Keen to offer a wider string of services related to virtual assets including crypto derivatives products, custodial and trading services to fitly qualified retail and institutional investors in Dubai, Binance, the leading global blockchain services provider, has been granted Minimal Viable Product (MVP) licence by the Virtual Assets Regulatory Authority (VARA). The first licence was issued to FZE, a subsidiary of the popular crypto exchange, FTX. The licence allows the crypto mammoth to provide now more services in the sphere of the virtual asset within its internationally benchmarked legislative framework for virtual asset service providers (VASPs) in line with stern investor and market protection principles. This one-of-its-kind regulatory licence unlocks the local banking channels to benefit the users approved by VARA. Further, the increased levels of consumer protection relieve the traders as well.
Why transition to an MVP Licence from a Provisional Licence?
The move will help Binance expand its global footprint specifically within the United Arab Emirates, a hub spot for the budding space where a very few crypto-associated firms have pursued regulatory approval such as Blockchain.com, OKX and FTX, to name some. This licence is a major milestone that follows a host of registrations for Binance’s local entities in the MENA region and across Europe in Italy, France, and Spain. Further, it attests to Binance’s aspiration to be a regulation-led platform with solid compliance and security controls that have consumer protection and market integrity at its core. With this new licence, Binance is able to open a client money account with a domestic bank and provide qualified customers a wide array of services including:
- Transfer of virtual assets
- Virtual asset exchange services
- Custody & management of virtual assets
- Conversion between virtual assets and fiat currencies
- Virtual assets payments & remittance services
- Virtual token offering & trading services
The crypto giant is elated to share what his Excellency Helal Saeed Almarri, Chairman of VARA, stated – “We are pleased to have Binance licenced to operate within the VARA MVP Programme. The VARA regime aims to strike an effective balance between value creation and risk mitigation, enabling open market innovation while assuring protection for the economically vulnerable. The MVP Phase, is designed for select global players across the value chain, that are committed to responsible industry participation and VARA looks forward to Binance being an active contributor, reinforcing Dubai’s commitment towards creating a next-gen secure ecosystem for this future economy.”
“At Binance we welcome regulations that are globally consistent, enable responsible innovation, protect users, and give them choice. VARA’s unique operating model is setting a benchmark for the global industry, and this most recent registration is an acknowledgment of our compliance and safety processes in the new regulatory framework. We strongly believe there is a significant opportunity to work with our industry peers to develop consistent implementation standards around the world as we have been doing in Dubai.” remarked Changpeng Zhao (CZ), founder and CEO of Binance.
“Our registration in Dubai is a reflection of the country’s progressive stance on blockchain technology and its willingness to embrace this sector through collaboration. We look forward to continued partnership as we build upon our team and operations in Dubai to roll out additional services, including local banking capabilities and enhanced products.”, said Alexander Chehade, the General Manager of Binance Dubai.
What is a virtual asset?
A virtual asset is nothing but a digital representation of an item that has value in a specific environment. This medium of exchange or property can be electronically traded, transferred or used for payment or investment purposes. Virtual currency such as Bitcoin, Litecoin, Ethereum or Dogecoin. Gaming tokens, non-fungible tokens (NFTs) and governance tokens (under specific conditions) are some commonly known examples of a virtual asset worldwide. Additionally, the term “virtual asset” should not be confused with the term “digital asset” as the latter is a much broader category that covers other types of assets as well not just virtual assets. Simply put, all virtual assets can be digital assets, but all digital assets can’t be virtual assets.
Institutional Investors vs. Retail Investors
First thing’s first, investors can be of different types. Two most common ones are – Institutional Investors and Retail Investors. Authorised organisations that make investments on their client’s behalf are known as Institutional Investors. However, Retail Investors are those who invest on their own. The differences between institutional and retail investors relate to costs, investment opportunities, and access to investment insight and research. The two terms differ from the perspective of costs, investment opportunities, and access to investment insight and research as well. The below-drawn table will shed more light on the differences between two.
|Institutional Investors (II)||Retail Investors (RI)|
|Are companies with employees who invest on behalf of others (usually, other companies and organizations).||Are individuals who invest their own money, for their own benefit and not on behalf of others.|
|Institutional investors are the big guys on the block—the elephants with a large amount of financial weight to push around. They are the pension funds, mutual funds, money managers, insurance companies, investment banks, commercial trusts, endowment funds, hedge funds, and also some private equity investors.||Are individuals or non-professional investors who buy/sell debt, equity, securities and other investments through a broker, bank, mutual fund or retirement accounts like 401(k)s. Usually, when investing for the long-term or trading for their own accounts, they invest much smaller amounts less frequently, compared to institutional investors.|
|They do not use their own money, but rather, invest the money of others on their behalf. Institutional investors account for more than 85% of the volume of trades on the New York Stock Exchange||They manage their own money. Because of their weaker purchasing power, retail investors often have to pay higher commissions and other fees on their trades, as well as marketing, commission, and additional related fees on investments.|
Understand Qualified Investors
The natural or legal person that is capable of managing its own investments by itself according to the following conditions, unless it desires to be just a normal investor:
A. The corporate person who suffices any of the following conditions:
- The Federal Government, local government and governmental entities, institutions and authorities, or companies wholly owned by any of the aforementioned
- Foreign governments, and their entities, institutions and authorities or companies wholly owned by any of them
- International authorities and organizations
- Entities licenced by the Authority or by a Similar Regulator
- A corporate person who meets, on the date of its last financial statements, at least two of the following requirements:
- Its total budget of AED 75 million
- Has net annual return of AED 150 million
- Holds funds or paid-up capital of AED 7 million
B. The natural person accredited by the Authority or by a Similar Regulator to carry out any functions related to financial activities or services.
