Dubai’s Virtual Assets Regulatory Authority (VARA), the regulator overseeing cryptocurrency laws in UAE's largest city, announced updated regulations this week aimed at building its virtual asset industry, while also combating ongoing illicit financial activities in virtual space.
The new regulations cover seven broad virtual asset activities ranging from lending and borrowing services to management and investment services, with the goal of building protections to increase investor confidence and market growth in Dubai.
The new regulations contain rulebooks and guides explaining terminology, fees necessary to conduct virtual financial activities, and fines for violations that can add up to more than $13 million.
Helal Saeed Almarri, a chairman of VARA’s executive board and the director general of Dubai’s Department of Economy and Tourism, stated that the mission is to establish the emirate as leader in digital finance.
Dimitry Mihaylov, the chief scientific officer at metaverse gaming platform Farcana, said that spelling out fintech rules puts Dubai ahead of the global pack.
“It looks like VARA learned the lesson from the United Kingdom and now harmonizes digital assets laws in favor of metaverse,” he told Al-Monitor, referring to the fact that Britain’s finance ministry laid out its first set of crypto rules only on Tuesday, according to Reuters.
He added that companies that work in metaverses, of which there are many in Dubai, hesitate to use virtual assets without clear regulations.
VARA was founded in February 2022, and became the world’s first regulator to establish headquarters in the metaverse. It welcomed decentralized finance institutions such as crypto exchange giant Binance in March of last year, as well as the now beleaguered FTX in July — only months before it collapsed in a global spectacle that raised questions about the viability of cryptocurrency.
By the end of 2022, the most popular cryptocurrency, Bitcoin, lost 60% of its value and the greater market had shrunk by $1.4 trillion, reported Reuters.
Alex Kim, the chief monetization officer at XR Platform Sensorium, a Cayman Islands registered social virtual reality company, said that like any financial space, metaverse regulation must make sure that all users have access to legal experiences and activities.
“However, a balance must be struck,” he added, since the appeal of the metaverse is a decentralized space that no central authority should control.