How Is Accounting Going To Fare In The Cryptocurrency World In Dubai?
The UAE is committed to transforming the desert city of Dubai into a cryptocurrency powerhouse. However, several challenges stand in the way of the UAE's aim to become the epicentre of the cryptocurrency world. One of them is that many accountants who are accustomed to using traditional accounting methods find it challenging to get used to accounting for cryptocurrencies.
But what is the reason?
The practice of allocating an equivalent sum of cash is standard practice when accounting for cryptocurrencies, this is challenging because cryptocurrency cannot be used to pay for anything directly. The main cause of this is the extreme volatility of cryptographic assets. Even a brief period can cause their value to change. This makes it difficult to translate the value of a cryptocurrency into real money or cash. Furthermore, no established guideline indicates how to handle accounting in Dubai, UAE, for digital currencies like bitcoin and others.
Implications of cryptocurrencies for accountants in Dubai
Accounting is largely focused on financial transactions; therefore, any trend toward the use of cryptocurrencies by organizations, individuals, or even governments is likely to have substantial implications for the entire industry.
The widespread use of cryptocurrency would have an impact on how accountants run their businesses and the services they offer to clients. Accounting companies will have a responsibility to make sure that clients who engage in crypto transactions are subject to increased due diligence procedures. The minimal level of routine due diligence that should be used is screening against high-quality sanctions, politically exposed individuals, negative publicity, etc. This is due in large part to the lack of regulation in the cryptocurrency industry, as there is likely to be a huge increase in the number of criminals using digital currencies for money laundering and other financial crimes.Get Quote
Dubai paves the way with a new cryptocurrency
The UAE has made it quite apparent that it aims to lead the world in blockchain-related enterprises. The zero-corporate tax regulations of Dubai have long been popular with cryptocurrency businesses. The low tax burden and business-friendly regulatory environment in Dubai have already prompted cryptocurrency exchanges like OKX, Blockchain.com, and Binance to apply for operating permits. According to research from analyst firm GlobalData, blockchain-based companies in Dubai have also benefited from $97 million in capital offerings in 2022. This is more than the $14 million invested in the sector in 2017.
As a result, Dubai has taken the offensive—or, more specifically, a charm offensive role—instead of collapsing under the weight of all the issues revolving around the cryptocurrency industry. To entice blockchain-based businesses to the city, it has established new laws that guarantee both the security of their assets and their long-term prosperity.
In March 2022, Dubai established the Regulation of Virtual Assets, which offers a framework for companies dealing with virtual assets like cryptocurrencies and NFTs. The law defined the guidelines for Dubai's new Virtual Assets Regulatory Authority (VARA), a government body entrusted with enforcing the law, including investigating and sanctioning enterprises that violate it and issuing licenses for exchanges.
The Future of Cryptocurrency Accounting in the Emirates
Dubai’s overhaul of its cryptocurrency laws, free zones, and tax structure has already witnessed positive results. Not only have popular crypto exchanges moved to the city, but there has been an expansion in the city's growth capital as well. Thus, the Dubai Block Chain Plan will create economic opportunities for all business sectors in Dubai and solidify Dubai's position as a global technology leader by fostering entrepreneurship and increasing global competition.
Thus, Crypto accounting may not be straightforward, but thanks to the existence of VARA and the rise in demand for crypto regulations, the current accounting standards will soon be able to incorporate accounting for cryptocurrencies, and that will be the strategic approach employed by practicing accounting firms in Dubai.
You can also read: What is the Future of Crypto Assets Regulation in UAE?
Why choose CDA for your accounting needs?
CDA, with its innovative accountants on its team, can fulfil the accounting requirements in the most professional manner possible without causing any discrepancies or errors. CDA has been providing its accounting and auditing services for more than a decade, which has made it one of the best accounting firms across the UAE. CDA’s team is already well-equipped with the accounting strategies for cryptocurrency transactions, and we are on standby to cater to your accounting needs related to crypto transactions. Contact our team right away if you want to learn more.