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  • Annex 1: Fiat-Referenced Virtual Assets Issuance Rules

    • Part I – Approval Requirements

      • A. Interpretation

        1.
                 		 Fiat-Referenced Virtual Asset [FRVA] means a type of Virtual Asset that purports to maintain a stable value in relation to the value of one or more fiat currencies but does not have legal tender status in any jurisdiction. An FRVA is neither issued nor guaranteed by any jurisdiction and fulfils its functions only by use and acceptance within the community of users of the FRVA.
        2. As stated in Rule I.B.3 of these FRVA Rules, the issuance of any FRVA that purports to maintain a stable value in relation to the value of AED shall not be approved under these FRVA Rules and shall remain under the sole and exclusive regulatory purview of the CBUAE.
        3.
                 		 FRVAs do not include Virtual Assets which are—
         
          a. representations of any equity claim;
          b. issued by central banks acting in their monetary authority capacity [e.g. central bank digital currencies [CBDCs]]; or
          c.
                 		 tokenised bank deposits used only for interbank settlement purposes.
         
        4.
                 		 Reference Currency means, in relation to an FRVA, a VARA-approved fiat currency—
         
          a. the value of which an FRVA purports to maintain a stable reference to;
          b. which is controlled by a central bank of any country[ies] or territory[ies] which are not subject to any sanctions in accordance with Federal AML-CFT Laws;
          c. which has the status of legal tender; and
          d.
                 		 which is required to be accepted within a given jurisdiction.
         
        4.
                 		 Reserve Assets means, for the purposes of these FRVA Rules, the pool of assets maintained in accordance with Rule III.B of these FRVA Rules and as approved by VARA. Reserve Assets are not Client Money or Client VAs, as defined in the Compliance and Risk Management Rulebook.
         

      • B. General requirements for VARA approval

        1.
                 		 As stated in Rule I.C.1 of the VA Issuance Rulebook, the issuance of an FRVA is a Category 1 VA issuance and as such is a VA Activity. In addition to compliance with these FRVA Rules, and all other Regulations, Rules and Directives as communicated by VARA in its Licence or otherwise from time to time, any Entity seeking to carry out the issuance of an FRVA will be required to comply with the following Rulebooks—
         
          a. Company Rulebook;
          b. Compliance and Risk Management Rulebook;
          c. Technology and Information Rulebook;
          d. Market Conduct Rulebook; and
          e. VA Issuance Rulebook.
         
        2.
                 		 Approval conditions. VARA may, in its sole and absolute discretion, impose conditions on any approvals granted for the issuance of an FRVA by a VASP including, but not limited to—
         
          a.
                 		 segregation of an Entity’s business or operations in relation to VA issuances and VA Activities [or other similar businesses and activities, if applicable] by implementing and strictly enforcing policies and procedures;
          b.
                 		 provision of further information to demonstrate the VASP’s ability to comply with any Regulation, Rule or Directive; and/or
          c.
                 		 any additions or modifications to requirements set out in any Regulation, Rule and/or Directive.
         
        3.
                 		 AED as Reference Currency. In addition to Regulation III.A.4, the issuance of any Virtual Asset that purports to maintain a stable value in relation to the value of AED shall remain under the sole and exclusive regulatory purview of the CBUAE. Entities seeking to issue any such Virtual Asset in the Emirate must comply with any applicable CBUAE regulation.
         
        4.
                 		 Currencies of sanctioned countries or territories. VASPs may not have as a Reference Currency any currency issued by any country[ies] or territory[ies] which are subject to sanctions under Federal AML-CFT Laws.
         

