The Dubai Virtual Assets Regulatory Authority (“VARA”), the regulator in charge for supervising the virtual assets (“VA”) law, has released the most awaited Virtual Assets and Related Activities Regulations 2023 on 7th February, 2023 (“VA Regulations”). In order to accelerate the development of a fully global digital economy, VARA was established under the Law No. (4) of 2022 of Regulating Virtual Assets in the Emirates of Dubai as the sole, independent and specialized regulator for VA in the world.

The VA Regulations lay forth a thorough framework for VA based on principles of global financial stability and economic sustainability in order to ensure the maximum return on investment and protection of investor funds. The VA Regulations provides comprehensive regulatory framework which includes but is not limited to: general prohibitions and exemptions on VA activities; issuance of VA; licensing; VA activity rulebooks; anti-money laundering and combating the financing of terrorism; marketing regulations; protection against and investigation of market offences; provision of investigation powers to VARA; and provisions for protection of confidential financial information.

Among the major highlights of the VA Regulations is the licensing process for prospective entities who wish to provide investment services for VA in the Emirate of Dubai and it has clearly stated that any entity wishing to carry out one or more VA activities in the Emirate must seek authorisation from VARA prior to providing any services regarding investment in VA. Every entity seeking a licence from VARA shall adhere to the licensing process as prescribed by VARA from time to time when applying for the licence.

The VA Regulations also provide for VA activity rulebooks which are required to be followed by the entities after obtaining the license from VARA. VA activity rulebooks are divided into 2 (two) parts. Every licensed entity is required to comply with 4 (four) mandatory rulebooks mentioned in the first part. The second part covers the rulebooks which are required to be followed for offering the specific activity only, hence, entities are required to follow the rulebooks mentioned in the second part only if they are licensed by VARA for conducting that specific activity.

The release of these VA Regulations is going to create a huge impact on the global VA market and Dubai has taken a lead in providing a regulatory framework to ensure that investment and trade in VA are conducted in a safe and legal manner to the maximum possible extent. It would be interesting to see that how India and other major jurisdictions in the world are going to take steps regarding the regulation of VA after the introduction of the VA Regulations.

Authors: Sumit Kochar and Apoorv Shishodia