In a groundbreaking decision, the Dubai Court of First Instance has ruled that cryptocurrency can be legally recognized as a valid form of salary payment under employment contracts.
This ruling, stemming from case number 1739 of 2024, represents a significant shift in the United Arab Emirates’ legal perspective on digital currencies.
Legal experts, including Irina Heaver, a partner at UAE law firm NeosLegal, have hailed the decision as a “progressive approach” that reflects the evolving nature of financial transactions in the Web3 economy.
Employment Dispute Opens Door for Crypto Recognition
The legal battle that led to this landmark ruling involved an employment dispute where the plaintiff, an employee, sought unpaid wages, wrongful termination compensation, and other benefits.
The employment contract specified that the employee’s monthly salary would be paid partly in fiat currency and partly in 5,250 EcoWatt tokens, a form of cryptocurrency.
Over a six-month period, the employer failed to pay the cryptocurrency portion of the salary, prompting the employee to file a lawsuit.
In its 2024 decision, the Dubai Court of First Instance ruled in favor of the employee, recognizing the validity of the cryptocurrency payment as stipulated in the employment contract.
The court ordered the employer to fulfill the contractual obligation to pay the salary in EcoWatt tokens without requiring conversion into fiat currency.
This ruling marks a significant departure from the court’s earlier stance in a similar case in 2023, where a claim for cryptocurrency wages was denied due to the lack of a straightforward method for valuing the tokens.
Irina Heaver commented on the ruling, noting its importance in advancing the legal recognition of cryptocurrency in employment contracts.
“This decision reflects a broader acceptance of cryptocurrency in employment contracts and highlights the court’s recognition of the evolving nature of financial transactions within the Web3 economy.”
She further emphasized that the ruling is a crucial acknowledgment of how value is created and shared in the Web3 space, where it is increasingly common for employees to be compensated in a mix of fiat currency and project tokens. This decision, she noted, reflects the growing acceptance of digital assets as legitimate forms of payment, aligning the legal framework with the realities of the evolving digital economy.
Dubai Officially Recognizes Cryptocurrency as a Legitimate Means of Value
In 2023, the Dubai Court addressed a similar case involving the inclusion of EcoWatt tokens in an employment contract.
Although the court acknowledged that the contract specified payment in cryptocurrency, it ultimately ruled against the employee’s claim. The decision was based on the plaintiff’s inability to provide a clear and reliable method for converting the cryptocurrency into fiat currency.
The court stated,
“It is established according to the Court of Cassation, that determining the employment relationship, its start, duration, and the resulting effects falls under the authority of the trial court. As the claimant did not provide evidence of the value of the digital currency, the court disregards it.”
However, the 2024 ruling demonstrated a significant shift in the court’s earliest approach.
This time, the court recognized cryptocurrency’s validity as a form of payment and enforced the payment of the agreed-upon salary in EcoWatt tokens without requiring conversion to fiat.
The court’s decision was grounded in Article 912 of the UAE Civil Transactions Law, which states that wages are a worker’s right against the employer and that the employer must pay wages on due dates.
The court ruled,
“As the respondent did not provide evidence of payment in EcoWatt tokens, the court orders the respondent to pay the claimant the value of her wages in EcoWatt tokens.”
The court’s decision is expected to encourage further integration of digital currencies into everyday financial transactions in the UAE, potentially paving the way for broader adoption of cryptocurrencies across various sectors.
With over 3,000 cryptocurrency companies operating in the UAE and employing tens of thousands of people, this ruling offers employees a crucial layer of protection. It sets a precedent that could lead to greater acceptance and use of digital currencies in employment contracts and other financial agreements, reinforcing the UAE’s position as a forward-thinking hub for blockchain and crypto innovation.