Dubai launches on-chain Bots regulations! Peaq creates a legal framework for the AI machine economy.

The Decentralized Physical Infrastructure Network (DePIN) protocol peaq has signed a memorandum of understanding with the Dubai Virtual Asset Regulatory Authority (VARA) to establish a legal framework for on-chain Bots and tokenization machines. The memorandum focuses on peaq's Machine Economy Free Zone, and both parties will collaborate in areas such as VARA's authorized guidelines for new projects, joint training on technology and Compliance, and data sharing to support research and regulation.

What are on-chain Bots? The revolutionary vision of the Peaq machine economy

(Source: Peaq)

Peaq is a machine economy-oriented Layer-1 blockchain where connected devices and on-chain Bots can own assets, share data, and generate revenue. It is the foundation for DePIN and the tokenization of Real World Assets (RWA). The Machine Economy Free Zone launched in July, serving as a controlled testing environment for testing how artificial intelligence and on-chain Bots operate within a decentralized network.

The core concept of on-chain Bots is to grant machines and IoT devices a blockchain identity, enabling them to autonomously perform economic activities. Imagine a self-driving taxi that not only picks up and drops off passengers but also automatically pays for charging fees, maintenance costs, and even stores its income in its own digital wallet. The realization of this autonomous economic capability requires a legal framework to define the rights and responsibilities of machines.

Peaq co-founder Max Thake commented, “The protocol demonstrates both parties' commitment to realizing a machine economy in a compliant manner while enabling people to participate, build, and benefit from a whole new economic sector.” This compliance-oriented development strategy is precisely why peaq chose to collaborate with VARA in Dubai.

Three Core Capabilities of On-Chain Bots:

Asset Ownership: Machines can own cryptocurrency wallets and digital assets.

Autonomous Trading: Automatically execute payments and receipts through smart contracts.

Data Monetization: Share sensor data and earn Token rewards

This vision is not science fiction. Some IoT devices are already operating on the peaq network, such as shared bicycles automatically collecting rent through peaq, and charging stations automatically charging electric vehicles and settling electricity fees. As technology matures, more complex on-chain Bots applications will gradually be realized.

Why Dubai VARA has become the global benchmark for crypto regulation

At the same time, VARA, established in 2022, is the regulatory authority for virtual assets in Dubai, responsible for the licensing, compliance, and policy of digital asset businesses throughout the emirate. Just a week ago, VARA signed a strategic agreement with the Dubai government-backed Free Zone and Commodities Authority DMCC, aimed at establishing a legal framework for tokenization of goods.

Matthew White, the CEO of VARA, stated that the organization's goal is to “make Dubai a global benchmark for the next generation of asset security and sustainable development.” Behind this ambitious vision is the UAE's strategic investment in the blockchain and digital asset industry. Since its establishment in March 2022, VARA has been committed to promoting Dubai and the United Arab Emirates (UAE) as a global leading center for blockchain and digital asset innovation.

On May 19, VARA updated the regulations for virtual asset service providers (VASP), clarifying the rules related to the issuance and listing of tokenized real-world assets (RWA). According to the UAE law firm NeosLegal, the new regulations allow institutions to issue RWA and trade them in the secondary market. This clear regulatory framework provides legal certainty for businesses, reducing compliance costs and risks.

In August this year, VARA signed a strategic cooperation agreement with the UAE Securities and Commodities Authority (SCA) to unify the digital asset management mechanism nationwide. As a result, the Dubai license will be valid throughout the UAE. This unified regulatory approach eliminates barriers to operations across emirates and facilitates business expansion.

On September 22, the UAE also signed the Multilateral Agreement on Automatic Exchange of Tax Information under the Crypto Asset Reporting Framework (CARF), which establishes a mechanism for automatic tax information sharing between countries. The Ministry of Finance stated that the framework will come into effect in 2027, with the first data sharing expected to occur in 2028. This shows that while the UAE is embracing the crypto industry, it is also actively participating in international regulatory coordination.

Three Core Issues of the On-Chain Bots Legal Framework

According to a press release issued on Thursday, peaq's memorandum of understanding with VARA focuses on peaq's machine economy free zone. Both parties will also collaborate in areas such as VARA's licensing guidelines for new projects, joint training on technology and compliance, and data sharing to support research and regulation. This comprehensive cooperation framework provides a pathway for establishing the legal status of on-chain bots.

The core issues that the legal framework for on-chain Bots needs to address include: First, the legal status of machines. When a Bot possesses a cryptocurrency wallet and autonomously conducts transactions, how should it be regarded legally? As property, an agent, or some new form of economic entity? Second, the issue of liability. If the autonomous decision-making of on-chain Bots results in losses or defaults, who should be held responsible? Is it the owner of the machine, the manufacturer, or the blockchain running its smart contract? Third, tax and accounting treatment. How is the income generated by the machine taxed? How are its expenses accounted for?

These questions do not have ready-made answers within the traditional legal framework. The collaboration between peaq and VARA aims to explore solutions to these questions in practical applications. The Machine Economy Free Zone, as a controlled testing environment, can experiment with various legal and technical solutions without affecting the overall financial system.

The UAE Becomes the Preferred Destination for Global Crypto Tycoons

Dubai and the UAE's open attitude has attracted a large number of wealthy cryptocurrency investors, making the country a top destination for millionaires worldwide, with an estimated 9,800 people expected to relocate by 2025. Behind this wave of wealthy immigration is a unique combination of advantages offered by the UAE: zero personal income tax, a clear regulatory framework for cryptocurrency, highly developed financial infrastructure, and an open attitude towards innovative technologies.

Chase Ergen, a board member of DeFi Technologies, stated that the cryptocurrency industry will become the second largest industry in the UAE within the next five years. This prediction is not mere talk. Currently, the largest industry in the UAE is oil and natural energy, while the second largest is tourism. If the cryptocurrency industry can indeed surpass tourism to become the second largest industry, it means that its contribution to GDP will reach hundreds of billions of dollars.

On-chain Bots and the machine economy are essential components of this industrial transformation. With the exponential growth of IoT devices, the data generated by machines and the services provided will create tremendous economic value. The collaboration between peaq and VARA provides a legal foundation for the UAE to seize opportunities in this emerging field.