Dubai launches a comprehensive regulatory framework for trading virtual asset derivatives

Today, the Dubai Virtual Assets Regulatory Authority (VARA) launched a comprehensive regulatory framework for derivatives traded on the stock exchange in the field of virtual assets, which reflects Dubai’s position as one of the leading cities in the world in enacting laws regarding virtual assets and drawing up enforceable rules specific to this sector.

This framework, set out in Version 2.1 of the Virtual Assets Regulatory Authority (VARA) Exchange Services Rulebook, allows licensed Virtual Asset Service Providers (VASPs) to offer financial derivatives products within a clearly defined regulatory scope provided they obtain an explicit license and adhere to strict operational, prudential and behavioral requirements.

This step comes at a time when the demand for derivatives in virtual asset markets continues to grow, and at a time when global regulatory bodies are working to address the increasingly complex issue of financial product governance in the field of digital assets.

The Dubai Virtual Assets Regulatory Authority’s framework addresses this issue head-on by establishing binding requirements in five areas including customer suitability and profiling requirements, particularly for higher-risk products, margin, leverage and liquidation controls to manage market risk exposure, segregation of client assets and accounts to mitigate systemic and counterparty risks, enhanced disclosure and communication obligations, aligned with the Dubai Virtual Assets Regulatory Authority’s marketing regulations, and regulatory intervention powers, which enable the Dubai Virtual Assets Regulatory Authority to act decisively. In response to market pressures or misconduct.

Together, these provisions aim to ensure that Dubai keeps pace with the growth of sophisticated market structures and that proportionate safeguards are in place to protect market participants and the integrity of the market as a whole.

Together, these provisions are designed to ensure that the growth of Dubai’s evolving market structures is accompanied by proportionate safeguards for the protection of market participants and the integrity of the market as a whole.

Robin Bombardi, General Legal Counsel for the Dubai Virtual Assets Regulatory Authority (VARA), explained that derivatives are the next natural step in the development of virtual asset markets, but they require higher standards of governance.

The Dubai Virtual Assets Regulatory Authority’s framework provides licensed providers with a clear path to offer these products responsibly, while giving market participants confidence that Dubai’s virtual assets ecosystem operates according to strict, enforceable rules designed to protect them. This is the best way to build a market that will stand the test of time.

The Code is part of the Dubai Virtual Assets Regulatory Authority’s ongoing commitment to ensure that innovation within the virtual assets ecosystem is supported by strong governance, market practices and transparent communications, in addition to effective regulatory oversight in which approval is not presented as an endorsement of any specific product or service.

The Exchange Services Rules Guide, version 2.1, is effective immediately and applies to all Virtual Asset Service Providers (VASPs) licensed by the Virtual Assets Authority to provide exchange services within the Emirate of Dubai.