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As of February 7, 2023, new rules for Virtual Assets (VAs) were introduced by the Virtual Asset Regulatory Authority (VARA) in Dubai. These rules apply immediately to all businesses offering virtual asset services in Dubai, except those operating in the Dubai International Financial Centre. The main services covered by these rules include advisory services, broker-dealer services, custody, exchanges, lending, payment, virtual asset management, and investment services.

These new regulations, known as the VARA Framework, are an important step in managing and regulating virtual assets in Dubai. They are designed specifically for virtual assets and service providers, and are different from regulations in other places. The goal is to help Dubai become a global center for blockchain and web3 technologies, rather than focusing only on specific regions.

VARA is the official authority in charge of regulating VAs in Dubai. A law called Cabinet Decree No. 111/2022 states that no one in the UAE (outside of certain areas like the Abu Dhabi Global Market and Dubai International Financial Centre) can engage in virtual asset activities without a license from the UAE Securities and Commodities Authority (SCA) or local authorities like VARA.

A separate law, Act No. (4) of 2022, outlines VARA’s role and responsibilities, including its authority to regulate virtual assets. VARA also sets the rules for how virtual assets can be marketed, promoted, and advertised in Dubai, ensuring proper control and regulation for the future.

Overview of the VA Platform

The VA system is made up of the Virtual Assets and Related Activities Regulations 2023, along with several rules. These regulations explain how a company can register and get a license as a Virtual Asset Service Provider (VASP).

The rules also define which activities with virtual assets are regulated. They include strict guidelines to prevent money laundering and market crimes like insider trading and market manipulation. Companies with a VARA license must follow four key rules to keep their license and operate in the virtual asset space. Additionally, there are seven more rules for specific activities.

These rules help identify the risks of working with virtual assets, and all licensed companies must follow them.

There are also rules for issuing virtual assets, which ensure compliance with the Administrative Order.

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If you would like to discuss the regulation of your virtual asset business or the publication of the VARA Rules and their impact on your business, please

Territorial Coverage

Recent laws confirm that VARA (Virtual Assets Regulatory Authority) has control over all of Dubai, including its free zones, except for ADGM and DIFC. Here's how it applies to other regulators:

  • VARA and the UAE Central Bank will regulate payment tokens and fiat-backed stablecoins.

  • The UAE Central Bank will manage central bank digital currencies.

  • Companies licensed by VARA don't need a separate license from the Securities and Commodities Authority (SCA).

  • Businesses with other cryptocurrency licenses in Dubai Free Zone may need a separate VARA license to work with virtual assets.

VARA Rules

Recent laws confirm that VARA (Virtual Assets Regulatory Authority) has control over all of Dubai, including its free zones, except for ADGM and DIFC. Here's how it applies to other regulators:

  • VARA and the UAE Central Bank will regulate payment tokens and fiat-backed stablecoins.

The laws governing VARA give it the power to create rules about virtual asset activities. Any company wanting to work with virtual assets in Dubai must get a license from VARA before starting operations. VARA’s rules define various virtual asset activities, such as:

  • Advisory Services

  • Broker-Dealer Services

  • Custody Services

  • Exchange Services

  • Lending and Borrowing Services

  • Payments and Remittances Services

  • VA Management and Investment Services

Licensed companies must pay taxes and registration fees. VARA has also made some exceptions for specific professionals and organizations, such as those related to the UAE government, though they still need to get permission from VARA.

Organizations that do not meet licensing requirements must still follow registration rules. For example, proprietary traders of virtual assets who manage $250 million or more within any 30-day period must follow regulations and obtain a license. VARA also governs the voluntary registration of businesses offering technical services related to distributed ledger technology or using these services, as well as traders with smaller portfolios.

The licensing process has several steps:

  • Getting a temporary permit

  • Submitting documents for a preliminary license for a minimum viable product (MVP)

  • Getting an MVP operating license

  • Receiving a Full Product License (FMP)

Since these regulations are new, only a few companies have received licenses so far, and only at the Temporary Permit or MVP stages. The fourth stage involves strict checks, and detailed instructions for the entire process are not yet available, but they will be soon.

Additional VARA Rules

  • All companies licensed by VARA must follow VARA's rules, even for activities outside of Dubai.

  • Virtual Asset Service Providers (VASPs) must follow Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) laws.

  • VASPs must comply with the Administrative Order.

  • Privacy tokens or anonymous virtual assets are not allowed in Dubai.

  • Companies can face penalties for insider trading, illegal disclosures, and market manipulation, including price manipulation of virtual assets.

  • Penalties can be up to AED 50 million (about $13.6 million) or 15% of the company's annual income.

Codes of Practice
for Specific Activities

All seven rules specify that companies must publicly disclose details of any past prosecutions or convictions of senior management or board members.

This rule applies to all employees, whether those convictions or prosecutions originated in the UAE or elsewhere. These rules also govern the client’s investment methodology, background checks, staff competence, and compliance with the client’s requirements.

The Code of Conduct for Brokerage and Dealer Services prescribes detailed requirements for trading and execution rules. Also, there are special rules that control margin trading, transactions as a principal, and the distribution of virtual assets.

The Code of Custody Services establishes strict requirements for the composition of the board of directors and the committee of the board of directors of VASP. Also, additional information relates to separation, control, wallet management, and general customer relationship management.

There is also a set of rules for lending and borrowing. This document confirms that VARA’s activities are potentially more extensive than any other regulatory body in the UAE. Please see the directions above for specific requirements for risk management, reporting, evaluation, and record keeping.

One of the VA Management and Investment Services rulebooks has rules that relate to the management and investment of virtual assets. There are also several strict rules regarding marketing and fair advertising.

Details regarding the Payment and Money Transfer Service rules will be published. All newly issued requirements must be consistent with the needs of the UAECB.

Issuance of Virtual Assets

The final part of VARA's rules covers how virtual assets can be issued. Before issuing any virtual assets in Dubai, companies need to get approval from VARA.

However, this rule does not apply to virtual purchases that can't be transferred. Companies must also follow the rules for things like white papers, disclosing risks, and meeting technology and security standards.

Not every virtual asset needs separate permission from VARA to be used in Dubai. But VARA can cancel its approval if the virtual asset isn't issued within six months of getting permission. Companies planning to distribute tokens should remember this. If their permit is canceled, they will need to apply for it again.

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Any Questions

Frequently Asked Questions

VARA (Virtual Assets Regulatory Authority) is a Dubai-based authority that regulates virtual assets like cryptocurrencies. Its goal is to create a secure, transparent, and innovative environment for virtual assets.
The Virtual Assets and Related Activities Regulations 2024 are rules set by VARA to ensure safe, regulated practices in the virtual assets industry, protecting users and encouraging growth.
VARA enables three types of companies: startups, large established businesses, and financial institutions, helping them operate within a regulated virtual asset environment.
VARA provides licenses for activities like virtual asset exchanges, custodial services, and issuance of new virtual assets, ensuring they meet regulatory standards.
Activities that need a VARA license include trading virtual assets, offering custodial services, and providing financial advice related to virtual assets.
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