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On July 10, the Virtual Asset Regulatory Authority (VARA) issued a market notice – known as a “market alert” – involving the BitOasis exchange. However, rather than seeing this announcement as a negative, it should reflect positively on the credibility of Dubai’s regulatory regime. It also shows the willingness of UAE companies to seek authorization and improve standards, to the benefit of the region and investors.
VARA – the onshore cryptocurrency regulator of the Emirate of Dubai – is responsible for overseeing the provision, use and exchange of virtual assets in the region. It published its marketing regulations last year and its regulatory framework in February 2023. The rules are a comprehensive regime that tries to carefully balance a robust, facilitative framework that provides investor protection.
Part of the regime was the introduction of an operational MVP license – a minimum viable product license – as part of Dubai’s regulatory framework for digital assets. The VARA MVP license is not a full regulatory evaluation license, but a mechanism to set certain standards to facilitate and reduce the time a crypto business can access the market.
However, it requires certain regulatory standards and takes into account investor protection. A company holding an MVP license will still have to go through VARA’s full licensing process.
Through the aforementioned market alert, VARA has announced that BitOasis’ temporary license has been suspended. To be clear, the announced suspension does not affect BitOasis’ ability to materially serve its current customers, nor will it prevent the firm from obtaining a full license. The VARA action also reduces the firm’s ability to take on new clients.
Routine interaction
As a domestic crypto business from the UAE, BitOasis will of course be disappointed by this action, but it also shows that it has acted responsibly by seeking authorization to meet VARA’s high standards.
It is very likely that BitOasis will work closely with the regulator to rectify the situation. This should be considered a fairly routine interaction between regulators and firms seeking to be authorized.
In fact, this approach of active dialogue between the regulator and the regulated firm is welcome, and represents a positive signal for companies that want to establish themselves there. This active and open dialogue is something that has been a challenge for many crypto firms trying to get authorization in some other jurisdictions.
It’s also important to remember that MVP license suspension does no means that BitOasis must cease operations. BitOasis’ own blog makes it clear that this does not “affect our ability to continue to provide broker-dealer services to our existing retail customers, although we commit to not onboarding new customers until we fully comply with VARA requirements”.
Part of the process
Speaking as a former regulator, the approach of imposing limits or restrictions on new business is not unusual. It allows corrective action to be taken and avoids the compounding effects of any problems until things are resolved. Again, this is a reasonable and normal approach to supervisory oversight.
My view is that this is, in fact, a good sign that VARA’s supervisory framework – with its checks and balances and facilitative approach – is working effectively, and that VARA is acting as a regulator that is forward-looking and engaging with firms as they go through the authorization process. .
BitOasis’ suspension of the MVP license should not require a decision to take hasty or extreme actions – either for investors or firms that interact with BitOasis. Rather, this is a natural transition for firms moving from an unregulated to a regulated environment, which must be further trained to fit into the new regulatory regime.
We are likely to see these regulatory challenges in the European Union under the Markets in Crypto Assets Act (MiCA) – Europe’s crypto regulatory regime – when crypto firms move to a full regulatory conduct and prudential framework. The same will apply in the UK when its broader crypto regime comes into effect, as firms and crypto supervisors work to move to a more stable state.
It is very likely that BitOasis will be able to accept new business and get a full license – as it is working with VARA to resolve any outstanding issues. It is also a positive signal for the region that their regulatory approach can be seen globally as an effective regime and that investors and companies coming to the region can have confidence in VARA as a supervisory body.
Compliance EMEA Crypto Businesses
