In a notable development for crypto adoption, a UAE court made a landmark ruling that recognizes digital tokens as part of employment benefits, though it stopped short of approving full salary payments in cryptocurrencies.
This decision underscores the UAE’s progressive stance on integrating digital assets into its economy. The ruling mandates an employer to compensate an employee with EcoWatt tokens as agreed upon in their employment contract, marking a significant milestone for crypto usage within the UAE’s financial system.
Anna Zeitlin, a partner specializing in Fintech and Financial Services at Addleshaw Goddard, clarified the scope of the ruling. Zeitlin explained to Arabian Business, “This case relates to the benefits due to an employee under their employment contract, not the actual salary itself,” highlighting that the UAE’s Wage Protection System (WPS) still requires documenting salaries in dirhams.
Zeitlin also emphasized the legal framework surrounding the ruling, noting that Article 22 of Federal Decree-Law No. (33) of 2021 allows employers to pay salaries in dirhams or another agreed-upon currency, but the WPS would need adjustments to accommodate such alternatives. She also raised concerns about the volatility of cryptocurrencies, stating, “Compensating employees in cryptocurrencies that have experienced huge value fluctuations may prove risky and might expose them to market drops.”
The ruling is seen as a potential catalyst for broader crypto adoption across various sectors in the UAE, with particular interest in its applications in real estate and retail.
Zeitlin stated, “I hope this case will pave the way for companies to pay salaries, not just employment benefits, in cryptocurrencies, and for the WPS to allow the registration of currencies other than just AED.”
To mitigate risks, Zeitlin suggested that authorities could explore payment options like Central Bank Digital Currencies (CBDCs) or stablecoins. She remarked, “No doubt, the world is watching these developments, and it is unlikely that international financial regulators and institutions will be critical of such a court judgment.”
As the UAE continues to establish itself as a leader in crypto-friendly regulations, Zeitlin envisions even broader applications for cryptocurrencies. “It would be great to see wider adoption of cryptocurrency in other forms of payments, e.g., in retail outlets or utility bills,” she said. She also highlighted the potential for blockchain technology to revolutionize the real estate market, suggesting that tokenizing title deeds could significantly speed up transactions. “If the various land departments tokenised their title deeds and added them to a blockchain, real estate transactions could happen in seconds rather than weeks,” she noted. “Furthermore, permitting payments in cryptocurrency for real estate would open the market up to a much wider audience.”
This court ruling marks another important step as the UAE moves towards further integrating digital assets into its economy.