Dubai Sets The Pace By Issuing Landmark Virtual Asset Regulations ⋆ ZyCrypto

In one of the most comprehensive efforts to create a crypto regulation framework, Dubai’s Virtual Asset Regulatory Authority (VARA) has issued its Virtual Asset Regulatory Authority 2023 regulations.

VARA was launched in 2022 and is the sole authority for regulating, supervising and overseeing Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) across Dubai (excluding the Dubai International Financial Centre).

As per the VARA regulations 2023, any entity that wishes to carry out Virtual Asset activities in Dubai must obtain prior authorisation from VARA. VASPs must go through a 4-stage licensing process. The licensing process starts with obtaining a provisional permit, followed by a preparatory licence, an operating licence and eventually a Minimum Viable Product (MVP) licence. 

According to VARA, they have not granted any operating licence to any VASP so far. VARA says that it has only issued some licences to VASPs at the provisional or preparatory licensing stages.

The regulations also list the rulebooks for VASPs and Virtual Asset-specific rulebooks. The rulebooks comprise rules and any guidance issued by VARA. All VASPs must comply with the rulebooks and the Virtual Asset specific rulebooks for activities they have been licensed to carry out.

Furthermore, the regulations also recognise Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws and all other federal legislation relating to money laundering, terrorist financing, the financing of unlawful organisations or sanctions non-compliance. VASPs must comply with all Federal Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Laws.

VARA’s administrative order regulating marketing, advertising and promotions related to virtual assets requires that such activities be fair, clear, not misleading and identifiable as marketing or promotional. In the event of non-compliance, VARA may issue fines and penalties, request the suspension of marketing activities and revoke any issued licences.

The regulations also permit VARA to supervise, examine or investigate licensed entities. VARA may undertake enforcement actions against any licensed entity for violating these regulations.

According to the regulations, VASPs providing Virtual Asset activities in Dubai must also comply with any applicable Central Bank of the UAE (CBUAE) regulation on Virtual Assets.

Through these regulations, VARA also aims to increase awareness about Virtual Asset services and to attract investments and businesses to Dubai.

The regulations lay a more precise foundation for virtual asset businesses that wish to operate in Dubai. VARA’s regulatory objectives include the promotion of Dubai as a regional and international hub for Virtual Assets and related services.