On Tuesday, Dubai’s Virtual Assets Regulatory Authority (VARA) granted a Virtual Asset Service Provider (VASP) license to the Bulgarian decentralized lending platform Nexo, allowing it to conduct operations and provide services within and from the Emirates. This approval signifies the initial phase in the acquisition of a complete license, which comprises an initial provisional permit, a preparatory license, and finally, an operating license.
Amid regulatory hurdles, Nexo is actively seeking full approval to provide virtual asset services in Dubai.
Nexo DTC, the regional entity of the company, is striving to obtain comprehensive approval for a range of activities, encompassing lending and borrowing, management and investment, as well as broker-dealer operations.
Nexo’s Dubai entity, Nexo DWTC, has been awarded an Initial Approval from Dubai’s Virtual Assets Regulatory Authority (VARA) for a vast range of virtual asset service activities. 🇦🇪
Dubai’s forward-looking culture of innovation is a natural fit for our goal in contributing to… pic.twitter.com/H5dPjzXru2
— Nexo (@Nexo) March 5, 2024
In order to obtain the full Virtual Asset Service Provider (VASP) license, the exchange must satisfy specific conditions established by VARA. Upon meeting these requirements, the company will be eligible for operational approval, enabling Nexo to provide regulated digital asset services such as exchange, broker-dealer, management and investment, as well as lending and borrowing services.
In March 2022, Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s prime minister and ruler, endorsed a new virtual assets law, laying the groundwork for cryptocurrency regulation in Dubai. Additionally, the ruler appointed VARA with enforcement powers in designated development and free zones, with the exception of the Dubai International Financial Centre. The objective is to safeguard investor assets from prevalent crypto scams and fraudulent activities, while also outlining a roadmap for the region to become a thriving Web3 hub.
Dubai, along with the UAE’s capital, Abu Dhabi, has been actively courting financial institutions and positioning itself as a global cryptocurrency hub. Although Nexo DTC’s initial approval has not yet been reflected in VARA’s public record register, updates are typically processed within a few days of such developments.
VARA in Dubai serves as the singular regulatory authority tasked with licensing and overseeing the burgeoning virtual asset sector across all mainland and free zones, excluding the independent Financial Free Zone (Dubai International Financial Centre).
Kalin Metodiev, co-founder and managing partner at Nexo, expressed enthusiasm for pursuing new market strategies in accordance with the guidance provided by Dubai’s Virtual Asset Regulatory Authority.
“Nexo is enthusiastic about the pursuit of new market strategies aligned with the transformative guidance of Dubai’s Virtual Asset Regulatory Authority.”
In the past, Nexo encountered regulatory hurdles, notably agreeing to a $45 million settlement with the SEC for the failure to register the offer and sale of its Earn Interest Product (EIP). Furthermore, the company initiated legal action against Bulgaria, seeking $3 billion in damages following an investigation that cleared it of any wrongdoing but tarnished its reputation.
Similarly, entities such as Binance.US and Coinbase have come under scrutiny from the SEC over possible securities violations. Despite these regulatory obstacles, cryptocurrency exchanges and platforms persist in seeking licenses or permits across different jurisdictions globally.
An increasing number of cryptocurrency enthusiasts are looking to the Middle East as a burgeoning hub for digital assets.
Dubai has positioned itself as a leading global center for cryptocurrency activity, garnering praise from numerous firms operating in the sector.
In recent months, Dubai’s regulatory authorities have issued operational licenses at various stages to several cryptocurrency exchanges and firms, including Aquanow, Backpack Exchange, OKX, and WadzPay. These developments underscore Dubai’s reputation as a crypto-friendly jurisdiction, characterized by a robust regulatory framework and comprehensive guidelines for Virtual Asset Service Providers (VASPs). All crypto firms engaging in regulated activities in the region are required to obtain a license from VARA.
Introduced in February 2023, Dubai’s crypto regulatory framework mandated that all crypto exchanges and service providers apply for operational licenses by November 17, 2023. Consequently, VARA received over 1,000 registration applications from various crypto platforms.
Brad Garlinghouse, CEO of Ripple, highlighted Dubai as a prime example of a jurisdiction where regulators actively engage with the evolving crypto industry. He praised the city’s status as a global leader, attributing its success to clear regulatory frameworks, policies fostering innovation, and an entrepreneurial-friendly environment.
