VARA Takes Steady Steps Toward Comprehensive Crypto Regulations in Dubai
Summary:
Dubai's Virtual Asset Regulatory Authority (VARA) is progressing towards creating a comprehensive regulatory framework for cryptocurrency services. The rules apply to activities such as advisory services, exchange services, and asset management, among others. Firms that don't fall into these categories can directly register with VARA. Non-compliance with the rulebook could attract fines between 20,000 dirhams and 200,000 dirhams. Notably, the regulations prohibit the issuance of privacy coins. VARA is also planning to extend its focus to emerging crypto ecosystems such as Decentralized Finance (DeFi) and the metaverse.
Dubai's cryptocurrency regulatory body, the Virtual Asset Regulatory Authority (VARA), is making steady progress towards creating a comprehensive regulatory framework for crypto service providers. Established in March 2022, VARA introduced its detailed crypto regulatory guidelines by February 2023, showcasing a fast-paced approach to defining the cyberspace regulatory ecosystem.
These guidelines, applicable only within Dubai, excluding the Dubai International Financial Centre's free-trade zone, encompass four mandatory rulebooks, seven activity-specific rulebooks, and a single virtual asset issuance rulebook. All crypto service providers must procure a license from VARA and conform to the rules laid out in these rulebooks.
Services that require licensing under VARA's guidelines include advisory, broker-dealer, custody, exchange, lending and borrowing, payment and remittance, along with virtual asset management and investment services. Companies that don't fall into these categories can directly register with VARA. Further, firms with a trading capital above $250 million, that actively invest their own portfolio in digital assets, also need to register with VARA. Any breach of the rulebook will attract penalties ranging from 20,000 dirhams ($5,500) to 200,000 dirhams ($55,000). Privacy coins, according to these regulations, are prohibited.
In an effort to gain insights into the regulatory approach, Cointelegraph was in conversation with VARA executives. Deepa Raja Carbon, VARA’s managing director and vice-chair, confirmed that focus is on harmonizing and aligning with the global regulatory landscape, rather than mere differentiation. Carbon also emphasized the significance of stakeholder collaboration and market engagement, through roundtable discussions and collaborative workshops, aiding in understanding the complexity of the decentralized ecosystem.
Carbon acknowledged the challenges of creating regulations for an emerging industry like cryptocurrency. The focus, she reiterated, was to develop a comprehensive framework aligning with global practices, a process made possible through consultations with a broad spectrum of stakeholders including industry leaders, innovators, investors, and the public.
The addition of Special Development Zones, according to Carbon, has contributed to VARA's regulatory expertise. These zones serve as cultivators of innovation, integrating virtual assets and conventional financial systems. She added that this platform of collaboration stimulated learning about the crypto market and helped develop a pragmatic approach to forming regulatory frameworks.
The vice-chair marked the micro-ecosystems manifested in these zones as reflective of the broader market, providing essential empirical data and experiences. Accordingly, these zones allow regulators to mold their strategies and craft regulations that foster innovation responsibly and sustainably.
VARA's future plans include increasing its focus on emerging crypto ecosystems such as Decentralized Finance (DeFi) and the metaverse. Incidentally, NFTs and the metaverse gained popularity during the 2020-2021 bull run, attracting tech giants like Meta and Apple. Simultaneously, traditional financial institutions, including JPMorgan Chase, have begun showing interest in the DeFi ecosystem.
Carbon asserted that VARA is fully supportive of Dubai's Metaverse Strategy, which advocates the development of Web3 and metaverse ecosystems as significant innovators to aid economic expansion. She notes that in sync with Dubai's goal to attract more than a thousand companies and establish over 40,000 virtual jobs by 2030, VARA is designing a regulatory framework to encourage growth and innovation.
VARA's new regulations have potentially made Dubai and the United Arab Emirates a preferred global hub for cryptocurrency, attracting several crypto firms, some of which including Hex Trust MENA FZE, Trek Labs Ltd TOKO FZE, and Komainu MEA FZE, have already obtained operational licenses from VARA.
Dubai's cryptocurrency regulations, introduced in February 2023, stipulated that all crypto exchanges and service providers must apply for an operational license by November 17, 2023. Consequently, VARA received over 1,000 registration applications.
Published At
12/20/2023 5:00:00 PM
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