Dubai’s Virtual Assets Regulatory Authority (VARA) has announced the suspension of FTX’s operating license. VARA revealed on its website that the decision was made given the financial situation of FTX and its affiliates.
The revoked license was the FTX MENA Minimum Viable Product (MVP) license, a permit that was to serve as FTX’s initial foray into the United Arab Emirates. VARA confirmed that no funds belonging to investors in the UAE were lost as it revoked the license before any exposure to clients.
Part of the reason why Dubai’s investors were not adversely affected by the implosion was that the license issued to FTX was only a preparatory one that required another approval from VARA. Furthermore, the independent regulator notes that FTX was yet to secure a domestic bank account which is an integral requirement before digital asset exchanges can begin operations in the UAE.
“The situation has been and will continue to remain closely monitored for the latest updates to ensure that timely and substantive actions are taken within the Emirate of Dubai to protect investors and all market participants,” read VARA’s notice.
Other virtual asset service providers (VASPs) operating in the country have been asked by VARA to provide full disclosures of their exposures to FTX to determine the scale of the contagion in the UAE. VARA claims that it carries out due diligence before issuing its licenses, and the FTX debacle is its sternest test so far in the quest to transform Dubai into a digital asset hub.
Opening the floodgates, but there could be consequences
In March, Dubai passed a new law that sought to clearly regulate digital assets and their regional operators. The law gave validity to the creation of VARA and was hailed for its positive stance towards the virtual currency industry.
On the heels of the law, Binance, FTX, and Crypto.com gained licenses to set up shop in the region while other service providers followed their lead. VARA was tasked with the duties of safeguarding the interests of consumers and setting a standard for the control of the industry.
To achieve its goal of attracting digital asset service providers to the country, there is always a measure of risk that a few bad eggs might ruin the ambitious plans.
Since the collapse, FTX has come under new leadership and is currently slugging it out in bankruptcy court amid jurisdictional issues. There have been widespread calls for the arrest of FTX founder Sam Bankman-Fried, but he has been scheduled to give a talk at a New York Times conference to the chagrin of disgruntled investors.
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