Dubai’s VARA Unleashes Crypto Staking through Custody Services

<p>In a
significant move to expand the scope of virtual asset services in the Emirate
of Dubai, the Virtual Asset Regulatory Authority (VARA) has published a revised
Custody Services Rulebook. The updated regulations permit staking from custody
services, provided that the prescribed requirements of the amended rulebook are
met. This change allows Virtual Asset Service Providers (VASPs) to offer
staking without requiring a separate license for VA Management and Investment
Services.</p><p>Crypto Staking Is Now
Available in Dubai through Custody Services</p><p>VARA, the authority
responsible for regulating crypto services in Dubai (excluding the Dubai
International Financial Centre), has significantly changed its current
legislation. This amendment allows VASPs licensed as custodians to provide
<a href="https://www.financemagnates.com/terms/s/staking/">staking</a> services to their customers from the same legal entity. The provision
of this additional service will not require a separate license for VA
Management and Investment Services but will necessitate specific additional
approval from VARA.</p><p>Furthermore,
additional licensing and supervision fees will be payable in connection with
the provision of this new service. This move aligns with the Emirate's broader
strategy to foster innovation and growth in the financial technology sector,
ensuring that regulations are in place to maintain integrity and consumer protection
within the crypto space.</p><p>Crypto staking is a process that involves holding a specific cryptocurrency in a digital wallet to support the operations of a blockchain network. It's a form of proof-of-stake (PoS) consensus mechanism, where the creator of the next block is chosen based on the number of coins held and staked.</p><p>It allows individuals to earn additional income by participating in the validation process of transactions in the crypto ecosystem.</p><p>From Oil to Crypto</p><p>Once entirely
dependent on oil, Dubai now has very limited reserves. Therefore, it has begun
preparations for economic transformation, just like the rest of the United Arab
Emirates (UAE), focusing its economy on other sources of income. As a result,
Dubai's GDP is now only 5% dependent on liquid gold. One step towards
independence from oil extraction was the introduction of the first regulations
governing the cryptocurrency market in<a href="https://www.financemagnates.com/cryptocurrency/regulation/dubai-adopts-digital-asset-law-establishes-independent-regulator/" target="_blank" rel="follow"> 2022 and the creation of VARA</a>.</p><p>Regulatory
tensions in other parts of the world, including the USA and Europe, have led to
increasing cryptocurrency companies moving to the UAE and Dubai. It cites very
favorable tax conditions and stability, as well as the transparency of local
regulations. The possibility of crypto staking is an additional nod and
incentive towards them.</p><p>According
to Alex Chehade, the General Manager of Binance Dubai, the UAE could become the
primary destination for cryptocurrency businesses seeking favorable and
transparent regulations.</p><p>Binance and Major Crypto
Exchanges Are Now in Dubai</p><p>Last month,
Binance, one of the largest cryptocurrency exchanges in the world, <a href="https://www.financemagnates.com/cryptocurrency/binance-secures-operational-license-in-dubai-despite-global-woes/" target="_blank" rel="follow">obtained </a>an
operational license for crypto services in Dubai. This week, Komainu, a custody
service provider for crypto assets, <a href="https://www.financemagnates.com/cryptocurrency/dubais-crypto-surge-komainu-bags-license-after-binances-entry/" target="_blank" rel="follow">announced obtaining a similar license</a>.</p><p>"Dubai
has a vibrant digital asset ecosystem and impressive talent pool, and we are
proud to contribute to the growth of this innovative financial <a href="https://www.financemagnates.com/terms/h/hub/">hub</a>. Our
presence and desirable regulatory status in the region marks another
differentiator for us as we execute the next phase of our business," Sebastian
Widmann, the Head of Strategy at Komainu, commented.</p><p>The local
market also seems to hold substantial promise, as evidenced by retail
investors' enthusiasm in trading activities. The increasing count of engaged
traders in the UAE's FX/CFDs market underscores this trend, with Investment
Trends reporting that the number of traders in these financial instruments
hit an all-time high of <a href="https://www.financemagnates.com/forex/uaes-fx-and-cfds-trader-population-reaches-record-49000-in-2023/" target="_blank" rel="follow">49,000 in 2023</a>.</p><p>In addition
to Binance and Komainu, other leading cryptocurrency companies such as <a href="https://www.financemagnates.com/cryptocurrency/bitget-joins-bybit-and-okx-in-newest-dubai-crypto-push-opens-local-office/" target="_blank" rel="follow">Bitget,
ByBit, and OKX</a> have sought local licenses in the United Arab Emirates (UAE).
This movement reflects a broader pattern among digital asset exchanges to
establish a foothold in the UAE. In a related development, OKX has recently
joined forces with Komainu to enhance the security of institutional crypto
trading.</p>

This article was written by Damian Chmiel at www.financemagnates.com.