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  • Part V – Collateral Wallet Services Rules

    • A. Compliance with Collateral Wallet Services Rules

      1.Only VASPs Licensed by VARA to carry out Custody Services may provide Collateral Wallet Services.
      2.VASPs Licensed by VARA to carry out Custody Services may only provide Collateral Wallet Services if explicitly authorised to do so by VARA, with such authorisation being expressly stipulated in the VASP's Licence.
      3.VASPs providing Collateral Wallet Services will be subject to licensing and/or supervision fees incremental to the fees for Custody Services in Schedule 2 of the Regulations, or other fees published by VARA, as amended from time to time, in order to be able to provide Collateral Wallet Services.
      4.VASPs that are authorised to provide Collateral Wallet Services must comply with this Part V of the Custody Services Rulebook, at all times, when undertaking the regulated activity of providing Collateral Wallet Services.
      5.Collateral Wallet Services are regarded by VARA as ancillary services to the Custody Services that a VASP provides. As such, all VASPs providing Collateral Wallet Services must comply with all other Rules relating to Custody Services throughout the provision of Collateral Wallet Services, including but not limited to the Client Virtual Assets Rules in Part V of the Compliance and Risk Management Rulebook, subject only to the explicit exceptions contained in this Part V of the Custody Services Rulebook.
      6.In addition to VARA's powers in Part IX of the Regulations, VARA shall have the right to limit, suspend or revoke any authorisation granted to a VASP to provide Collateral Wallet Services, upon reasonable grounds VARA deems appropriate at any time.
       

    • B. Client Instructions

      1.VASPs providing Collateral Wallet Services must comply with Rule III.A.3 of this Custody Services Rulebook and continue to act only on explicit instructions received from their clients throughout the provision of such services.
      2.If a VASP wishes to obtain and rely on any pre-authorised instruction from a client, the VASP must consider all reasonably foreseeable circumstances where such instruction is likely to be used by the VASP as authorisation, and the VASP must communicate all such circumstances clearly to the client, prior to the client providing such instruction.
      3.All pre-authorised instructions sought or obtained by a VASP must be sufficiently detailed, accurate and relevant for the client to understand both the circumstances in, and actions for, which such instructions will be relied upon by the VASP.
      4.Collateral Wallet Services cannot be provided on an ‘opt-out’ basis, and the activity may only be initiated after the VASP has received a client’s specific instruction to do so.
       

    • C. Receipts

      1.
      Immediately after receiving a client's instructions to initiate a transfer of Virtual Assets to an account and/or VA Wallet for the purposes of Collateral Wallet Services, a VASP must provide the client with a receipt including the following information—
       
      a.confirmation of whether the transfer has been successfully initiated;
      b.date and time of receipt of the client’s instructions;
      c.amount and type of Virtual Assets in the transfer;
      d.transaction identification details and/or reference; and
      e.total balance of the client's Virtual Assets held in the client's account and/or VA Wallet for the purposes of Collateral Wallet Services.
       
      2.
      Immediately after a transaction on the account and/or VA Wallet used for the provision of Collateral Wallet Services has been completed, a VASP must provide the client with a receipt including the following information—
       
      a.date and time of the transaction;
      b.details of the recipient including whether the transaction has been credited back to the client or to an Exchange;
      c.amount and type of Virtual Assets in the transaction;
      d.transaction identification details and/or reference;
      e.full details of all exchanges, trades or conversions completed in the course of the transaction (if applicable), including times and rates of the exchange; 
      f.a breakdown of all fees paid or payable by the client and when they have been paid or become payable (as applicable); and
      g.total balance of the client's Virtual Assets held in the client's account and/or VA Wallet for the purposes of Collateral Wallet Services.
       

    • D. VA Wallets and Safekeeping of Virtual Assets

      1.VASP must use VA Wallets which are specifically designated for the purposes of providing Collateral Wallet Services only (“CWS Client VA Wallet"). VASPs must identify CWS Client VA Wallets used for providing Collateral Wallet Services as such in their internal books and records. CWS Client VA Wallets used for providing Collateral Wallet Services cannot be re-purposed or used for any other purpose either during or after the provision of Collateral Wallet Services.
      2.As a limited exception only, Rule III.B.3 of this Custody Services Rulebook shall not apply to the CWS Client VA Wallets used by the VASP for the provision of Collateral Wallet Services.
      3.VASPs providing Collateral Wallet Services remain responsible to their clients for the safekeeping of the Virtual Assets for which Collateral Wallet Services are being provided.
       

