Dubai Court Recognizes Cryptocurrency Salary Payments as Legally Valid

The Dubai Court of First Instance ruled that salary payments in cryptocurrency are legally valid under employment contracts. 

This ruling, delivered in case number 1739 of 2024 (Labour), marks a significant evolution in the UAE's legal approach to cryptocurrency, setting a precedent for future cases involving digital currency payments.

Case Background: The Dispute Over Crypto Salaries

The case began when an employee filed a lawsuit against their employer, claiming unpaid wages, wrongful termination compensation, and other related benefits. According to the employment contract, the employee was entitled to a monthly salary in fiat currency, as well as an additional payment of 5,250 EcoWatt tokens, a type of cryptocurrency.

The dispute arose when the employer failed to pay the EcoWatt token portion of the salary for six months. The employee sought legal redress, arguing that the employer’s failure to pay the cryptocurrency portion constituted a breach of contract.

In 2023, the same court had dealt with a similar case where part of the employee’s remuneration was supposed to be paid in EcoWatt tokens. However, in that instance, the court ruled against the employee, primarily due to the lack of a clear method for valuing the cryptocurrency in terms of its fiat currency equivalent.

This earlier ruling reiterated that tangible and precise valuation of financial obligations is essential, especially when those obligations involve non-traditional assets like cryptocurrency. 

The 2024 ruling represents a significant departure from the court's previous stance. This time, the court recognized and enforced the payment of the salary in EcoWatt tokens as specified in the employment contract, without requiring the conversion of the tokens into fiat currency.

Dubai’s Regulatory Environment: A Crypto-Friendly Jurisdiction

Dubai’s legal landscape has been evolving to accommodate the growing interest in cryptocurrencies. 

In 2022, the city implemented the Dubai Virtual Asset Regulation Law and established the Dubai Virtual Assets Regulatory Authority (VARA), creating a comprehensive legal framework for businesses related to virtual assets, including cryptocurrencies and non-fungible tokens (NFTs).

Dubai's favorable tax environment further enhances its status as a cryptocurrency hub. The city, part of the United Arab Emirates (UAE), does not impose personal income tax or capital gains tax on individual investors, making it an attractive destination for those looking to optimize their tax liabilities on income and capital gains from crypto investments.