In a major move to expand the range of virtual asset services in Dubai, the Virtual Asset Regulatory Authority (VARA) has published a revised custodial services rulebook.。Updated regulations allow for pledges from custodial services, provided that the requirements of the revised rulebook are met。

This change allows virtual asset service providers (VASPs) to offer pledge services without the need for a separate VA management and investment services license.。

Pledge of Cryptocurrencies through Custody Services

VARA, the body responsible for regulating cryptocurrency services in Dubai (excluding the Dubai International Financial Centre), has made significant changes to its current legislation.。The amendment allows a VASP licensed by the custodian to provide pledged services to its customers from the same legal entity.。Providing this additional service does not require a separate license for VA Management and Investment Services, but requires special additional approval from VARA.。

In addition, additional licensing and regulatory fees are required to provide this new service。The move is in line with the UAE's broader strategy to promote innovation and growth in the fintech sector, ensuring regulations are in place to safeguard the integrity and consumer protection of the crypto sector.。

A cryptocurrency pledge, a process that involves holding a specific cryptocurrency in a digital wallet to support the operation of a blockchain network, is a proof-of-stake (PoS) consensus mechanism that selects the creator of the next block based on the number of tokens held and pledged.。

Moreover, it allows individuals to earn additional income by participating in the transaction verification process in the crypto ecosystem.。

From oil to cryptocurrency

Once totally dependent on oil, Dubai now has very limited reserves。As a result, it has begun to prepare for an economic transition, shifting its economic focus to other sources of income, just like other countries in the UAE.。As a result, Dubai's GDP is currently only 5% dependent on liquid gold.。A step towards independence from oil extraction is the introduction of the first regulations governing the cryptocurrency market in 2022 and the creation of VARA。

Regulatory tensions in other parts of the world, including the United States and Europe, have led to an increasing number of cryptocurrency companies moving to the UAE and Dubai.。It cites very favorable tax conditions and stability, as well as transparency in local regulations.。The possibility of cryptocurrency pledges is an additional recognition and incentive for them。

Alex Chehade, general manager of Binance Dubai, said the UAE could become a major destination for cryptocurrency businesses seeking favorable and transparent regulation.。

Major Crypto Exchanges Settle in Dubai

Last month, Binance, one of the world's largest cryptocurrency exchanges, obtained a license to operate crypto services in Dubai.。This week, Komainu, a crypto asset custody service provider, announced that it was granted a similar license.。

"Dubai has a vibrant digital asset ecosystem and an impressive talent pool, and we are proud to contribute to the development of this innovative financial hub."。Our presence and good regulatory position in the region mark another strength for us as we execute the next phase of our business, "commented Sebastian Widmann, head of strategy at Komainu.。

The enthusiasm of retail investors for trading activity is proof that the local market also seems to have great prospects.。The increasing number of active traders in the UAE Forex / CFD market highlights this trend。There are reports that the number of traders in these financial instruments hit an all-time high of 49,000 in 2023.。

In addition to Binance and Komainu, other leading cryptocurrency companies such as Bitget, ByBit and OKX have also sought local licenses in the United Arab Emirates (UAE), reflecting the broader model of digital asset exchanges establishing a foothold in the UAE.。In a related development, OKX recently joined forces with Komainu to enhance the security of institutional cryptocurrency transactions.。