    • E. Settlement integration with trading venues

      1.VASPs providing Collateral Wallet Services may only provide the Collateral Wallet Services to their clients for trading or other transactions on venues which are Licensed by VARA to carry out Exchange Services (“Exchange").
      2.VASPs providing Collateral Wallet Services may only provide the Collateral Wallet Services in respect of one Exchange per client account and/or VA Wallet. A VASP's client may have multiple accounts and/or VA Wallets with the VASP through which Collateral Wallet Services are provided, in order for the client to trade or transact on different Exchanges, however each account and/or VA Wallet may only be in respect of one Exchange.
      3.Further to Rule V.E.2 of this Custody Services Rulebook above, VASPs providing Collateral Wallet Services may only permit one Exchange to have any rights or claims over Virtual Assets held in any given CWS Client VA Wallet used for the provision of the Collateral Wallet Services.
      4.In addition to all requirements under Part II.C of the Company Rulebook, VASPs providing Collateral Wallet Services must identify and disclose all conflicts of interest between the VASP and its clients in the provision of the Collateral Wallet Services including, but not limited to, any conflicts which arise because of the VASP's commercial arrangements with any Exchange.
       

    • F. Risk Disclosure Statement

      1.
      VASPs providing Collateral Wallet Services must provide each client with a risk disclosure statement in respect of the Collateral Wallet Services explaining—
       
      a.co-mingling of Client VAs. To the extent applicable, that Client VAs may no longer be held in segregated VA Wallets containing the Virtual Assets of that client only;
      b.safekeeping. A detailed description of how Client VAs are held, including but not limited to if Client VAs are held in accounts and/or VA Wallets containing Virtual Assets of more than one client of the VASP; and
      c.rights of Exchanges. The nature of all rights or claims that any Exchange has over Client VAs, accounts, Client VA Wallets and/or any CWS Client VA Wallet.
       
      2.The risk disclosure statement required under Rule V.F.1 above of this Custody Services Rulebook must be separate from the Client Agreement and VASPs must independently obtain confirmation of the acceptance of such risk disclosure statement from each client, prior to the VASP providing Collateral Wallet Services to that client.
       

    • G. Client Agreements

      1.
      In addition to all requirements in respect of Client Agreements in the Market Conduct Rulebook, and under Rule III.D of this Custody Services Rulebook, VASPs providing Collateral Wallet Services shall include the following, to the extent applicable, in Client Agreements in respect of the Collateral Wallet Services—
       
      a.a description of the Virtual Assets for which Collateral Wallet Services are provided to such extent that the details are sufficient to identify them; 
      b.respective rights of the VASP, the client and any other Entity involved in the Collateral Wallet Services, in respect of Virtual Assets that are the subject of the Client Agreement;
      c.rights of the client to withdraw, manage or directly control decisions pertaining to any Virtual Assets, in respect of which the Collateral Wallet Services are provided, and any conditions or circumstances under which the client may be unable to do so;
      d.a statement explaining that Virtual Assets in respect of which the Collateral Wallet Services are provided may be at risk, including the types and nature of such risks, as well as the likelihood and severity of any losses that may be suffered; and
      e.a statement explaining whether the VASP receives any remuneration, discount or other benefit for using any third party (with a disclosure of the specific Entities where applicable), in the course of the provision of the Collateral Wallet Services.
       

    • H. Reporting and Notification

      1.
      Reporting. In addition to all other applicable requirements in respect of regulatory reporting in the Regulations, Rulebooks or its Licence, VASPs providing Collateral Wallet Services shall, on a monthly basis, submit to VARA the following information—
       
      a.
      in respect of the Client Virtual Assets held in CWS Client VA Wallets used for the provision of the Collateral Wallets Services—
       
      i.a list of all Virtual Assets held in the and the total number held of each Virtual Asset; and
      ii.the total value, denominated in AED, for each Virtual Asset listed in Rule V.H.1.a.i of this Custody Services Rulebook;
       
      b.total number of clients to whom the VASP provides or has provided the Collateral Wallets Services in the relevant reporting period; and
      c.the names of each of the Exchanges with whom the VASP has settlement integrations and/or who have any rights or claims over any CWS Client VA Wallet, in accordance with Rule V.E.
       
      2.
      Notifications. In addition to all other notification requirements in the Regulations, Rulebooks or its Licence, VASPs providing Collateral Wallet Services shall notify VARA immediately in the event of any of the following, at any time during the provision of the Collateral Wallet Services—
       
      a.system, reporting or reconciliation delay or failure; and
      b.an error or inaccuracy in the recording of any client’s balance.