Dubai's virtual asset regulator, the Virtual Assets Regulatory Authority (VARA), has implemented stringent measures to enhance market integrity and risk oversight within the digital asset sector. The deadline for licensed digital asset companies to comply with the updated activity-based Rulebooks is set for June 19.
On May 19, VARA announced the release of Version 2.0 of the Rulebooks, which include strengthened controls around margin trading and token distribution services, harmonized compliance requirements across all licensed activities, and clearer definitions for collateral wallet arrangements. The regulator emphasized the importance of these updates in line with global regulatory best practices to ensure a more transparent and secure environment for virtual asset service providers (VASPs).
VARA's supervisory mechanisms have been enhanced across various regulated activities, including advisory, broker-dealer, custody, exchange, lending and borrowing, virtual asset management and investment, and virtual asset transfer and settlement services. A VARA spokesperson highlighted that the updates aim to bring consistency in defining core operational terms and align risk management and disclosure obligations where activities overlap.
The tightening of leverage thresholds for margin trading, clearer collateralization standards, and enhanced monitoring obligations for VASPs offering this feature are part of the regulatory changes. Margin trading, which allows traders to control large positions with smaller amounts of capital, can amplify both gains and losses. By implementing stricter leverage thresholds, VARA aims to limit the risks of widespread liquidations in a market downturn.
Additionally, VARA introduced a new section on token distribution, outlining licensing prerequisites, investor protections, and marketing restrictions. The focus on marketing restrictions, particularly for retail-facing offers, underscores the regulator's commitment to aligning with global conduct expectations and addressing regulatory gaps.
The updates introduced by VARA are designed to streamline compliance processes for digital asset companies, reduce ambiguity, and provide clarity on regulatory requirements. The 30-day transition period provided to VASPs allows for a smooth transition towards full compliance by June 19, 2025. These regulatory changes reflect Dubai's commitment to fostering a robust and well-regulated digital asset ecosystem in line with international standards.
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