TL;DR:
- VARA published its Exchange Services Rulebook with governance, disclosure and risk management rules for VASPs offering crypto derivatives.
- VASPs must segregate margin accounts, settle transactions within 24 hours and maintain active market surveillance systems.
- The regulator can suspend trading of any digital asset and adjust margin requirements upon any suspicion of regulatory non-compliance.
The Dubai Virtual Assets Regulatory Authority, known as VARA, published its Exchange Services Rulebook, a regulatory framework that establishes mandatory standards for governance, disclosure and risk management for all licensed virtual asset service providers (VASPs) offering crypto derivatives in the emirate.
The document addresses both margin trading and exchange-traded derivatives (ETDs) and grants VARA broad supervisory powers.
Margin Accounts and Segregated Funds
Under the new rules, VASPs may only offer margin trading if they hold explicit authorization in their license. To obtain it, they must submit detailed terms and conditions, including a model margin agreement, and demonstrate adequate control systems. Before opening a margin account, each firm must assess the financial situation, investment objectives and operational experience of each client to determine their suitability.
Margin accounts must be kept separate from other trading accounts. Furthermore, no VASP may use one client’s funds to finance another client’s margin operations, even with the express consent of the party concerned.
Providers are required to issue monthly account statements, send early notifications when a client’s ownership percentage falls to a defined level and, if the balance drops below the required maintenance margin without the client remedying the deficit within a reasonable timeframe, sell assets from the account to restore the required level.
For ETDs, VARA requires a separate approval process. VASPs must demonstrate that the underlying assets meet defined standards, including analysis of circulating supply, future supply and ownership concentration. These services may also only be offered to clients who have been assessed as capable of understanding the associated risks. VASPs offering ETDs must also establish and maintain an insurance fund, with a minimum balance set by the regulator, composed of virtual assets, fiat currency or approved stablecoins.
Code of Conduct Under VARA’s Direct Oversight
The rulebook requires VASPs to publish and enforce a code of conduct for all clients on their platforms. That code must empower the firm to impose sanctions ranging from warnings and trading bans to expulsions and referrals to criminal authorities. VARA reserves the right to suspend trading of any asset if it detects possible breaches of its market conduct provisions. Firms must also share surveillance data with the regulator, including information on positions and inventory levels.
On corporate governance, any VASP offering exchange services must have at least one independent director on its board. That status is disqualified if the individual held a management position within the previous two years, served on the board for more than seven consecutive years or holds 10% or more of the share capital. Additionally, VASPs must report annually to VARA the remuneration of directors and committee members, including salaries, bonuses and virtual asset incentives.
