Dubai has taken a significant step towards establishing a stricter and more institutional framework for the crypto asset market. The Virtual Assets Regulatory Authority (VARA) has introduced comprehensive rules for licensed virtual asset service providers (VASPs) with its newly published “Exchange Services Rulebook.” The new regulation sets mandatory standards in areas such as governance, transparency, risk management, and market surveillance, focusing particularly on crypto derivatives and margin trading.
Tight supervision of crypto derivatives from Dubai
This framework covers both margin trading and exchange-traded derivatives (ETDs). VARA grants broad supervisory authority to companies wishing to operate in these areas, and can intervene if necessary, such as suspending transactions or changing margin requirements.
According to the new rules, VASPs can only offer margin trading if explicitly permitted in their licenses. To provide this service, companies must submit comprehensive applications including detailed contract samples and risk management systems. Furthermore, opening a margin account will not be possible without evaluating criteria such as users' financial status, investment goals, and trading experience. This approach implies stricter filtering regarding investors' suitability for risks.
One of the notable aspects of the regulation is the mandatory separation of funds to protect client funds. Accordingly, margin accounts will be kept completely separate from other trading accounts. Moreover, one client's assets cannot be used for another client's margin trading. This rule aims to limit chain risks during market stress. Furthermore, VASPs will be required to provide their clients with written account statements at least once a month and continuously monitor their accounts. An early warning notification will be issued if the account value falls below a certain level, and a further notification will be sent quickly if it falls below the maintenance margin. If the user does not provide the necessary collateral on time, the platforms will sell the relevant assets to restore balance.
On the derivatives side, a stricter approval process is foreseen. VASPs are required to analyze criteria such as the circulating supply of assets to be traded, future supply projections, and ownership density. At the same time, these products can only be offered to users who can understand the risks and meet the financial obligations. Another important innovation is the mandatory insurance fund. Platforms offering derivative services are required to establish an insurance fund of a minimum size determined by VARA. This fund can consist of crypto assets, fiat currency, or regulator-approved stablecoins. The aim is to create a safety net to protect users in cases of extreme volatility or systemic risk.
The new regulation also directly impacts the transaction infrastructure. Accordingly, transactions carried out on exchanges must be finalized within 24 hours, except for unforeseen circumstances such as technical malfunctions. This stands out as an important standard, especially in terms of liquidity and security. VARA also introduces codes of conduct to ensure market discipline. Platforms are now required to publish and actively implement a clear "code of conduct" for users. Under these rules, sanctions such as warnings, trading bans, and removal from the platform can be applied. In more serious violations, the matter may be taken to judicial authorities.
There are also significant obligations on the market surveillance side. VASPs are required to share detailed data with the regulator, including measures taken regarding large positions, inventory levels, and position limits. VARA also has the authority to suspend transactions in any asset when necessary.
On the corporate governance side, a requirement for independent members on boards of directors has been introduced. The independence criteria are quite strict, preventing individuals who have held senior positions in the company in the last two years or who have served on the board for a long time from taking on this role. Furthermore, the salaries, bonuses, and crypto-based incentives of board and committee members will be reported to VARA annually.
