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Understanding Dubai Virtual Assets Regulatory Authority’s Regulations on Digital Asset Exchange Ownership, Governance, and Audit Procedures

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It is reported that, according to insiders, after the bankruptcy of the digital asset exchange FTX last year, officials of the Dubai Virtual Assets Regulatory Authority (VARA) aske

Understanding Dubai Virtual Assets Regulatory Authoritys Regulations on Digital Asset Exchange Ownership, Governance, and Audit Procedures

It is reported that, according to insiders, after the bankruptcy of the digital asset exchange FTX last year, officials of the Dubai Virtual Assets Regulatory Authority (VARA) asked for more information about its ownership structure, governance and audit procedure in recent weeks, and the person asked to discuss private deliberations anonymously. Three of the insiders said that VARA requires all international companies seeking permission to provide similar information.

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The increasing popularity of digital assets in the modern world has led to the rise of many digital asset exchanges globally. However, while the growth and success of these exchanges have been remarkable, they have also brought to light various challenges such as governance, ownership, and audit procedures. In line with this, the Dubai Virtual Assets Regulatory Authority (VARA) has been seeking information on these aspects from digital asset exchanges, especially after the bankruptcy of FTX last year. This article explores VARA’s regulations concerning digital asset exchange ownership, governance, and audit procedures.

The Importance of VARA’s Regulations

Digital asset exchanges operate in an industry that is inherently susceptible to risk and fraud. For example, inadequate governance structures can result in malicious users exploiting loopholes and manipulating the platform at the expense of other users. Also, weak audit procedures can make it easy for bad actors to engage in fraudulent activities unnoticed. Therefore, VARA’s regulations on digital asset exchange ownership, governance, and audit procedures are essential in ensuring the security, stability, and transparency of these platforms.

Ownership Structures

VARA requires digital asset exchanges seeking permission to operate in Dubai to provide detailed information about their ownership structure. This includes the identification of all shareholders and beneficial owners, their percentage ownership, and nationality. This information is crucial in determining the level of control and influence different individuals or entities have over the platform. Additionally, VARA assesses the suitability of the shareholders and beneficial owners based on their financial stability, criminal records, and reputation.

Governance Structures

Digital asset exchanges must also comply with VARA’s regulations on governance. In this regard, VARA requires exchanges to have a board of directors responsible for overseeing the management and operations of the platform. The board must have clear lines of responsibility, defined roles, and an appropriate composition that reflects the best interests of the stakeholders. Furthermore, VARA requires the exchanges to have policies and procedures that ensure compliance with regulatory requirements, mitigate risks, and enhance transparency.

Audit Procedures

VARA has established robust regulations on audit procedures to enhance the transparency and accuracy of the financial statements of digital asset exchanges operating in Dubai. The regulations stipulate that exchanges must appoint independent auditors to conduct regular audits of their financial records. The auditors must be registered and licensed in Dubai, and they must be independent of any conflicts of interest related to the operations of the exchange. The audit reports must be submitted to VARA, and they must adhere to the International Financial Reporting Standards.

Conclusion

VARA’s regulations on digital asset exchange ownership, governance, and audit procedures are essential in ensuring the safety and security of these platforms. They provide a clear framework for safeguarding the interests of all stakeholders and minimizing the risks associated with fraudulent activities. Digital asset exchanges seeking permission to operate in Dubai must comply with these regulations to promote the growth and development of the digital asset industry while maintaining transparency and accountability.

FAQ’s

1) What is VARA and what does it do?
VARA, or the Dubai Virtual Assets Regulatory Authority, is an organization responsible for establishing regulations on digital asset exchanges operating in Dubai. Its mandate includes ensuring the safety, security, and transparency of these platforms.
2) Why are ownership structures essential in digital asset exchanges?
Ownership structures determine the level of control and influence different individuals or entities have over the platform. Understanding the ownership structure is critical in promoting transparency and accountability in the exchange.
3) Do digital asset exchanges operating in Dubai submit regular audit reports to VARA?
Yes. Digital asset exchanges operating in Dubai must submit regular audit reports conducted by independent auditors who are licensed by VARA. These reports are essential in ensuring transparency and accuracy in the financial statements of the exchanges.
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