On 7 February in 2023 the Virtual Assets Regulation Authority (VARA) of Dubai adopted the 2023 Virtual Assets and Related Activities Regulations (the Regulations), which includes four compulsory and seven activity-specific rulebooks. This adoption followed the Dubai Law No. 4 of March 11, 2022, which regulates virtual assets in Dubai, granting VARA the authority to regulate activities related to virtual assets, excluding the Dubai International Financial Center (DIFC). The DIFC has its own regulatory regime for virtual assets. VARA was authorized to establish regulations for all relevant activities and virtual assets, with the law setting definitions for virtual assets and distributed ledger technology, as well as outlining a broad list of activities that require a license.
The territorial scope of the regulations includes all virtual assets and virtual asset activities (VA Activities) in Dubai, except for the DIFC. Part III of the regulations prohibits any entity from conducting or promoting any VA Activity in Dubai without authorization or licensing from VARA, except for those with Exempt Entity status or an exemption covering a specific VA Activity. VARA has the discretion to determine whether an entity is conducting VA Activities in Dubai. Even if VARA determines that an offshore provider of VA Activities is not conducting VA Activities in Dubai, any marketing of VA Activities to Dubai residents must comply with VARA’s Marketing Regulations. Offshore providers must obtain VARA’s approval before marketing and demonstrate that they hold all necessary licenses to provide VA Activities in their home jurisdiction.
VARA specified several activities as licensable VA Activities under the Regulations. These include advisory services, broker-dealer services, custody services, exchange services, lending and borrowing services, payment and remittances services, and VA management and investment services. Advisory services include offering personal recommendations to clients, while broker-dealer services involve arranging orders for the sale and purchase of VAs, facilitating transactions, and providing issuance-related services. Custody services entail safekeeping VAs for or on behalf of another entity, while exchange services cover the exchange, trade, or conversion between VAs and fiat currency. Lending and borrowing services involve transferring VAs or lending them to another party, with the expectation of their return. Payment and remittances services include receiving VAs for transmission/transfer, and VA management and investment services encompass acting on behalf of a client in managing VAs.