C. The natural person who has:
- Net equity, with the exception of their main house, is valued at AED 4 million
- Annual income is not less than AED 1 million annually
- Satisfactory knowledge and experience in the field of investment and its risks, is being represented by an entity licenced by the Authority without prejudice to the terms of its licencing
The Government of Dubai, of late, enacted Law No. 4 of 2022 on the Regulation of Virtual Assets (VAL) and launched the Dubai Virtual Assets Regulatory Authority (VARA) in March 2022, pursuant to this Law. The public corporation is the only authority regulating virtual assets all across Dubai and its free zone territories (excluding DIFC) and the world’s first sole regulator for virtual assets guiding authority for the emerging sector of Virtual Assets. VARA plays a pivotal role in development of Dubai’s advanced legal framework to safeguard investors and structuring of global standards for Virtual Asset industry governance, while backing the vision for a borderless economy.
Services & Functions of Dubai Virtual Assets Regulatory Authority (VARA)
VARA is an autonomous public organisation, linked to the Dubai World Trade Centre Authority, that has been structured under the Virtual Asset Law (DWTCA to provide services related to virtual assets in collaboration with the UAE Central Bank and Securities and Commodities Authority. These services include:
- Licencing and regulation of entities engaged in activities in the virtual asset space
- Development of strategic plans and policies surrounding virtual asset activities
- Regulation and supervision of the issue and offering of virtual assets and tokens
- Prescribing of regulations to virtual assets
Shouldering the responsibilities of regulating, supervising, and overseeing Virtual Asset services, VARA has a legal personality and financial autonomy which make it a competent entity in the Emirate that has the duties and powers to:
- formulate the general policy and the strategic plans related to regulating Virtual Asset services in the Emirate, as well as dealing and trading in Virtual Assets in the Emirate; and present the same, through the Director General, to the Board of Directors for approval;
- control, supervise, and oversee the issuance, offering, and relevant disclosure processes of Virtual Assets and Virtual Tokens;
- regularise, and issue Permits to, Virtual Asset Service Providers in line with the requirements, procedures, and rules adopted by it; and keep a watch on them to ensure their compliance with the provisions of this Law, the resolutions issued in pursuance hereof, and other Legislation in force in the Emirate;
- govern, and set out rules and controls to govern, the conduct of the Activity in the Emirate, including the activities related to Virtual Asset management, clearing, settlement, and safekeeping services;
- categorise, and figure out the types of, Virtual Assets and Virtual Tokens; and prescribe the standards and rules for trading in the same;
- stipulate, in coordination with the Dubai Digital Authority, the procedures for the protection of the Personal Data of Beneficiaries;
- regulate and monitor the operation and management of Virtual Asset Platforms, Distributed Ledger Technology, and Virtual Asset Wallets; monitor trading and other transactions conducted through the same; prevent the manipulation of Virtual Asset trading prices, and develop the rules required to protect Beneficiaries and curb suspicious practices;
- issue, in coordination with the concerned entities, the instructions and guidelines required for developing a process for the assessment and monitoring of Virtual Asset Service Providers; and the procedures and measures that must be taken in respect of Suspicious Transactions conducted in violation of the above-mentioned Federal Law by Decree No. (20) of 2018, the resolutions issued in pursuance thereof, and other Legislation in force in the Emirate;
- familiarise Beneficiaries, and enlighten them on dealing and trading in Virtual Assets and the risks arising therefrom;
- partake, in coordination with the concerned entities, in local, regional, and international economic exhibitions, symposia, and conferences on Virtual Assets, whether held within or outside of the Emirate;
- collaborate and coordinate with local, federal, and international entities, as well as the Private Sector, on all matters related to regulating Virtual Assets, with a view to ensuring the achievement of VARA objectives;
- collect, in accordance with the Legislation in force in the Emirate, the fees prescribed for conducting the Activity and the charges and commissions related to dealing and trading in Virtual Assets on Virtual Asset Platforms;
- coordinate with the Central Bank of the United Arab Emirates on all matters related to the protection and stability of the financial system in the UAE;
- propose Legislation for regulating Virtual Asset services, and present the same to the competent entities in the Emirate to take the necessary action in respect thereof;
- establish, solely or in partnership with others, companies and corporations within or outside of the DWTC for the purposes of achieving the objectives of VARA and ensuring the performance of its functions under this Law, in accordance with the Legislation in force in the Emirate and the relevant regulations and by-laws approved by the Board of Directors;
- consider the reports and complaints relating to Virtual Asset services, and make the appropriate decisions in respect thereof; and
- exercise any other duties or powers that are related to the regulation, oversight, and supervision of Virtual Assets and Virtual Asset Service Providers, or that are required for the achievement of the objectives of VARA, as assigned to it by the Board of Directors.
Activities that Need VARA’s Permit
VARA is in charge of dispensing a permit to Virtual Asset Service Providers authorising them to perform the Activity or authorising a Person (natural or legal) to carry out any activities, business, or services related to Virtual Assets as defined by VARA itself. Below-listed are the activities that are governed as per the new Virtual Asset Law and need a permit from VARA:
- Virtual asset platform operation and management services
- Settlement and custody procedures services
- An exchange between virtual assets and currencies (both domestic and foreign), and tween one or more forms of virtual assets
- Virtual assets transfer services
- Virtual asset custody, settlement, management, or control services
- Services related to virtual asset wallets
- Offering and trading in virtual tokens
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