      • C. Significant FRVA Issuers

        1.
                 		 VARA may, in its sole and absolute discretion, designate any VASP Licensed to issue an FRVA as a Significant FRVA Issuer at the time of issuing a Licence or anytime thereafter.
        2.
                 		 In designating a VASP as a Significant FRVA Issuer, VARA may consider all factors relevant to the VASP and/or the FRVA issued by the VASP, including but not limited to—
         
          a. the number of holders of the FRVA;
          b. the value of circulating and/or outstanding supply of the FRVA;
          c. the value of the Reserve Assets maintained by the VASP;
          d. the number and value of transactions in the FRVA;
          e.
                 		 whether the VASP and/or its affiliates carry out any other VA Activity[ies] and/or financial services in the Emirate, or provide services similar to VA Activities and/or financial services in other jurisdictions;
          f. interconnectedness with licensed financial institutions and/or VASPs; and/or
          g.
                 		 the business, structural and operational complexity of the VASP in relation to the FRVA issued by it.
         
        3.
                 		 VARA may, in its sole and absolute discretion, impose any Rules on a Significant FRVA Issuer in addition to those contained in the Rulebooks, which may include, but not be limited to, additional Rules on—
         
          a. company structure and corporate governance;
          b. Paid-Up Capital, Net Liquid Assets, Insurance and/or Reserve Assets;
          c. audits, regulatory reporting and regulatory notifications; and/or
          d.
                 		 any other matter as VARA deems appropriate.
         

    • Part II – Additional Disclosures

      • A. Additional Whitepaper disclosures

        1.
                 		 In addition to all other disclosures required in Rule III.A of the VA Issuance Rulebook, VASPs Licensed to issue FRVAs must include the following in the Whitepaper—
         
          a. the type[s] and composition of Reference Currency[ies];
          b. whether the type[s] and composition of Reference Currency[ies] may change and, if so, the circumstances in which any such changes may take place and the consequential effect of such changes;
          c. a clear and detailed policy on the creation and redemption of FRVAs in circulation and the consequence of such creation or redemption on the increase and decrease of the Reserve Assets;
          d.
                 		 the type[s] and composition of Reserve Asset[s], and methodology for valuing such Reserve Assets;
          e. criteria for how Reserve Asset[s] are or will be identified;
          f. the custody arrangement of the Reserve Assets including, but not limited to, the custodian[s] involved and how the VASP Licensed to issue FRVAs ensures it has timely access to Reserve Assets to process redemption requests in compliance with Rule III.C of these FRVA Rules;
          g.
                 		 a detailed description of how Reserve Assets are maintained, with reference to the requirements in Rule III.B of these FRVA Rules;
          h.
                 		 a detailed description of how they will comply with Rules relating to the handling of redemption requests in Rule III.C of these FRVA Rules, and all relevant risks which may affect their compliance;
          i. the procedures and timeline for holders of FRVAs to redeem such FRVAs at par;
          j.
                 		 prominently state whether having a valid Client Agreement with the VASP Issuer is a condition for redemption of the FRVA directly from the VASP Issuer;
          k.
                 		 detailed assessments of risks relevant to the management, custody, investment and/or liquidation of the Reserve Assets, including, but not limited to, credit risk, market risk and liquidity risk, and policies and procedures to manage such risks for the purpose of processing redemption requests; and
          l.
                 		 any other relevant information as may be determined by VARA.
         

      • B. Additional ongoing disclosures

        1.
                 		 VASPs Licensed to issue FRVAs shall at least every month and in a clear, accurate and transparent manner disclose on their website the following information regarding whether an FRVA is one hundred percent [100%] backed by Reserve Assets—
         
          a. the number and value of FRVAs in circulation; and
          b.
                 		 the value and composition of the Reserve Assets,
         

                 		 as independently audited in accordance with Rule III.D.1 of these FRVA Rules.
         
        2.
                 		 Disclosures in accordance with Rule II.B.1 of these FRVA Rules shall be accompanied by a statement confirming whether the FRVA is, for the period covered and at the time of the disclosure, at least one hundred percent [100%] backed by Reserve Assets in accordance with independent audit requirements in Rule III.D.1 of these FRVA Rules.
        3.
                 		 VASPs Licensed to issue FRVAs shall as soon as possible and in a clear, accurate and transparent manner disclose on their website any event that has or is likely to have a significant effect, directly or indirectly, on the market value of the FRVAs.
         

