How Legal Frameworks Support Dubai’s Digital Economy Transformation

Parnika Chaturvedi, Partner, and Daniel Xu, Partner, King & Wood Mallesons, explain the powers of the Digital Economy Court and Virtual Asset Law.

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With the rapid growth of the digital economy and its continued integration into our everyday lives, it has now become more essential than ever to ensure that a secure and reliable ecosystem is available to investors, users and businesses.

Parnika Chaturvedi
Parnika Chaturvedi

The Dubai Government has been at the forefront of developing and implementing advanced infrastructure, specialised legislations and judicial systems, which are pivotal to establishing a strong framework to support digital transformation.

In recent times, the two key legal developments surrounding the virtual and digital landscape have been:

  1. Establishment of the Specialised Court for the Digital Economy as part of the Dubai International Financial Center (“DIFC”) Courts.
  2. Promulgation of Dubai Law No 4 of 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (“Virtual Asset Law”).

Specialised Court for the Digital Economy in the DIFC

On 14 December 2021, the DIFC Courts announced the launch of a Specialised Court for the Digital Economy (“Digital Economy Court”) to resolve disputes relating to current and emergent technologies, including digital assets, cryptocurrency, big data, blockchain technologies, artificial intelligence, cloud services, unmanned aerial vehicles, 3D printing technologies, and robotics.  This specialised judicial tool has been introduced to meet the specific needs of the digital economy sector.

The Digital Economy Court will be operated by eminent judicial experts and supported by solid and reliable infrastructure and service providers. It can further be expected that the Digital Economy Court will complement the existing divisions, including the Technology and Construction Division and the Arbitration Division.

Daniel Xu
Daniel Xu

The proposed draft Digital Economy Court Rules, which were in the consultation phase until 20 April 2022, provide deep insight into the expected jurisdiction and powers of the Digital Economy Court.  Some of the salient features of these draft Rules are:

  • Granting the Digital Economy Court wide powers and jurisdiction over disputes
  • The draft Rules provide a non-exhaustive definition of the type of claims that are suitable for determination by the Digital Economy Court. This includes any claims involving issues relating to the digital economy, thereby, creating a real possibility of an overlap between claims that can be brought into the Digital Economy Court and another division of the DIFC Court.
  • The draft Rules grant the Court the power to grant interim and final remedies.
  • Modern and forward thinking
  • The draft Rules place great emphasis on digital determination of disputes, smart forms and digital procedures. For example, there is a presumption that hearings will be conducted remotely with digital presentation of material, rather than in person.
  • Fast-track procedure
  • The draft Rules propose a fast-track process for claims in which the value does not exceed AED 100,000 or where the parties have agreed to use the fast-track process irrespective of the value of the claim. This fast-track process only allows for a limited route of appeal to the Digital Economy Court on issues of law or procedural irregularity, but there is no appeal to the Court of Appeal.

Virtual Asset Law

On 28 February 2022, the Emirate of Dubai issued the Virtual Asset Law on the regulation of Virtual Assets and established the Virtual Assets Regulatory Authority (“VARA”). The Virtual Asset Law provides the legal framework to protect and govern the various players involved with virtual assets in Dubai.

Dubai is one of the few jurisdictions to have introduced a law to govern virtual assets, which is consistent with the vision of developing Dubai and the UAE as a regional and global destination in the digital space.


The Virtual Asset Law is applicable throughout Dubai (including all free zones and special development areas), except for DIFC.  The Virtual Asset Law is not meant to regulate Virtual Assets at a Federal level.

The DIFC regulator, the Dubai Financial Services Authority (DFSA), is working on its own regulation for the virtual asset sector and recently published Consultation Paper 143 on the Regulation of Crypto Assets in the DIFC, which was open for comments until 6 May 2022.

Virtual Assets

The law provides a very wide definition of Virtual Assets to include cryptocurrencies, tokens, non-fungible tokens, and any other virtual asset determined by VARA.

A digital representation of value that can be digitally traded, transferred or used as an exchange or payment tool or for investment purposes, including Virtual Tokens, and any digital representation of any other value determined by the Authority in this respect.

-Provision of the Virtual Asset Law

Regulatory Authority

VARA has been established to oversee the development of the business environment for virtual assets in terms of regulation, licensing and governance.  This includes preparing rules and regulations and proposing legislation in respect of virtual assets, and acting as a supervisory authority for virtual asset platforms and for the issuance and offering of virtual assets.

VARA will be based in the Dubai World Trade Centre (“DWTC”) as an independent entity affiliated   with the existing DWTC Authority. Some of the key features of VARA are:

  • VARA will have legal status and financial and administrative autonomy, with an independent and juridical capacity to protect and regulate the stakeholders in virtual asset services. VARA will also oversee the enforcement of the Virtual Asset Law.
  • VARA is expected to cooperate and coordinate with other federal agencies, including the UAE Central Bank, to develop general policy.
  • Any person or legal entity is only allowed to undertake any activities within VARA’s scope following VARA’s authorisation. However, no express prohibition appears to be placed on individuals or entities operating or investing from outside Dubai.

The Virtual Asset Law is a positive development in the digital economy space.  VARA is expected to issue further implementing regulations in the future.

Concluding remarks

These timely developments including the introduction of innovative and progressive frameworks and judicial tools, are the right steps for Dubai to become the global hub for digital assets and transformation.

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