payment Token Issuing for which it has been granted a License.

      a)

      In addition to performing the sale or transfer of Payment Tokens that forms part of its Payment Token Issuing, a Payment Token Issuer shall be responsible for the generation of Payment Tokens, development and maintenance of associated technology required for Payment Tokens to operate in accordance with their White Paper and Customer Terms, and burning of Payment Tokens. If any of those activities are performed by another Person, they must be performed on behalf of the Payment Token Issuer and in accordance with the outsourcing requirements under Article (20).

      2.

      The exclusive business of a Payment Token Conversion Provider or Payment Token Custodian and Transferor which is a Virtual Assets Exchange Platform Operator shall be the performance of:

      a)

      any Payment Token Conversion and Payment Token Custody and Transfer activities for which it has been granted a License or Non-Objection Registration; and

      b)

      any Virtual Asset activities for which it is licensed or regulated by SCA or any Local Licensing Authority prior to receipt of its License or Non-Objection Registration under this Regulation.

      3.

      The exclusive business of a Payment Token Conversion Provider or Payment Token Custodian and Transferor which is an Exchange House shall be the performance of:

      a)

      Any Payment Token Conversion and Payment Token Custody and Transfer activities for which it has been granted a License or Non-Objection Registration; and

      b)

      any activities for which it is licensed or regulated by the CBUAE under the Regulations re Licensing and Monitoring of Exchange Business.

      4.

      The exclusive business of a Payment Token Conversion Provider or Payment Token Custodian and Transferor which is licensed under the Retail Payment Services and Card Schemes Regulation or the Stored Value Facilities (SVF) Regulation shall be the performance of:

      a)

      any Payment Token Conversion and Payment Token Custody and Transfer activities for which it has been granted a License; and

      b)

      any activities for which it is licensed, regulated or otherwise approved by the CBUAE under the Retail Payment Services and Card Schemes Regulation or the Stored Value Facilities (SVF) Regulation.

      5.

      Except where one of Article (17)2 to Article (17)4 apply or the Payment Token Conversion Provider or Payment Token Custodian and Transferor is a Bank, the exclusive business of a Payment Token Conversion Provider or Payment Token Custodian and Transferor shall be the performance of any Payment Token Conversion and Payment Token Custody and Transfer activities for which it has been granted a License.

    • Article (18): Notification and Reporting Requirements

      1.

      Where any material change affects the accuracy and completeness of information provided in an Application, the Applicant, Licensee or Registree, as the case may be, shall immediately notify the Central Bank of such change and provide all necessary information and documents.

      2.

      A Licensee or Registree shall immediately notify the Central Bank of any violation or potential violation of any provision of this Regulation or CBUAE Regulations. Such notification must be accompanied by details of adequate measures which the Licensee or Registree will implement to rectify the violation.

      3.

      A Licensee or Registree shall immediately notify the Central Bank if it becomes aware that any of the following events have occurred or are likely to occur:

      a)

      any event that prevents access to or disrupts the operations of the Licensee or Registree;

      b)

      any legal action taken against the Licensee or Registree either in the UAE or in a Third Country;

      c)

      the commencement of any insolvency, winding up, liquidation or equivalent proceedings in relation to the Licensee or Registree, or the appointment of any receiver, administrator or provisional liquidator under the laws of any country;

      d)

      any disciplinary measure or sanction taken against the Licensee or Registree or imposed on it by a regulatory body other than the Central Bank, whether in the UAE or in a Third Country;

      e)

      any change in regulatory requirements to which a Licensee or Registree is subject beyond those of the Central Bank, whether in the UAE or in a Third Country;

      f)

      any repeated occurrence of sales of a Payment Token at below its nominal/Fiat Currency face value where the sale is by or facilitated by the Licensee or Registree; or

      g)

      any other event specified by the Central Bank from time to time.

      4.

      Payment Token Conversion Providers and Payment Token Custodian and Transferors shall report to the Central Bank on the volume and value of business that they conduct in relation to Virtual Assets which are not Payment Tokens, in accordance with such reporting requirements as the Central Bank may determine from time to time.

      5.

      Licensees shall report to the Central Bank on their complaints management programme, including reporting on the number of complaints received, the topics of complaints, the number of open and closed complaints, and the amount of time complaints have been open or took to close, in accordance with such reporting requirements as the Central Bank may determine from time to time.

      6.

      Licensees and Registrees must comply with any further regular or ad-hoc reporting as determined by the Central Bank.

      7.

      Notwithstanding the paragraphs above, Licensees and Registrees shall, as appropriate and applicable, comply with their notification requirements as further specified in this Regulation, including but not limited to under:

      a)

      Article (14)2;

      b)

      Article (19)4(a);

      c)

      Article (22)8(a);

      d)

      Article (24); and

      e)

      Article (34)15

    • Article (19): Use of Agents

      1.

      Where a Licensee intends to perform Payment Token Services through an Agent, it must conduct an assessment of such arrangement and provide a report to the Central Bank of the following:

      a)

      name and address of each Agent;

      b)

      assessment of the adequacy of the internal control mechanisms that will be used by the Agent in order to comply with the requirements of Article (33) and any CBUAE Regulations produced under it;

      c)

      assessment of the Persons responsible for the management of the Agent, and evidence that they fulfil any fit and proper requirements specified by the Central Bank;

      d)

      the scope of Payment Token Services for which the Agent is mandated; and

      e)

      evidence of the Licensed Payment Token Service Provider’s adherence, in its contractual arrangements with the Agent, to Article (20).

      2.

      The Central Bank shall assess the suitability of a proposed Agent and Agent arrangements based on the report submitted under Article (19)1, and may require the Licensee to supply additional information for its assessment.

      a)

      Following its assessment, the Central Bank shall make a decision whether to approve or decline to approve the Agent.

      b)

      The Licensee shall not engage an Agent to perform Payment Token Services before having received such approval.

      3.

      Licensees shall contractually ensure that Agents acting on their behalf disclose this fact to Customers.

      4.

      Licensees shall:

      a)

      immediately notify the Central Bank of any change regarding their use of Agents; and

      b)

      on an annual basis conduct an additional assessment and provide an additional report to the Central Bank of the matters listed in Article (19)1.

      5.

      The Central Bank may suspend, withdraw or revoke its approval of an Agent. Where the approval of an Agent is suspended, withdrawn or revoked, the Licensee must ensure that the Agent immediately ceases to perform Payment Token Services on the Licensee’s behalf.

      6.

      Licensees shall be responsible for ensuring and maintaining appropriate training and qualifications for their Agents.

      7.

      A Payment Token Service performed by an Agent shall be treated as performed by its principal Licensees.

    • Article (20): Outsourcing

      All Licensees shall comply with the Outsourcing Regulation as if they were a “Bank” as defined in the Outsourcing Regulation.