Dubai’s Virtual Assets Regulatory Authority (Vara) has issued regulations to offer certainty and greater clarity on the expected level of operator responsibility and mitigate market risks.
The Virtual Assets and Related Activities Regulations 2023 mandates “gold-standard risk assurance” and anti-money laundering standards to be applied by licensed businesses within the emirate, said a statement from the regulator on Tuesday.
The regulatory framework is focused on the risks that each virtual asset activity presents to the market and seeks to offer service providers a clear framework of rules which apply to their operations and business models, Vara said.
“Dubai’s D33 economic plan has outlined our mission to establish the emirate as the capital of the future economy anchored by metaverse, AI, Web3.0 and blockchain,” said Helal Almarri, director general of Dubai’s Department of Economy and Tourism and chairman of Vara’s executive board.
“Ahead of its first anniversary, Vara launches the VA framework structured to accelerate our new economy agenda, augmenting secure and sustainable global market growth. This custom-designed construct reflects the UAE’s commitment to building responsible safeguards and Dubai’s confidence in delivering a progressive VA ecosystem that nurtures next-gen innovation.”
Dubai adopted the Virtual Assets Regulation Law in March last year with the aim of creating an advanced legal framework to protect investors and provide international standards for virtual asset industry governance.
Virtual assets include cryptocurrencies such as Bitcoin and non-fungible tokens (NFTs).
The Vara regulates the sector throughout the emirate, including special development zones and free zones, but excluding the Dubai International Financial Centre.
The authority, which will also be responsible for licensing, has legal and financial autonomy over the virtual asset sector.
The government is taking concrete steps to establish a strong digital economy and make use of the advantages provided by digital transformation.
The national digital economy will grow to more than $140 billion in 2031 from today’s $38 billion, a report this week by Dubai Chamber of Digital Economy said.
The Vara will facilitate economic stability, investor protection and jurisdictional resilience in Dubai’s virtual assets industry, the statement said.
The new regulations cover seven licensed virtual asset activities, including advisory, broker-dealer, custodial, exchange, lending-borrowing, payments and remittance, and VA management and investment services, Vara said.
Issuance is also a regulated activity under the Vara regime, to allow consumers to make a more informed decision on new tokens being launched in Dubai and the associated obligations of the issuer.
Existing minimum viable product (MVP) operational licence applicants (and holders of either the provisional or preparatory MVP licenses), legacy UAE-based virtual asset service providers (Vasps) and new market entrants will be provided with a route towards full market product licensing, the statement said.
All Vasps offering services in Dubai before the publication of the FMP regulations will be required to register with Vara and become fully compliant with the rules.
Any breach of this condition will be subject to regulatory action, Vara said.
“The UAE has remained committed to … updating its oversight and regulatory approach, addressing global risks of money laundering and terrorist financing, arising from the potential misuse of new technologies,” the regulator added.
Vara granted licences to a number of global cryptocurrency platforms last year as Dubai continues to integrate virtual assets into its system.
These include CoinMena, Bahrain's Sharia-compliant cryptocurrency asset trading platform, as well as Binance, the world’s largest cryptocurrency exchange, BitOasis and Bybit.
Crypto platforms OKX and Huobi, which are both based in the Seychelles, and Singapore’s Fintonia Group also received provisional licences from Vara.
In May, Vara said it had entered into the metaverse with the establishment of its Metaverse HQ, making it the first regulator to have a presence in the digital space.
