VARA reporting requirements for VASPs in Dubai

Virtual Asset Service Providers (VASPs) operating in Dubai intending to offer below mentioned activities are required to obtain a license from the Virtual Assets Regulatory Authority (VARA) before undertaking these activities –

1. Advisory services
2. Broker-Dealer services
3. Custody services
4. Exchange services
5. Lending and Borrowing services
6. Management and Investment services
7. Transfer and Settlement services
8. Virtual Assets Issuance Category -1 (Fiat-Referenced Virtual Assets)

This licensing process ensures that VASPs adhere to specific regulatory standards designed to maintain market integrity and protect consumers.

As of 12th Dec, 2024 23 VASPs have been licensed by VARA, including:

• BitOasis Technologies FZE
• Deribit
• OKX Middle East Fintech FZE
• Binance FZE

Here’s the public register of the licensed VASPs

Virtual Assets and Related Activities Regulations 2023

These regulations set out the regulatory framework and enforcement powers of VARA. These regulations provide 4 compulsory rulebooks that every licensed VASP needs to comply with:

1. Company Rulebook
2. Compliance and Risk Management Rulebook
3. Technology and Information Rulebook
4. Market Conduct Rulebook
   
   

Reporting Requirements

Compliance and Risk Management Rulebook highlights certain reporting requirements including:

1. Detailed records of individual transactions including Date, time, amount and nature of the transactions
2. Suspicious activity reports
3. Periodic compliance reports

Purpose of Reporting Requirements in General

These reporting obligations serve several critical functions:

• Market Integrity: Regular reporting helps maintain a fair and orderly market for virtual assets, ensuring that all participants adhere to established rules and standards.
• Consumer Protection: By monitoring VASPs’ activities, VARA can safeguard consumers from fraudulent practices and ensure that VASPs act in the best interests of their clients.
• Risk Management: Comprehensive reporting allows for the identification and mitigation of risks associated with virtual assets, including financial crimes and operational failures.
• Regulatory Oversight: These requirements enable VARA to effectively supervise the virtual asset sector, ensuring compliance with laws and facilitating prompt corrective actions when necessary.

In summary, the licensing and reporting requirements imposed by VARA on VASPs are designed to foster a secure, transparent, and efficient virtual asset ecosystem in Dubai, aligning with international best practices and regulatory standards.

Reconciliation Requirements

VASPs are mandated to perform daily reconciliations of client balances. This requirement ensures the accuracy and integrity of client asset records. VASPs must establish systems to conduct precise daily reconciliations of the virtual assets owned by each client. The reconciliation process should encompass:

• Client Credit Ledger Balances: A comprehensive list of individual client credit ledger balances as recorded by the VASP
• Client Debit Ledger Balances: A comprehensive list of individual client debit ledger balances as recorded by the VASP

Additionally, VASPs are required to notify VARA of any material discrepancies identified during the reconciliation that remain unresolved.

For client money accounts, VASPs must ensure accurate daily reconciliations that include:

• A comprehensive list of individual client credit ledger balances as recorded by the VASP
• A comprehensive list of individual client debit ledger balances as recorded by the VASP
• Outstanding Lodgements
• A comprehensive list of client account cash book balances
• Formal statements from third-party banks showing account balances as of the reconciliation date

VASPs must reconcile these records daily and investigate any discrepancies, taking corrective action promptly, including using the VASP’s own funds if necessary.

Purpose of Daily Reconciliation

The daily reconciliation of client balances serves several critical functions:

• Client Asset Protection: Ensures that client assets are accurately accounted for and safeguarded against misappropriation or loss.
• Operational Integrity: Maintains the reliability of the VASP’s financial records, promoting trust and confidence among clients and stakeholders.
• Regulatory Compliance: Aligns with VARA’s regulatory framework, ensuring that VASPs operate within the legal requirements set forth to protect the virtual asset market’s integrity.

By adhering to these reconciliation requirements, VASPs contribute to a transparent and secure virtual asset ecosystem, fostering confidence among clients and upholding the standards established by VARA.

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