While the initial legislation which established VARA was a watershed moment for the regulation of virtual assets in Dubai, the VA Regulations have been long awaited as the industry now has a clear and public pathway to regulation under VARA.
What do the VARA Regulations refer to?
The regulations are targeted at any entity which wishes to carry out an activity in the virtual asset space in the Emirate of Dubai but outside of the Dubai International Financial Centre. The DIFC has enacted its own token and crypto legislative frameworks which apply to entities carrying out activities within the DIFC and regulated by the DFSA.
Under the VA Regulations, the activities that can be carried out and regulated by VARA are as follows:
- Advisory services;
- Broker-dealer services;
- Custody services;
- Exchange services;
- Lending and borrowing services;
- Payments and remittances services; and
- VA management and investment services.
Each of these activities is defined in the VA Regulations which will allow entities to understand whether any of their current or prospective operations may fall under the regulation of VARA. There are certain exemptions included in the VA Regulations which allow certain entities to operate without a license such as professionals. We note that UAE government-owned or linked entities are exempted from complying with the regulations.
What are the VA Rulebooks?
The VA Regulations are composed of four compulsory rulebooks and seven activity-specific rulebooks.
The compulsory rulebooks are composed of the Company Rulebook, the Compliance & Risk Management Rulebook, the Technology & Information Rulebook, and the Market Conduct Rulebook. These will be applicable across all entities regulated by VARA which carry out any type of activity related to virtual assets.
The seven activity-specific rulebooks will only be applicable to an entity carrying out said specific activity and regulated by VARA. One of the activity-specific rulebooks has yet to be published which is the payments & remittances services rulebook.
Are the new regulations flexible enough to allow for VA and crypto innovation to thrive?
The nature of new or nascent technology is that regulation will always be a few steps behind its regulation. This has usually allowed technology to continue to develop without heavy restrictions on adoption or development.
The VA Regulations have struck a good balance by providing clear licensing and registration requirements for prospective entities while at the same time ensuring that strong governance, compliance, and consumer protection protections remain.