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17 July 2024

DUBAI’S DET AND FREE ZONE COUNCIL ACTIVATE APPLICATIONS FOR LEGACY VIRTUAL ASSET OPERATORS TO BECOME FULLY REGULATED UNDER VARA

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By E247
  • • Virtual Assets (VA) Sector including all businesses offering products, services, and associated activities, is fully regulated and falls under the purview of VARA in the Emirate of Dubai 
  • • All existing businesses operating in, or providing services associated with the VA Sector are required to respond to an Initial Disclosure Questionnaire (IDQ) by the deadline of 30-April-2023
  • • All entities that qualify for a regulated Full Market Product (FMP) Licence will commence their transition to a VARA regulated regime by 31-August 2023 

Dubai, United Arab Emirates, 14 April 2023: The Virtual Assets and Related Activities Regulations 2023, establishes clear requirements for the VA sector to be fully regulated under VARA in the Emirate of Dubai, including all businesses offering products and services associated with the sector. VARA is working closely with Dubai’s Department of Economy and Tourism (DET) and Free Zone Authorities (FZAs), towards meeting the set deadline of 30 April for all initial disclosure questionnaires (IDQs) across the sector to be received as the first step towards the migration of the market to a regulated regime. 

Under Cabinet Resolution No. 111 of 2022 Concerning the Regulation of Virtual Assets and their Service Providers, which came into effect on 15 January 2023, all companies operating in or seeking to operate in this sector in or from the Emirate of Dubai must be licensed by VARA. VARA has been actively engaged, with DET and Dubai’s numerous FZAs to facilitate the seamless transition of existing Virtual Asset Service Providers (VASPs) into the VARA regulatory regime as well as formalise the application process for new regulated licences.  

His Excellency Helal Saeed Almarri, Director General Dubai’s Department of Economy & Tourism said: “Under the directive of His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council, we are making progress with Dubai’s D33 Agenda which outlines our mission to establish the Emirate as the capital of the Future Economy anchored by Metaverse, AI, Web3.0 and Blockchain. The virtual assets sector that spans all these pillars is integral to the strategy presenting a dynamically evolving ecosystem that fuels all aspects of sustainable economic growth. Ensuring that our marketplace is secure, participants are responsible, and investors and consumers are effectively protected is our top priority.  With key stakeholders responsible for commercial licensing across the Emirate working closely to deploy VARA’s full market regulatory construct, we aim to set a benchmark that positions the Emirate of Dubai as a global role model for VA sector development”.
Legacy market operators carrying out VA activities in Dubai (excluding DIFC) are required to declare their desire to undertake regulated activities by submitting an IDQ to their current licensing authority – DET or any of FZAs, by the final deadline of 30-April 2023. Upon subsequent receipt of an Application Acknowledgement Notice (AAN), operating VASPs will commence the appropriate course of action for those requiring to be regulated or registered under VARA by 31 August 2023. 

H. E. Dr. Mohammed Al Zarooni, Secretary-General of the Dubai Free Zones Council, remarked: “Dubai’s Free Zones have been an integral part of the business landscape for decades, providing start-ups, entrepreneurs and overseas companies looking to establish regional headquarters with access to a geographically strategic, multicultural, dynamic and bureaucracy-free environment. We have witnessed growing interest from virtual assets-focused entities who are keen to adhere to the VARA licensing regime. Adopting the new regulations, provides a safe and sustainable operating environment for VA companies and further establishes Dubai as a credible destination for this sector”.

Ahmad Al Falasi, CEO, Department of Economy and Tourism, said: “Dubai’s reputation as an easy-to-navigate, pro-business destination home to over 200 nationalities, is an attractive proposition for virtual asset companies, looking for a safe, regulated environment. DET is working closely with VARA to ensure that all existing VA services providers will be in full adherence to the regulations within the defined timelines”. 

A total of seven distinct types of regulated VA activity licences can be applied for:  Advisory Services, Broker-Dealer Services, Custody Services, Exchange Services, Lending and Borrowing Services, Transfer and Settlement Services and Management and Investment Services. 

Commenting on the imminent April deadline to receive all legacy operator IDQs as the first phase of the migration plans, Henson Orser, Chief Executive Officer, VARA, said: “VARA has been working closely with both DET and the emirate’s Free Zone Authorities in order to ensure a smooth transition for legacy Virtual Assets Service Providers (VASPs) in Dubai, many of whom were at the forefront of innovation in this space. This transition was further supported by VARA’s Minimum Viable Product (MVP) programme, a timebound initiative that enabled new applicants to set up operations and become market ready until official release of our full suite of regulations on 7 February 2023. The introduction of the Virtual Assets and Related Activities Regulations gives the existing companies, a clear timeline to ensure that they submit their initial disclosures by the end of April.”

 

VARA’s Full Market Product (FMP) Regulations are designed to specifically cater for the provision of permissible activities and services to customers and investors, by operators from the Emirate of Dubai. With bespoke rules and guidelines designed to provide clarity, assure certainty, and mitigate market risks, VARA seeks to develop a model framework for global economic sustainability within an innovation-centric environment that is truly borderless, technology agnostic, and future-focused.