On March 11, 2022, the Regulation of Virtual Assets (VAL) became effective in the Emirate of Dubai after Law No. 4 of 2022 was enacted on February 8. The VAL Law establishes the Dubai Virtual Assets Regulatory Authority (VARA), which will supervise the legal framework for businesses related to virtual assets, including crypto assets, digital assets, and non-fungible tokens (NFT). VAL and VARA are milestones, and reflect Dubai’s vision to become one of the jurisdictions of choice for groups, investors and entrepreneurs in DeFi, STO, crypto-businesses and blockchain technology.

VARA will be in charge of the enforcement of the VAL law and will cooperate with other federal agencies, including the UAE Central Bank, to issue a code of ethics, general policy, and strategic plans. However, VARA will not regulate services related to virtual assets on a federal level.

In particular, VARA’s mandate includes monitoring trading activities in virtual asset services to prevent price manipulation and establish high standards of protection of personal data. An entity that breaches VAL may be subject to certain penalties and fines, including withdrawal of VARA’s authorisation for six months.

VAL defines

• a virtual asset as a “digital representation of value which can be digitally traded or transferred or used as an exchange or payment tool or for investment purposes” and
• a virtual token is a “digital representation of a group of rights which can be issued and traded digitally through a virtual asset platform (a platform operated by a virtual asset provider licensed by VARA)”.

Important details of VARA:

• VARA is responsible for regulating, supervising and overseeing the issuance, offering and relevant disclosure processes of virtual assets, including digital properties, crypto assets and NFT.
• VARA has legal status and financial and administrative autonomy, with an independent and juridical capacity to protect and regulate the stakeholders in virtual asset services, affiliated with the Dubai World Trade Centre (DWTC) Authority.

Any natural person or legal entity offering virtual asset services can only do so if it is

1. granted a license from VARA,
2. operating in the Emirate of Dubai, and
3. has a trade license from the relevant commercial authority in the Emirate of Dubai.

VARA is expected to issue implementing decisions on the implementation of VAL, including a description of relevant activities, exempted virtual assets, procedures for licensing and associated fees, virtual asset custodians, digital wallets, and tokenisation and trading.

For further information on VAL and VARA, please contact our Crypto-Assets team at SALVUS – info@salvusfunds.com.