    • Part III – Additional Compliance Obligations of FRVA Issuers

      • A. Maintenance of stable backing

        1.
                 		 VASPs Licensed to issue FRVAs shall ensure that—
         
          a.
                 		 any increase in the circulating supply of the FRVA is always matched by a corresponding increase in the Reserve Assets; and
          b.
                 		 any decrease in the circulating supply of the FRVA is always matched by a corresponding decrease in the Reserve Assets.
         
        2.
                 		 VASPs Licensed to issue FRVAs shall ensure that any increase or decrease in the Reserve Assets required under Rule III.A.1 of these FRVA Rules is responsibly managed to avoid any adverse market impact in relation to the Reserve Assets.
        3.
                 		 VASPs Licensed to issue FRVAs shall, regardless of whether any third party[ies] are involved in the creation or redemption of the FRVA, comply with Rule III.A.2 of these FRVA Rules at all times.
         

      • B. Reserve Assets

        1.
                 		 VASPs Licensed to issue FRVAs shall, at all times, hold and maintain sufficient Reserve Assets such that the FRVA is at least one hundred percent [100%] backed by Reserve Assets.
        2.
                 		 VASPs Licensed to issue FRVAs shall only hold Reserve Assets denominated in the Reference Currency[ies] in—
         
          a.
                 		 cash or cash equivalents [including, but not limited to, central bank reserve deposits, bank deposits and CBDCs]; or
          b.
                 		 highly liquid financial instruments with minimal market risk, credit risk and concentration risk, which are capable of being liquidated rapidly with minimal adverse market impact, including the following—
         
            i.
                 		 debt securities with residual maturity of ninety [90] days or less, issued by—
         
              1. governments or central banks of the Reference Currency; or
              2.
                 		 government agencies [local or international];
         
            ii.
                 		 repurchase agreements with a maturity of seven [7] days or less which are backed by [i] above; and
            iii.
                 		 short-term government money market funds.
         
        3.
                 		 VASPs Licensed to issue FRVAs shall, at all times, manage Reserve Assets effectively and prudently, at least by—
         
          a.
                 		 maintaining Reserve Assets only with financial services firms [as agreed with VARA during the licensing process]—
         
            i. appropriately and validly authorised to hold the specific type of Reserve Assets; and
            ii.
                 		 segregated from their own funds;
         
          b. ensuring newly added Reserve Assets are held in accordance with their custody arrangements;
          c. putting in place policies and procedures to ensure Reserve Assets can be promptly accessed and converted into the Reference Currency[ies] at all times, for the purpose of processing and completing any redemption requests in accordance with Rule III.C of these FRVA Rules; and
          d.
                 		 conducting regular risk assessments to evaluate the appropriateness of the composition of Reserve Assets [including, but not limited to, whether there is sufficient diversification in the types of Reserve Assets held] in ensuring compliance with Rule III.B.1 of these FRVA Rules.
         
        4.
                 		 VASPs Licensed to issue FRVAs shall, to the furthest extent permitted by applicable laws, hold Reserve Assets of an FRVA in such a manner that—
         
          a.
                 		 such Reserve Assets are legally segregated and remote from their own assets [including, but not limited to, any assets held in relation to other FRVAs] and do not form a part of their estate;
          b.
                 		 they would not be prevented or hindered from processing any redemption requests in accordance with Rule III.C of these FRVA Rules, at all times [including, but not limited to, ensuring such Reserve Assets are not rehypothecated, or subject to any pledges, encumbrances, right of set-off or counterclaim];
          c.
                 		 will not otherwise be subject to any recourse by their creditors, the custodian of the Reserve Assets or any other third parties, in particular in the event that they become Insolvent; and
          d.
                 		 VARA has the ability to direct the control, liquidation and distribution of all such Reserve Assets for the purposes of fulfilling its regulatory obligations.
         
