Skip to content
- VARA rulebook expands oversight powers, enabling trading suspensions and margin shifts.
- New margin rules require strict approvals, client checks, and enforced liquidation steps.
- Derivatives trading faces limits, insurance fund rules, and tighter governance standards.
Dubai’s Virtual Assets Regulatory Authority (VARA) has released a detailed Exchange Services Rulebook for licensed virtual asset firms. The framework introduces strict rules on governance, trading practices, and risk controls across margin and derivatives activity.
The rulebook gives VARA broad authority over exchange operations. The regulator can suspend trading and change margin requirements when needed. These powers apply across all licensed virtual asset service providers operating in Dubai.
Margin trading rules have become more stringent in the new system. No firm can offer margin trading unless their license permits it. To achieve this, firms must submit extensive documentation.
VARA Tightens Margin Trading and Client Rules
VASPs must submit their terms and conditions before offering margin trading services. They must also submit a template for a standard margin agreement. This is part of demonstrating their risk management systems.
Firms must conduct client suitability checks before opening accounts. This ensures that VASPs are not exposed to high-risk clients.
Margin accounts should not be mixed with regular accounts. There should be no cross-funding of accounts from different clients under any circumstances. This is true even when both parties consent.
VASPs should send client account statements at least once a month. There is a requirement for a multi-level warning system in place. VASPs should send client warnings when risk limits are reached.
An early warning is triggered when ownership levels hit set limits. A second alert is sent if balances fall below the maintenance margin. Firms must act if clients fail to restore required levels.
If the shortfall remains unresolved, liquidation becomes mandatory. The VASP must sell assets to cover the deficit. This step ensures losses do not spread within the system.
Also Read: Crypto Tax Rules Misunderstood by 49% of Users, Coinbase Survey Finds
Exchange-traded derivatives face a separate approval process. Firms must justify the listing of each derivative product. The regulator requires detailed analysis of the underlying asset.
This includes data on circulating supply and future issuance. Ownership concentration must also be assessed. These checks aim to limit market manipulation risks.
New Framework Targets Derivatives Risk and Governance
Access to derivatives is also restricted. Only clients who understand the risks can participate. They must also meet financial obligations tied to such products.
VASPs that offer derivatives must have an insurance fund. The minimum balance in this fund is set by VARA. The fund can be made up of virtual assets, fiat, or stablecoins.
The settlement timelines apply to all exchange transactions. The settlement must occur within 24 hours of the trade execution. There can be delays in only technical cases.
The rulebook also outlines strict governance requirements. A firm must have at least one independent director on the board. The independence of the director is set out in the rule.
Executives, long-term directors, and major shareholders are not allowed. This ensures independence in governance. This rule aims to strengthen governance within firms.
The firms must disclose their compensation for the boards and committees. This includes salaries, bonuses, and incentives in digital assets. VARA will keep this information confidential unless required by law.
Also Read: Bitmine Hits $10.7B Crypto Milestone as Ethereum Dominates Treasury Strategy
