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Dubai’s Virtual Assets Regulatory Authority (VARA) has awarded a virtual asset service provider (VASP) license to Bulgarian decentralized lending platform Nexo to operate and offer services in and from the Emirates.
As announced on Tuesday, the approval marks the first step in obtaining a full license, which includes an initial provisional permit, a preparatory license, and an operating license.
Nexo Pursues Full Approval for Virtual Asset Services in Dubai Amid Regulatory Challenges
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
Nexo DTC, the company’s regional entity, aims to secure full approval for activities including lending & borrowing, management & investment, and broker-dealer operations.
To obtain the full VASP license, the exchange must meet specific conditions set by VARA. Once completed, the company will qualify for operational approval, which will allow Nexo to offer regulated digital asset services, including exchange, broker-dealer, management and investment, and lending and borrowing services.
In March 2022, Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s prime minister and ruler, approved a new virtual assets law, establishing a legal framework for crypto in Dubai. The ruler also appointed VARA to have enforcement powers in its special development and free zones, excluding the Dubai International Financial Centre.
The purpose is to protect investor assets from prevalent crypto scams and fraudulent activities and create a growth map for the region to become a functioning Web3 hub.
Dubai, alongside the UAE’s capital, Abu Dhabi, has been actively working to attract financial institutions and establish itself as a global crypto hub. While VARA’s public record register does not yet reflect Nexo DTC’s initial approval, updates are typically made within a few days of such developments.
Dubai VARA serves as the single custodial entity mandated to license and govern the burgeoning sector in Dubai, including all mainland and free zones, excluding the autonomous Financial Free Zone (Dubai International Financial Centre).
Kalin Metodiev, co-founder and managing partner at Nexo, expressed enthusiasm for pursuing new market strategies aligned with Dubai’s Virtual Asset Regulatory Authority’s guidance.
“Nexo is enthusiastic about the pursuit of new market strategies aligned with the transformative guidance of Dubai’s Virtual Asset Regulatory Authority.”
Previously, Nexo faced regulatory challenges, including agreeing to pay $45 million to the SEC for failing to register the offer and sale of its Earn Interest Product (EIP). Additionally, the company has sought $3 billion in damages from Bulgaria after an investigation found no evidence against it, alleging that the investigation brought Nexo into disrepute.
Entities like Binance.US and Coinbase have also faced scrutiny from the SEC regarding potential securities violations. Despite regulatory challenges, cryptocurrency exchanges and platforms continue to pursue licenses or permits in various jurisdictions worldwide.
The Middle East is Becoming an Attractive Crypto Hub
Dubai has emerged as one of the most crypto-friendly hubs in the world, earning praise from numerous crypto-related firms operating within the region.
In recent months, Dubai’s regulatory body has granted operational licenses at different stages to several crypto exchanges and firms, such as Aquanow, Backpack Exchange, OKX, and WadzPay.
These developments solidify its reputation as a crypto-friendly jurisdiction, showcasing a robust regulatory framework and comprehensive rulebooks for VASPs. All crypto firms undertaking or planning to undertake regulated activities within the region must apply for a regulated license with VARA.
The crypto regulatory framework in Dubai, introduced in February 2023, 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.
All crypto exchanges and service providers to license applicants in Dubai were asked to lodge their applications by November 17 for crypto exchanges to apply for operational licenses and for over 1,000 crypto platforms that have applied for registration.
Brad Garlinghouse, CEO of Ripple, highlighted Dubai as a prime example of a jurisdiction where regulators actively engage with the evolving crypto industry. He cited the city’s status as a global frontrunner, attributing its success to clear regulatory frameworks, policies promoting innovation, and an environment conducive to entrepreneurial endeavors.