VARA - THE NEW ERA OF VIRTUAL ASSETS
The cryptocurrency market is highly resilient and constant efforts are being made to determine the most appropriate course of action. The enthusiasm of the Emirate's leaders to advance blockchain technology and the metaverse through various initiatives is highly promising. As a result, in January, a new regulation and an independent regulatory authority for virtual assets were introduced by the UAE Cabinet, marking the state's first federal-level regulatory regime for the sector.
The Virtual Asset Regulatory Authority (VARA), the regulatory entity responsible for overseeing the implementation of cryptocurrency regulations within Dubai, has instituted new regulations for service providers of virtual assets operating within the jurisdiction effective 07th February 2023. Four mandatory rulebooks namely, company, compliance & risk management, technology & information, and market conduct together with activity-specific rulebooks encompass the operational guidelines for service providers. However, the laws are only applicable to participators located within Dubai and do not apply to those operating within the Dubai International Financial Centre (DIFC). General prohibitions of the regulations state that no Entity may carry out any virtual asset activity by way of business or promote, offer, or purport to do so, in the Emirate, unless it is either authorized and Licensed by VARA for the virtual asset activity or an employee carrying on or otherwise facilitating a virtual asset activity on behalf of its employer that is Licensed by VARA or an Exempt Entity. It is of utmost importance to note that the issuance of privacy coins or in other words Anonymity-Enhanced Cryptocurrencies and all related virtual asset activities are prohibited in the Emirate. Another important factor is that traders with a trading capital exceeding $250 million are now obligated to register with VARA.
Advising services, licensing, and yearly monitoring costs for custody, exchanges, broker-dealers, and loan services are now established by law for which the supervision and authorization fees range from AED 40,000 to AED 200,000. It is compulsory for all stakeholders to comply with legislation regarding marketing, advertising, and promotion restrictions, regardless of licensure by VARA. As per the regulations, infringements will result in penalties ranging from AED 20,000 to AED 500,000.
In conclusion, the adoption of a new regulatory framework will not only fuel the growth of the region's economy but will also play a vital role in its future development. By providing a secure and efficient system for transactions, blockchain will empower businesses and individuals alike to achieve greater success, and contribute to the overall prosperity of the region.
Senior Legal Consultant