Dubai has made a big move in the world of virtual assets with the launch of its Virtual Asset Regulatory Authority (VARA) and the issuance of the Virtual Assets and Related Activities Regulations 2023. The regulations aim to provide a comprehensive framework for virtual assets (VA) that is built on the principles of economic sustainability and cross-border financial security. The UAE has demonstrated its commitment to enabling these drivers safely and has updated its oversight and regulatory approach to address the risks of money laundering and terrorist financing that could arise from the potential misuse of new technologies.
The VA framework is designed to offer regulatory certainty, allowing the market to have greater clarity on the level of operator responsibility. It also mandates the application of gold-standard risk assurance and Anti-Money Laundering (AML) standards by licensed entities within Dubai.
VARA Aims for Economic Stability, Investor Protection, and Jurisdictional Resilience
As the authority responsible for providing VA oversight across the Emirate of Dubai (except DIFC), VARA aims to facilitate economic stability, investor protection, and jurisdictional resilience in VA-associated activities. The new regulations cover seven licensed VA activities including Advisory services, Broker-Dealer services, Custodial services, Exchange services, Lending-Borrowing services, Payments, and Remittances services, and VA Management and Investment services. Issuance is also regulated under the VARA regime to provide consumers with more informed decisions on new tokens being launched in Dubai and the obligations of the issuer.
Existing VASPs must register and become fully compliant
Existing MVP Operational license applicants, legacy UAE-based Virtual Asset Service-Providers (VASPs), and new market entrants will be provided with a route toward full FMP licensing. All VASPs offering VA services in Dubai prior to the publication of the FMP Regulations will be required to register with VARA and become fully compliant with the final rules. Any breach of this condition will result in regulatory action.
So far, the VARA licenses issued have only been either at Stage-Gate (1) Provisional or (2) MVP-Preparatory – to enable VASPs to fulfill all pre-conditions, and undertake readiness steps eg. establish offices, onboard employees with work visas, secure domestic bank account, etc. prior to being in a position to undertake any market operations. As such, no VARA licensee has, to date, been awarded an MVP-Operating permit, to provide regulated services or activities to their specifically authorized market segment(s) in the Emirate.
Dubai’s Vision for the Future Economy
Dubai’s goal to establish itself as the capital of the Future Economy anchored by Metaverse, AI, Web3.0, and Blockchain is evident with the launch of VARA and the VA framework. This shows Dubai’s confidence in delivering a progressive VA ecosystem that nurtures next-gen innovation while building responsible safeguards.
The full Virtual Assets and Related Activities Regulations 2023 can be found on vara.ae. Dubai’s launch of VARA and the VA framework demonstrates its commitment to promoting a responsible and progressive virtual asset ecosystem in the Emirate.