UAE Digital Assets Oasis Welcomes DAOs with New Regulatory Framework

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Hassan Shittu

Journalist

Hassan Shittu

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Hassan, a Cryptonews.com journalist with 6+ years of experience in Web3 journalism, brings deep knowledge across Crypto, Web3 Gaming, NFTs, and Play-to-Earn sectors. His work has appeared in…

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Last updated:

October 22, 2024 23:19 EDT

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The Ras Al-Khaimah (RAK) region in the United Arab Emirates (UAE) has launched a comprehensive regulatory framework specifically tailored for decentralized autonomous organizations (DAOs).

The newly introduced DAO Association Regime (DARe) provides DAOs with the legal infrastructure to operate within the region’s RAK Digital Assets Oasis free zone.

This framework allows DAOs to interact with off-chain entities, such as opening bank accounts and owning on-chain and off-chain assets, while ensuring a secure, legally compliant environment for decentralized operations.

UAE For DAOs: Is The Regulatory Framework Needed?

One of the most significant aspects of the DAO Association Regime is its provision of a structured legal framework, which has been a critical issue for DAOs operating in decentralized ecosystems.

DAOs, governed by smart contracts rather than traditional hierarchical structures, often face challenges when attempting to interface with real-world financial systems.

These challenges stem from a lack of legal recognition, limiting their ability to engage with traditional banking institutions or hold assets outside the blockchain.

But with the launch of DARe, RAK Digital Assets Oasis is addressing these limitations, enabling DAOs to operate with the same legal and financial privileges as traditional organizations.

In addition to offering DAOs the ability to open bank accounts, the new regulatory framework allows these blockchain organizations to own both on-chain and off-chain assets.

This is a significant development, as it removes barriers that have historically restricted DAOs from participating in broader financial ecosystems.

According to Luc Froehlich, Chief Commercial Officer of RAK DAO, the initiative is a key part of the region’s strategy to create a global hub for digital assets.

Froehlich said:

“By offering a structured legal framework, we enable DAOs to interact with the off-chain world, such as opening a bank account and owning both on- and off-chain assets.”

Moreover, the DARe framework introduces two distinct models tailored to the different stages of a DAO’s development.

Emerging DAOs with fewer than 100 members will benefit from a streamlined process.

In contrast, more mature DAOs with treasuries exceeding $1 million will be governed by a more sophisticated set of rules designed to address the complexities of larger organizations.

This dual-approach framework aims to provide flexibility and scalability, allowing DAOs of all sizes to thrive within a regulated environment.

RAK’s Position in the Global Digital Asset Ecosystem

Dr. Sameer Al Ansari, CEO of RAK DAO, also highlighted that the regulatory framework offers DAOs tax optimization and legal clarity.

“This DAO regime, crafted by Web3 natives and tailored to the specific needs of the Web3 industry, offers all the essential features DAOs require to have within a legal wrapper.”

The initiative attracts blockchain-based organizations and creates an environment where DAOs can collaborate with traditional financial institutions and other businesses.

Furthermore, the RAK Digital Assets Oasis free zone offers a unique environment for developing digital assets and blockchain technologies and integrating them into the broader financial system.

The introduction of the DAO Association Regime is a clear signal that the UAE is serious about creating an ecosystem where digital and decentralized projects can thrive in a regulated, secure environment.

Notably, the Central Bank of the UAE granted in-principle approval to AED Stablecoin, making it the region’s first fully regulated dirham-pegged stablecoin issuer.

This falls under the CBUAE’s new Payment Token Service Regulation and aligns with the UAE’s Digital Government Strategy 2025.

The approval of AED Stablecoin offers a more inclusive approach to crypto payments, although the regulatory framework prohibits using algorithmic stablecoins and privacy tokens.

Issuers must back their stablecoins with cash in a UAE bank or a combination of cash and government bonds.