According to recent media reports, the Virtual Assets Regulatory Authority (VARA) in Dubai has intensified its authority over the crypto exchanges functioning in the region. The regulator has brought under its radar several big crypto firms including Binance, which is reportedly the largest crypto exchange by market capitalization.
VARA is the entity in charge of regulating, supervising, and overseeing virtual assets and related activities in all zones across the Emirate of Dubai. Sources reveal that the VARA has targeted some very renowned crypto exchanges. The crypto exchanges that have received a notice from the regulator include Binance, Komainu, Hex Trust, and Crypto.com.
Reportedly the regulator has requested Binance and other international firms to provide additional details regarding their ownership, management, and auditing processes as part of their permit application process. The regulator is counting on this move to ensure that crypto companies comply with the “highest” regulatory guidelines while promoting innovation within the industry.
Dubai has proactively adopted and promoted blockchain development and other related technologies. However, the government acknowledges the importance of robust regulations to protect investors and prevent illegal activities such as money laundering and terrorist financing. Notably, VARA has requested the specified information about Binance but the request is taking longer to fulfill.
The regulator’s recent action also suggests its intent to improve its reputation with the Financial Action Task Force (FATF) and be removed from the agency’s “gray list.” The FATF gray list refers to the FATF’s practice of publicly identifying countries with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies.
According to several sources, regulators have currently sent the notice to only four companies reportedly but have targeted several over-the-counter crypto exchanges operating without licenses in Dubai.
Sam Blatteis, CEO of The MENA Catalysts, which provides government-relations advice to fintech multinationals expanding in the Persian Gulf said:
VARA wants to turn Dubai into a capital for the digital-assets economy while safeguarding its business ties with Western jurisdictions like Europe that are adopting more muscular crypto regulations.
Dubai for a long time has envisioned itself to be a hub for crypto and a leader of the metaverse. However, its recent move towards crypto exchanges comes from the happenings that shook the crypto sector last year including the collapse of the crypto exchange FTX.
In recent times, crypto exchanges across the globe have been under the scrutiny of regulators. Similar to Dubai, Hong Kong maintained a pro-crypto stance but its licensing regime has prioritized investors’ interests.
Binance, in particular, has received notice from the United States Commodity Futures Trading Commission (CFTC) as well. A few days back, CFTC sued Binance, and its founder Changpeng Zhao alleging that the company intentionally offered unregistered crypto derivatives products in the U.S. against federal law.