        5.
                 		 VASPs Licensed to issue FRVAs shall work with VARA to structure agreements with financial services firms to ensure VARA has priority access to Reserve Assets, to the furthest extent permitted by applicable laws, for the purposes of VARA fulling its regulatory obligations.
        6.
                 		 Conflicts of interest. In addition to all requirements relating to the avoidance and management of conflicts of interest in the Company Rulebook, VASPs Licensed to issue FRVAs shall take all appropriate steps, to the extent practicable, to prevent and, in any event identify, manage and publicly disclose conflicts of interest arising from the constitution and management of Reserve Assets.
        7. It is worth noting that Reserve Assets held with financial services firms, including but not limited to those regulated by the CBUAE, may be subject to prevailing reporting obligations incremental to those applicable under this Rulebook.

      • C. Redemptions

        1.
                 		 VASPs Licensed to issue FRVAs shall, at all times, ensure holders of the FRVA have the valid legally enforceable right to redeem the FRVA at par.
        2.
                 		 VASPs Licensed to issue FRVAs must ensure all requests made by holders, with valid Client Agreements with the VASP Issuer, to redeem the FRVA at par are, at all times, processed and completed—
         
          a. within one [1] Working Day of any such requests; or
          b.
                 		 if the trading and/or settlement of the Reserve Assets are subject to significant disruption events beyond the control of a VASP Licensed to issue FRVAs, within one [1] Working Day of the trading and/or settlement of Reserve Assets no longer being significantly impacted by such disruption events.
         
        3. VASPs Licensed to issue FRVAs shall process and complete redemption requests without charging any fees.
        4.
                 		 VASPs Licensed to issue FRVAs shall establish, maintain and implement clear and detailed policies and procedures to ensure compliance with this Rule III.C of these FRVA Rules.
         

      • D. Audits and reporting

        1.
                 		 In addition to all requirements relating to audits and reporting in the Compliance and Risk Management Rulebook, VASPs Licensed to issue FRVAs shall, on a monthly basis, commission an independent audit of the following information regarding whether an FRVA is one hundred percent [100%] backed by Reserve Assets—
         
          a. the number and value of FRVAs in circulation; and
          b.
                 		 the composition and value of Reserve Assets.
         
        2.
                 		 The Senior Management of a VASP Licensed to issue FRVAs shall, as soon as practicable upon its completion, submit to VARA an attestation as to the accuracy of each independent audit in accordance with Rule III.D.1 of these FRVA Rules.
         

      • E. Marketing

        1.
                 		 No Entity may, in the Marketing of any FRVA in the Emirate, include language suggesting that the value of an FRVA is maintained stable relative to its Reference Currency[ies], unless—
         
          a. it has a Licence to issue the FRVA and such Licence has not been revoked; and
          b.
                 		 the FRVA was issued and is maintained in accordance with these FRVA Rules.
         
        2.
                 		 VASPs Licensed to issue FRVAs shall, in all Marketing, include clear and unambiguous statements that—
         
          a.
                 		 the holders of the FRVA have the right to redeem the FRVA at par, and whether such right is directly enforceable against the VASP Issuer; and
          b.
                 		 such FRVAs are not covered by any investor protection or deposit guarantee schemes.
         

      • F. Capital requirements

        1.
                 		 VASPs Licensed to issue FRVAs shall always maintain its own capital equal to the total of—
         
          a. AED 600,000; and
          b.
                 		 two percent [2%] of the value of outstanding supply of the FRVA.
         

      • G. Prohibition on incentive benefits

        1.
                 		 VASPs Licensed to issue FRVAs shall not grant any interest, or otherwise make any payments or benefits [whether or not in the form of an FRVA] for the purpose of incentivising Entities to acquire, hold, or otherwise use an FRVA.
        2.
                 		 For the purposes of Rule III.G.1 of these FRVA Rules, the following shall be treated as benefits—
         
          a.
                 		 any remuneration, whether or not related to the length of time during which a holder of an FRVA holds such FRVA;
          b.
                 		 net compensation or discounts, with the purported effect equivalent or similar to that of interest accrued to a holder of the FRVA, directly from the VASP Licensed to issue the FRVA or from third parties; and
          c.
                 		 any other benefits [whether or not monetary in nature] which may incentivise Entities to acquire, hold, or otherwise use an FRVA, as may be determined by VARA in its sole and absolute discretion.
         

