Key Highlights
- VARA has introduced a comprehensive rulebook that sets stricter governance, risk management, and compliance standards for crypto exchanges.
- Crypto firms must obtain explicit approval to offer margin trading and are required to assess client suitability before onboarding.
- The regulator now has enhanced powers to monitor markets, enforce conduct rules, and suspend trading when necessary.
Dubai’s Virtual Assets Regulatory Authority (VARA) has dropped a detailed Exchange Services Rulebook that lays down strict governance, risk management, and disclosure requirements for licensed virtual asset service providers (VASPs) operating in the emirate.
The rulebook, now live on VARA’s official portal, covers margin trading and exchange-traded derivatives (ETDs), and hands the regulator sweeping powers to intervene in market activity, including the ability to suspend trading and adjust margin thresholds on the fly.
Margin trading gets a tighter leash
Under the new framework, VASPs cannot offer margin trading unless their license explicitly permits it. Getting that approval is not a rubber stamp either. Firms will need to submit full terms and conditions, a template margin trading agreement, and prove they have the systems and controls to back it up.
Before onboarding any client for margin trading, VASPs are expected to assess suitability by collecting details on the client’s financial position, investment goals, and prior trading experience. Margin accounts have to be kept separate from regular trading accounts, and cross-funding between clients is off the table, even if both parties agree to it.
On the reporting side, VASPs must issue written account statements at least once a month. There is also a layered warning system baked in. Firms need to send an early warning when a client’s ownership percentage hits a defined threshold and follow up with a prompt alert if the balance dips below the maintenance margin. If the client does not top up in a reasonable window, the VASP is required to liquidate virtual assets from the account to cover the shortfall.
Exchange-traded derivatives under the microscope
For ETDs, VARA has put in place a separate approval track. VASPs looking to list derivatives must show that the underlying virtual assets meet specific benchmarks, including analysis of circulating supply, projected future supply, and how concentrated ownership is.
Client access to ETD products is gated too. Only those who demonstrably understand the risks and can meet the financial obligations tied to derivatives will be eligible.
On top of that, VASPs offering ETD services are required to set up and maintain an insurance fund with a minimum balance determined by VARA. The fund can be held in virtual assets, fiat, or regulator-approved stablecoins.
Settlement timelines apply across both margin and ETD services. All exchange transactions must be settled within 24 hours of execution, unless delays arise from factors outside the firm’s control, such as issues with distributed ledger infrastructure not operated by the VASP.
Market surveillance and conduct standards
The rulebook also pushes VASPs to publish and enforce a code of conduct for all participants on their trading platforms. That code must give the VASP authority to take disciplinary action, ranging from warnings and trading bans to full expulsions and even criminal referrals where warranted. VARA retains the right to pursue its own enforcement actions on top of whatever the VASP does.
If the regulator suspects any breach of its market conduct rules, it can suspend trading of the virtual asset in question. VASPs are also obligated to share surveillance data with VARA, covering large positions, inventory levels, and steps taken to manage position limits.
Board independence and compensation disclosure
Governance requirements under the rulebook are equally granular. Any VASP running exchange services must have at least one independent director on its board, and VARA has drawn a hard line on what “independent” means. Anyone who held a senior management role at the firm in the last two years, has sat on the board for over seven years, or owns 10% or more of the company’s share capital is disqualified.
VASPs also have to submit annual compensation details for board and committee members to the regulator, covering salaries, bonuses, and any virtual asset-based incentives. VARA has said it will keep that data confidential unless the law requires otherwise.
The bigger picture
The Exchange Services Rulebook is the latest in a series of moves by Dubai to position itself as a credible, regulation-first hub for digital assets. While several jurisdictions are still figuring out how to classify crypto derivatives, VARA is already laying out operational-level requirements that mirror what traditional financial markets have had in place for years.
For VASPs eyeing Dubai as a base, the message is clear: the bar for compliance is going up, and the days of operating in grey areas are numbered.
Also Read: 49% Crypto Users Misunderstand Tax Rules, Coinbase Survey Finds
