Dubai, UAE: 2023 was a year marred by continued volatility in the world of virtual assets. Yet, it will also go down as being exemplary of the purposefulness of a secure, traceable and trustless VA network – making it the DNA of a resilient Future Economy. Keeping pace with the technological leapfrogs across blockchain and hybrid finance (decentralised and centralised constructs), Dubai’s Virtual Assets Regulatory Authority (VARA) has focused much of its efforts during 2023 on establishing Dubai as the leading, responsible hub for regulated VA. As the first regulator exclusively created to formalise the sector, VARA has issued a record number of regulatory licenses within its first year of full operations, fostering a secure, reliable and inclusive ecosystem of TradFi x DeFi operations.

VARA steadfastly upholds its alignment with international regulatory standards, especially those outlined by the Financial Action Task Force (FATF). This commitment is evident in VARA’s regulatory framework, which pioneers a balanced approach, harmonising innovation with stringent regulatory practices. Significant strides have been made by VARA in 2024 in regulatory announcements, beginning with the launch of path-defining regulations – another world first. Responsive refinements as promised, have been released to address necessary alignments to match sector maturity demands, ensuring continued relevance to market operations. Collaboration with traditional finance regulators, including but not limited to the Central Bank (CBUAE) and the Emirates Securities and Commodities Authority (SCA), has been pivotal, particularly in syncing efforts for FATF-compliant security in cross-border asset flows.

The live-dashboards of VARA’s cutting-edge on-chain cross-border transaction monitoring developed with inputs from subject matter specialists like XChain, were the marquee feature in the Expand North Star Arena at Dubai’s annual Future Blockchain Summit, last November. Taking the essence of Public-Private Partnership (PPP) further, beyond regulatory enablement for growth with industry participants that VARA remains in continuous dialogue with, the commitment to progressive innovation that drives environmental and socio-economic promise, are fundamental to the regulator’s mission to build towards a sustainable Future Economy. This naturally involves conversations with peers across jurisdictions - conversations that seek to drive interoperability and passportability. The series of ongoing bilateral discussions at the Dubai level, including but not limited to the most recently concluded ones with the Hong Kong Monetary Authority (HKMA) are exemplary of the focus this activity has driven through 2023. Collaborative initiatives to enhance financial infrastructure, market connectivity, and VA regulations are identified to be designed to facilitate joint fintech development and knowledge sharing, supported by stakeholders from the banking and technology sectors across both jurisdictions.

2023 – YEAR in Figures:

Overall, 2023 has established VARA as the world’s leading regulatory body in the field of Virtual Assets.

The regulator with under a year of full market operations under its belt, has awarded 19 regulated VASP licenses - of which 11 are already operational. A further 72 Initial Approvals have been issued to new entrants to the Dubai market that have already commenced the licensing process.

VARA’s Minimum Viable Product [MVP] Licensing programme is being phased out as it has served the purpose for which it was initiated in a period where the full market regulations had not been formally launched. In that period, it allowed VARA to observe, engage with, and custom-design rules based on learnings from global sector participant behaviours, without endangering the retail market. By ring-fencing risks of the seasoned market leaders that were entering Dubai in that phase, to institutional and qualified retail investors only, VARA was able to actively size the issues that MVP firms had faced operating in different jurisdictions, gain feedback on regulatory environments to ensure that the Dubai regulations would be practicable, globally scalable, and future-proofed at launch.

Additionally, in view of legacy market operators, VARA has issued 133 Application Acknowledgment Notices, reflecting the proactive and responsive regulatory approach. A total of 116 Proprietary Trading NOCs have been issued, with an additional 37 assessed and ready to be issued while 94 non-VA activity confirmation notices were also issued.

Matthew White, recently appointed CEO of VARA, commented: “As we open 2024, VARA is poised to accelerate its comprehensive focus on bolstering the infrastructure, broadening the spread and deepening the resilience of our VA ecosystem. Our commitment remains ensuring a secure and innovative environment for service providers and consumers alike. To this end, the industry can expect to see enhancements to the regulatory infrastructure for trading, devising innovative market structures for seamless transactions, and activating real-world use cases for secure, tokenised and fractionalised market participation using trustless blockchain networks. This endeavour involves close collaboration with market participants, particularly the mix of TradFi and native crypto with regulatory peers, underpinned by best practice protocols including those prescribed by FATF. Our goalpost remains unchanged – we started this journey 22 months ago and in this short space of time have built a strong foundation that we are in a position to accelerate from. 2024 will be the year to further Dubai's position as the global leader in the new economy underpinned by a regulated VA ecosystem, contributing substantially to the GDP.”

VARA remains dedicated to enhancing Dubai’s position as a global leader in the virtual assets industry. Our approach balances innovation with robust regulatory practices, ensuring a conducive environment for growth and development. VARA’s commitment to aligning with international standards, particularly FATF recommendations, remains unwavering as we continue to work collaboratively with global partners and stakeholders.

As the lines between traditional finance and decentralised finance blur, VARA recognises the importance of progressive technology and the need to fast-track maturity in investor and consumer protection, along with managing cross-border risks. We continue to foster awareness, education, and a collective recognition of our evolving digital landscape, leveraging marketing as a vehicle to enhance the impact of our policy-making and regulatory efforts.

The milestones achieved in 2023 set the stage for a promising future. VARA thanks all its stakeholders for their continued support and collaboration, and looks forward to another groundbreaking year in regulating and nurturing the virtual assets ecosystem.

About VARA:

Established in March 2022, following the effect of Law No.4 of 2022, VARA is the competent entity in charge of regulating, supervising, and overseeing VAs and VA Activities in all zones across the Emirate of Dubai, including Special Development Zones and Free Zones but excluding the Dubai International Financial Centre. VARA plays a central role in creating Dubai's advanced legal framework to protect investors and establish international standards for Virtual Asset industry governance, while supporting the vision for a borderless economy.

For more information visit: www.vara.ae

Media Contact:
Cathal Burke
Director of Marketing and Communications, VARA
cathal.burke@vara.ae