    • Schedule 1 – Definitions

      Term Definition
      “Category 1” has the meaning ascribed to it in the VA Issuance Rulebook.
      “CBDC” has the meaning ascribed to it in the Regulations.
      “CBUAE” means the Central Bank of the United Arab Emirates.
      “Client Agreement” has the meaning ascribed to it in the Market Conduct Rulebook.
      “Client Money” has the meaning ascribed to it in the Compliance and Risk Management Rulebook.
      “Client VAs” has the meaning ascribed to it in the Compliance and Risk Management Rulebook.
      “Company Rulebook” means the Company Rulebook issued by VARA pursuant to the Regulations, as may be amended from time to time.
      “Compliance and Management Rulebook” means the Compliance and Risk Management Rulebook issued by VARA pursuant to the Regulations, as may be amended from time to time.
      “Custody Services” has the meaning ascribed to it in the Regulations.
      “Directive” has the meaning ascribed to it in the Regulations.
      “Dubai VA Law” means Dubai Law No. [4] of 2022 Regulating Virtual Assets in the Emirate of Dubai, as may be amended from time to time.
      “Emirate” means all zones across the Emirate of Dubai, including Special Development Zones and Free Zones but excluding the Dubai International Financial Centre.
      “Entity” means any legal entity or individual.
      “Federal AML-CFT Laws” has the meaning ascribed to it in the Regulations. 
      “Fiat-Referenced Virtual Asset” or “FRVA” has the meaning ascribed to it in Rule I.A.1 of these FRVA Rules.
      “FRVA Rules” means these Fiat-Referenced Virtual Assets Issuance Rules issued by VARA pursuant to the Regulations, as may be amended from time to time.
      “Group” has the meaning ascribed to it in the Company Rulebook.
      “Insolvency Proceedings” has the meaning ascribed to it in the Regulations.
      “Insolvent” has the meaning ascribed to it in the Regulations.
      “Insurance” has the meaning ascribed to it in the Company Rulebook.
      “Market Conduct Rulebook” means the Market Conduct Rulebook issued by VARA pursuant to the Regulations, as may be amended from time to time.
      “Marketing” has the meaning ascribed to it in the Marketing Regulations.
      “Marketing Regulations” has the meaning ascribed to it in the VA Issuance Rulebook.
      “Net Liquid Assets” has the meaning ascribed to it in the Company Rulebook.
      “Paid-Up Capital” has the meaning ascribed to it in the Company Rulebook.
      “Reference Currency” has the meaning ascribed to it in Rule I.A.4 of these FRVA Rules.
      “Regulations” means the Virtual Assets and Related Activities Regulations 2023, as may be amended or supplemented by VARA from time to time.
      “Reserve Assets” has the meaning ascribed to it in Rule I.A.5 of these FRVA Rules.
      “Senior Management” has the meaning ascribed to it in the Company Rulebook.
      “Significant FRVA Issuer” means a VASP designated by VARA in accordance with Rule I.C.1 of these FRVA Rules.
      “Technology and Information Rulebook” means the Technology and Information Rulebook issued by VARA pursuant to the Regulations, as may be amended VARA from time to time.
      “VA Issuance Rulebook” means the Virtual Asset Issuance Rulebook issued by VARA pursuant to the Regulations, as may be amended or supplemented by VARA from time to time.
      “VARA” means the Dubai Virtual Assets Regulatory Authority.
      “Virtual Asset” or “VA” has the meaning ascribed to it in the Dubai VA Law.
      “Whitepaper” has the meaning ascribed to it in the VA Issuance Rulebook.
      “Working Day” means any day which is not a weekend or public holiday in the Emirate.