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Dubai, widely recognised as the most crypto-friendly city in the world, is finally tightening its grip on the industry.
Officials at Dubai's Virtual Assets Regulatory Authority (VARA) have asked Binance to provide more information about its company structure, governance and auditing.
International companies seeking digital asset licenses from VARA are also being requested the same information.
The move comes as other countries and regions bolster their regulatory stance on crypto following 2022's fallout.
“VARA wants to turn Dubai into a capital for the digital-assets economy while safeguarding its business ties with Western jurisdictions like Europe that are adopting more muscular crypto regulations,” said Sam Blatteis, CEO of The MENA Catalysts.
Binance told Bloomberg that they have "disclosed all necessary answers to VARA on a proactive basis and in line with our regulatory and fiduciary responsibilities" as well as having provided information about the ownership structure of its local entity.
Business as usual
For Binance, VARA's inquest is yet another thorn in its side, following a slew of concerns from US regulators.
The US has taken "significant action" against Binance Holdings and its CEO, Changpeng Zhao (CZ). Binance has been hit with a complaint from the Commodities Futures Trading Commission (CFTC), which claims that the crypto exchange's compliance efforts "have been a sham."
The US Department of Justice is also looking into allegations of money laundering and sanctions breaches made against Binance.
Only five days after Binance and Zhao were sued by the CTFC, a new lawsuit landed on their doorstep.
Moscowitz Law Firm and Boies Schiller Flexner filed the lawsuit against Binance, Zhao, Miami Heat forward Jimmy Butler, YouTuber Graham Stephan and crypto personality Ben Armstrong’ Bitboy.’
Binance is accused of listing unregistered securities as cryptocurrencies, including BNB, and paying social media influencers to promote them. The exchange was investigated for over a year before the lawsuit was filed.
The lawsuit added that the BNB burn program reduces the coin's supply to boost its value, making the asset an unregistered security.
Dubai still loves crypto
The UAE has been cracking down on OTC crypto exchanges operating in the region without licenses.
In January, Dubai released licensing and authorization requirements for virtual asset companies and issuers looking to operate in the emirate.
VARA's compulsory rulebooks cover compliance and risk-management standards for sector companies, as well as requirements on cyber security norms, market conduct and more.
There are also seven activity-specific rulebooks covering issuance, advisory, custody and exchange services, and more, as well as a specific rulebook for token issuance.
VARA said the regulations aim to "position Dubai as a regional and international hub for Virtual Assets and related services and to develop a digital economy in the city to boost its competitive edge locally and internationally"
"The VA Framework is structurally designed to offer regulatory certainty – allowing the market to have greater clarity on the expected level of operator responsibility," the regulator said in a statement.
Just last month, Crypto.com announced that VARA issued the firm with an minimal viable product (MVP) license. Under the license, the Singapore-based exchange cannot yet offer locally regulated digital-asset services in Dubai.
Nonetheless, the license means it is two-thirds of the way to earning the full license. The full license process involves three stages. Crypto.com received the first provisional permit in June last year. Its latest preparty license is the second stage.
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