Emirate regulators intend to bring local companies and major exchanges into the legal field, securing the region from illegal cryptocurrency transactions
Following the bankruptcy of the FTX exchange last November, regulators in Dubai have tightened their grip on the crypto business. According to Bloomberg interlocutors , after the closure of a number of illegal cryptocurrency exchanges, officials from the Dubai Virtual Assets Regulatory Authority (VARA) began sending out requests for information to crypto services operating in the emirate.
Gray List
Dubai authorities have to strike a balance between encouraging innovation and the need for proper oversight of the crypto industry. One of the experts interviewed by the publication, who advises fintech companies on their expansion in the Gulf region, says that the regulator intends to turn Dubai into the capital of the digital economy, while maintaining business ties with Western jurisdictions and not causing claims from them.
US exchange regulators are bringing charges against the largest crypto exchange and are trying to disconnect it from the US market. We tell who can take advantage of the situation and what are the risks for Binance and its users
The US Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance and its executives. The regulator intends to completely deprive the largest crypto exchange of the American market and accuses it of facilitating illegal activities and trading manipulations.
The text of the accusation took up 74 pages. Referring to quotes from internal chats that the agency was able to gain access to, service representatives accuse the exchange, its head Changpeng Zhao and former compliance director Samuel Lim of knowingly allowing Americans to trade cryptocurrency derivatives without a license, which is a gross violation of US law. . The CFTC also alleges that Binance, bypassing money laundering (AML) and know-your-customer (KYC) laws, deliberately helped large US clients bypass their own compliance procedures.
“The Middle East, represented by the UAE, seeks to strike a balance between remaining an attractive region for investment, and not becoming a “global laundry”, given the recent trend and claims to the region from the world community,” agrees the senior partner law firm Emet law firm Eduard Davydov.
The United Arab Emirates, of which Dubai is a part, has already stopped the activities of dozens of cryptocurrency exchanges that opened there without licenses. According to Bloomberg interlocutors , this was part of a wider program to remove the UAE from the gray list of the Financial Action Task Force on Money Laundering (FATF).
This trend is related to the growing concern of the authorities about the risks associated with the use of cryptocurrencies: fraud, money laundering and terrorist financing. As a result, the authorities are seeking to tighten regulation and control over companies involved in operations with cryptocurrencies, Davydov explains.
Among the concrete measures that the Dubai authorities can take, Davydov calls tightening the requirements for licensing crypto business, including more thorough verification of financial statements and enhanced compliance procedures. In addition, it is possible to increase fines and other sanctions for companies that violate the rules related to operations with cryptocurrencies, and in particular with the conduct of ICO (initial coin offering, Initial Coin Offering. – “RBC Crypto” ) . In general, these measures are aimed at increasing the transparency and reliability of operations with cryptocurrencies, as well as reducing the risks associated with these operations, the lawyer notes.
“I would not consider the request for this information in the context of toughening in relation to members of the cryptocurrency market. The VARA framework itself is both experimental and innovative. The organization appeared as part of the UAE initiative to create a space for the development of the cryptocurrency segment,” says Taisiya Romanova, a crypto expert and author of the GFiS Channel telegram channel.
The UAE has already received questions from the FATF in the context of the possibility of the country being blacklisted due to insufficient, according to the regulator, compliance with anti-money laundering measures. The agency published evidence that the country is directly and indirectly helping oligarchs to get away from Western sanctions, including through cryptocurrency transactions.
Reuters, March 11, 2019 – As Russians look for a safe refuge for their wealth, cryptocurrency companies in the United Arab Emirates (UAE) are being inundated with demands to liquidate billions of dollars’ worth of digital currency, according to industry executives and financial sources.
According to the sources, some clients are utilizing cryptocurrencies to invest in real estate in the UAE, while others want to use local businesses to convert their digital funds into hard currency and store it abroad.
The country is currently on the gray list. Therefore, thoughtlessly handing out licenses is not the best solution. Here, rather, the question is not about tightening the screws, but about protecting ourselves.
One executive of a cryptocurrency company stated that over the past 10 days, numerous requests for the sale of billions of dollars’ worth of bitcoin have been made by Swiss brokers because their clients are concerned Switzerland may freeze their assets. The executive added that none of the requests had been for less than $2 billion.
“In the last two weeks, we’ve got maybe five or six. We’ve never had this much interest, the executive said, adding that his company typically receives an inquiry for a major transaction once a month. None of them have yet fallen through – they sort of fell over at the last minute, which is not uncommon.
Binance at a Low Start
The world’s largest crypto exchange Binance also faced requests from VARA. Its head, Changpeng Zhao, lives in Dubai himself and is making efforts to make it the center of brand expansion in the Middle East. In doing so, it faces growing pressure from US regulators. At the end of March, the US Commodity Futures Trading Commission (CFTC) sued Binance and Zhao personally for violating derivatives trading laws and accused the exchange of fictitious compliance procedures.
US exchange regulators are bringing charges against the largest crypto exchange and are trying to disconnect it from the US market. We tell who can take advantage of the situation and what are the risks for Binance and its users
The US Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance and its executives. The regulator intends to completely deprive the largest crypto exchange of the American market and accuses it of facilitating illegal activities and trading manipulations.
The text of the accusation took up 74 pages. Referring to quotes from internal chats that the agency was able to gain access to, service representatives accuse the exchange, its head Changpeng Zhao and former compliance director Samuel Lim of knowingly allowing Americans to trade cryptocurrency derivatives without a license, which is a gross violation of US law. . The CFTC also alleges that Binance, bypassing money laundering (AML) and know-your-customer (KYC) laws, deliberately helped large US clients bypass their own compliance procedures.
The Dubai regulator is requesting more data from Binance than from other market participants, several interlocutors confirmed to reporters. The agency verifies information on the ownership structure, audit reports and management procedures at the level of the global group of companies related to the exchange. The process is complicated by the fact that Binance does not have a single headquarters, and instead of the board of directors in its usual form, there is a global expert council. In addition, the exchange has a complex corporate structure, including several holding companies and many legal entities in different regions. Binance representatives said they have provided VARA with a complete set of data on requests, including the results of the audit of the local division.
In addition to Binance, the VARA public registry of virtual asset service providers lists four more licensed companies: Komainu, Hex Trust, GC Exchange and the Crypto.com exchange. The latter, like Binance, has minimum viable product (MVP) pre-approvals, which means that they cannot yet offer crypto-related services in Dubai that are officially regulated by local law.
Binance intends to launch cryptocurrency trading in the emirate through its subsidiary Binance FZE, which the exchange says has a board of directors and is audited by Mazars. The launch of Binance FZE is “postponed for technical reasons” for the time being, and data on the owners of the company is not available in the federal register of companies operating in the UAE.
Binance’s first goal in the region is to obtain an Operational MVP license that will allow it to serve institutional and qualified investors, and after that to gain permission to fully enter the market, in particular, launch trading for retail users.
All issued licenses are temporary, it is a kind of “sandbox”, explains Taisiya Romanova. Obtaining licenses of a higher level will be possible only after the adoption of the necessary changes in legislation. Therefore, there is nothing strange in the fact that the regulator requests additional information from the business, “it would be strange just if it were different,” the expert sums up.
