Dubai’s Virtual Assets Regulatory Authority (VARA) is tightening scrutiny on crypto license applicants, following the bankruptcy of digital-asset exchange FTX last year. Anonymous sources familiar with the matter have revealed that VARA has requested additional information from Binance and other international companies seeking permits, including details on ownership structure, governance, and auditing procedures. Binance CEO Changpeng “CZ” Zhao, who resides in Dubai and has made it a key location for the company’s expansion in the Middle East, is expected to face pressure from US regulators in addition to VARA’s scrutiny.
The move is part of Dubai’s effort to balance fostering innovation with proper oversight, as the crypto industry has been marred by high-profile scandals in the past year. Binance has already faced legal action from the US Commodity Futures Trading Commission, which accused the company of violating derivatives regulations and having “sham” compliance procedures. Also, Binance has called the lawsuit “unexpected and disappointing.”
VARA is reportedly seeking information on Binance’s ownership, auditing, and board procedures at the global group level, which is taking longer to address due to the company’s size and complexity. Binance has a complicated corporate structure, with several holding companies and local entities. The company previously stated that it is working to hire an auditor for its entire balance sheet, but has had difficulty finding a firm able to take on the work.
UAE crackdown on unlicensed crypto exchanges
The United Arab Emirates (UAE) is cracking down on unlicensed crypto exchanges as part of a wider effort to be removed from the Financial Action Task Force’s “gray list” of jurisdictions deemed inadequate in uncovering illicit funds. According to sources, several over-the-counter crypto exchanges operating without licenses in Dubai have been targeted by regulators. The UAE foreign ministry has yet to respond to requests for comment. The country’s virtual-asset service provider register currently shows only four licensed companies, including Binance, Komainu, Hex Trust, and Crypto.com. However, Binance and the other three firms can only offer preparatory minimum viable product permits, which means they cannot yet offer locally regulated digital-asset services in Dubai.
Hex Trust, which has an operational MVP license, confirmed that it has received requests for additional information from the regulator regarding ownership, auditing, and board procedures. But, according to Filippo Buzzi, managing director for Middle East and North Africa, this has not delayed the permit process. Laurent Girouille, head of Komainu’s regional office in Dubai, said that the regulatory requirements were stringent, but not more so than those faced in Europe or Asia.
Binance, which plans to offer crypto trading in Dubai through its Binance FZE entity, has been delayed due to operational reasons. Also, the company is working on upgrading its license to an Operational MVP, which would allow it to cater to institutions and qualified investors, before applying for a Full Market Product permit. VARA, the regulator overseeing the licenses, is set to issue FMPs from the end of June, and recipients will be permitted to offer crypto trading to all retail investors. Ownership data for Binance FZE is not publicly available on the federal registry of firms operating in the UAE. Crypto.com and GC Exchange have declined to comment on their interactions with the regulator.
