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10 December 2023

VARA defines issuance rules to be global standard on asset reference tokens


Dubai's Virtual Assets Regulatory Authority (VARA) takes the first-of-its-kind regulatory position on issuance of specific categories of Virtual Assets backed by Real World Assets including but not limited to FIAT, offering greater assurance for cross-border interoperability.

The September 2023 edition of VARA’s Virtual Asset (VA) Issuance Rulebook, makes Dubai’s regime amongst the world's first to proactively establish prudential requirements for two specialist categories of tokens that maintain a stable value against their underlying asset class.

In the context of the FIAT Referenced Virtual Assets (FRVAs) it is critically noteworthy that assets specifically designed to maintain a stable value in relation to the UAE Dirham are designated to be under the exclusive purview of UAE’s Central Bank – making this a global-first to offer much needed clarity on stablecoin issuances. VARA's FRVA rules specifically cater for issuances against non-AED FIATs, and have garnered significant attention from global authorities seeking collaboration on regulating virtual assets with improved synchronisation and interoperability.

The latest edition of this VA Issuance Rulebook represents a significant stride in establishing a secure VA ecosystem in Dubai backed by a robust regulatory framework for greater consumer protection thereby bolstering safe VA adoption with a secure bridge between TradFi and DeFi ecosystems.

It ensures that VA issuers adhere to the highest standards of risk assurance, market stability, and transparency - especially with regard to issuance of tokens that are expected to provide a stable value against their underlying real world asset.

VARA has maintained that its regime is designed for its regulations to be responsive to market needs and agile in ensuring that global market risk can be proactively mitigated.

The updated rulebook encompasses a range of regulations, including licensing, approval, and registration requirements, with specific focus on whitepaper and public disclosures, issuer compliance obligations, supervision, examination, and enforcement. It specifically contemplates requirements for issuance of Asset Reference Tokens (ARTs) with a dedicated annex outlining regulations for FRVAs.

This rulebook specifically prioritises alignment with the UAE's rigorous efforts to combat Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) activities while simultaneously enhancing market stability and transparency.