October 8, 2023
Stablecoin Projects – Please Take Note
All tokens need to go through an internal assessment to ascertain if they qualify as Category 1 or Category 2 tokens under the VAI.
Category 1 tokens will require a VARA licence in order to be issued in Dubai. These are what the regulator calls “Fiat-Referenced Virtual Assets”, i.e., Virtual Assets that purport to maintain a stable value in relation to the value of one or more fiat currencies, but do not have legal tender status in any jurisdiction – stablecoins.
In order to obtain the relevant approvals, stablecoin projects will need to:
1. Maintain stable backing.
2. Have adequate reserves.
3. Holders should have an enforceable right of redemption.
4. Compliance with the Compliance and Risk Management rulebooks and adequate audit and reporting processes.
5. Marketing limitations when advertising without a licence.
6. Capital requirements of AED 600k and 2% of the value of any outstanding supply.
7. Prohibition on incentivisation benefits.
This is a starting point for the development of a stablecoin framework and indeed, one of the first implemented regulations in the world designed specifically to address the challenges faced by stablecoin issuers.