Against the backdrop of a crashing market and burned investors, Dubai has sealed a landmark rulebook that governs how the Emirate will regulate cryptocurrency activities.
The Virtual Asset Regulatory Authority (VARA), which serves as the single custodial entity mandated to license and govern crypto activities in Dubai, released guidelines for Virtual Assets Service Providers (VASPs).
The new rules create a legal framework for crypto aimed at protecting investors and designing much-warranted international standards for the industry governance. In addition, the VARA now has enforcement powers in the Dubai’s special development and free zones with the exception of the Dubai International Financial Centre.
The regulations set out four compulsory rulebooks and activity-specific rulebooks that VASPs must comply with to offer their services. The “Full Market Product Regulations” include guidelines that lay down the rules for compliance, risk management, market conduct, and other requirements.
“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,” the regulator said.
The VARA also cites the investor protection motivations, but hefty fines could make things tougher for crypto service providers. Under the new regulations, all authorized crypto firms in Dubai must adhere to rulebooks for marketing, advertising and promotions.
There are heavy penalties for the breach of these guidelines as violators will be fined between $5,500 and $55,000. If a business repeats the same violation within the year, it could see fines double as high as $135,000.
“The Full Market Product (FMP) Regulations are designed to specifically cater for the provision of permissible activities and services to customers and investors, from the Emirate of Dubai,” the announcement read.
Notably, the UAE was the first global economy to have set up a specialised regulator for the virtual asset sector. Announced by the UAE’s Prime Minister and ruler of Dubai, Sheikh Mohammed Bin Rashid, the emirate has enacted its first law governing cryptocurrency activities in 2022, and it has also formed an independent regulator to supervise the sector.
The country has developed a crypto-friendly reputation compared to other financial jurisdictions that instructed crypto companies to refrain from consumer-oriented marketing.
Dubai is also a favorite hub for crypto firms that suffer in their home from heavy taxes or taking a tough stance on cryptocurrency, which could pave the way for the city to attract more business.