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  • 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.