Crypto Regulation in Dubai 2024 – VARA

Crypto Regulation in Dubai

In 2022, the UAE enacted a federal law to regulate virtual assets, establishing the foundational framework for the country’s cryptocurrency industry. This legislation underpins local regulations across various emirates, including the creation of the Virtual Assets Regulatory Authority (VARA).

VARA has introduced the Full Market Product (FMP) Rules, a detailed regulatory framework governing virtual assets and related activities in Dubai. These rules, formulated under the Law on the Regulation of Virtual Assets, aim to safeguard consumers, maintain market integrity, and ensure the effectiveness and sustainability of VARA, while also promoting innovation.

For instance, VARA recently revoked BitOasis’ conditional license and initiated enforcement action just three months after granting it, citing the cryptocurrency exchange’s failure to meet specific conditions.

Given the tightening regulations and Dubai’s growing prominence as a cryptocurrency hub, we seek to clarify the city’s approach to crypto regulation.

What does VARA stand for?

VARA, the Virtual Assets Regulatory Authority, serves as a transparent and trusted regulatory body for the emerging virtual assets sector. Its mission extends beyond Dubai, aiming to create a globally replicable framework for industry regulation.

VARA’s objectives include:

Promoting Dubai as a Global Hub: Position Dubai as a leading regional and international center for virtual assets and related services, enhancing the Emirate’s competitiveness both locally and globally, while fostering the growth of its digital economy.
Raising Awareness and Encouraging Innovation: Increase public awareness of investment opportunities in the virtual asset sector and stimulate innovation within the industry.
Attracting Investments: Encourage investment in Dubai by attracting companies operating in the virtual asset field to establish their businesses in the Emirate.
Investor Protection and Anti-Fraud Measures: Develop regulations to protect investors and participants in the virtual asset market, and work to prevent illegal activities in coordination with relevant authorities.
Regulatory Development: Create the necessary regulations, rules, and standards to govern, supervise, and oversee virtual asset platforms, service providers, and all related aspects of the virtual asset industry.

Key Aspects of VARA Regulations

Organizations aiming to operate with virtual assets in Dubai or elsewhere must secure an FMP (Full Market Product) license. There are no nationality requirements for obtaining this license. Virtual Asset Service Providers (VASPs) must adhere to several rulebooks, which cover company regulations, compliance and risk management, technology and information, and market conduct.
The license is valid for one year and can be renewed for an additional 12 months. Companies will receive a renewal notice 90 days before expiration and must pay an annual supervision fee. VARA mandates that VASPs have a physical presence in Dubai to conduct virtual asset transactions from within the Emirate.
VASPs are required to maintain a transparent company structure, with a clear chain of ownership, delegated authority, and identifiable voting powers. This includes providing details on any Controlling Entities and Ultimate Beneficial Owners (UBOs).

Virtual Assets

Before an entity can begin issuing Virtual Assets in the Emirate, VARA must grant approval. The entity must submit all necessary information for this approval. If an approved issuer wishes to make any substantial changes, they must first obtain confirmation from VARA.

Certain Virtual Assets do not require VARA’s approval for issuance but still need to be registered. These include:

Free and non-transferable Virtual Assets
Non-redeemable and non-transferable Virtual Assets
Redeemable closed-loop and non-transferable Virtual Assets

For Virtual Assets that are either already issued or in the process of issuance, VARA may request a suspension if it finds any part of the process to be non-compliant with the VA Issuance Rulebook. VARA also reserves the right to impose additional conditions or take further enforcement actions, which may include fines or penalties.

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