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VARA Sets New Regulations for Virtual Assets in Dubai

In a recent update to virtual assets regulation in Dubai, persons who conduct virtual asset activities within the emirate, exempting the Dubai Financial Centre, (DIFC) are compelled to become fully regulated under the emirate's Virtual Assets Regulatory Authority (VARA). Effective from January 15, 2023, the cabinet resolution mandates that all companies operating in or intending to operate in Dubai's virtual asset sector must obtain a license from VARA. By April 30th, 2023 Virtual asset operators are required to conclude and submit initial disclosure questionnaires to their relevant licensing authority, Dubai’s Department of Economy and Tourism, or any Free zone authority. Therefore, it is advisable for operators of virtual asset activities to seek expert consultation from accredited virtual asset service providers in Dubai to stay compliant and to combat any complexities upon initial submissions and operation.

The Process of Product-Licensing

Upon receiving initial approval, qualifying persons will be able to complete their working set-up and subsequently, virtual assets service providers will submit a comprehensive product license application to VARA through the respective authority. However, in distinct instances, the application may be directly put up with VARA till the approved commercial licensor is ascertained.

Types of Regulated Virtual Asset Activity Licenses

Primarily, the pillars of virtual asset regulation are emerging technologies such as artificial intelligence, Web3, blockchain, and the metaverse. Therefore, persons who conduct virtual asset activities qualify to apply for seven types of regulated virtual asset activity licenses. These encompass:

  • Management and investment services.
  • Lending and borrowing services,
  • Exchange services
  • Custody services, 
  • Advisory services.  
  • Broker-dealer services.
  • Transfer and settlement services.

Objectives of Regulating Virtual Asset Operation in Dubai

Regulation of virtual asset operators has immense significance in Dubai's virtual business ecosystem. This includes and is not limited to the below:

  • The regulation gives a legal duty upon qualifying persons to be responsible for virtual asset business conduct, which effectively protects investors and consumers as the primary priority.
  • It sets a high yardstick that puts Dubai as a global epitome for virtual asset sector development.
  • The virtual assets regulatory framework provides international standards for the virtual asset industry governance, which ensures business enhancement and further positions Dubai as a creditable destination for the virtual asset sector
  • Imperatively, the Virtual Assets and Related Activities Regulations 2023 obligates gold-standard risk assurance and anti-money laundering standards which have to be enforced by licensed businesses or qualifying persons in Dubai.
  • The Virtual Asset Regulation narrows down upon the potential hazards which distinct virtual asset activities advance to the business ecosystem and further seeks to confer service providers a coherent body of regulations and standards which are applicable to distinct business structures.

Seek Expert Consultation From Virtual Asset Service Providers in Dubai

It is advisable for operators of virtual asset activities to seek consultation from accredited virtual asset service providers in Dubai. They furnish expert advisory and customized solutions to virtual asset complexities upon initial submissions and operation. Further, they assist qualifying persons to stay compliant with the Virtual Assets and Related Activities Regulation to which noncompliance accrues hefty fines. Thus, contact us today and we shall be glad to assist you! 

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Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.