Dubai releases its rulebook for crypto companies

Buildings of dubai in the background

Dubai has become the latest jurisdiction to create a rulebook for the use and proliferation of crypto. As the Emirate’s Virtual Asset Regulatory Authority (VARA) published its Virtual Assets and Related Activities Regulations 2023 on Tuesday.

The regulations set out a comprehensive Virtual Asset (VA) Framework built on principles of economic sustainability and cross-border financial security. Under the regulations, all crypto firms wishing to operate in Dubai must first obtain authorization and the relevant licenses.

VARA is “the world’s first independent regulator for virtual assets,” according to the post, and “serves as a transparent and trusted guiding authority for the emerging world of Virtual Assets.” A regulatory body was established in 2022 to oversee the crypto sector in Dubai and attract crypto and blockchain companies.

“With bespoke rules and guidelines designed to provide clarity, assure certainty, and mitigate market risks. VARA seeks to develop a model framework for global economic sustainability within an innovation-centric environment. That is truly borderless, technology agnostic, and future-focused,” the regulator said on Tuesday.

The stated goals of the organization are to create an “easy-to-replicate framework to regulate the industry,” and to help “mitigate risks and facilitate cross-border operations and innovation to enable safe market adoption and growth.”

The Full Market Product (FMP) Regulations have been designed to specifically address the provision of permissible activities and services to customers and investors in the Emirate of Dubai.

With the regulations, VARA is attempting to help mitigate the risks that different virtual asset activities present to the market. And provide virtual asset service providers (VASPs) with a clear framework of rules that apply to their business models. It hopes to achieve these goals “while maintaining a baseline market standard of compliance across core regulatory domains.”

VARA has developed four “Compulsory Rulebooks” related to “Company, Compliance & Risk Management, Technology & Information, and Market Conduct.” The regulator has also created seven activity-specific rulebooks to cater to risks associated with the following virtual asset activities. “Advisory, Broker-Dealer, Custody, Exchange, Lending & Borrowing, Payments & Remittances, and Management & Investment.”

If a VASP is licensed by VARA to offer an activity, only then will they have to comply with the corresponding activity rulebook. VARA has also established rules for the issuance of all virtual assets, as well as virtual asset marketing activities.

The market participants, both those licensed by VARA and those who are not, must follow the regulations for marketing, advertising, and promotions. And should be aware of the penalties for non-compliance.

The government of Dubai still needs to give final approval to the new framework before it is fully implemented.

Regulators from around the world now find themselves in a race to set up crypto supervision. And establish clear regulatory frameworks following the turmoil of 2022. Efforts to craft and enact licensing regimes are currently underway in the E.U., U.K., and South Korea, among other jurisdictions.