Dubai moving in on crypto exchanges, increases scrutiny after FTX bankruptcy

April 12, 2023

By Anjali Kochhar

Dubai is tightening scrutiny of cryptocurrency licence seekers in the wake of last year’s bankruptcy of digital-asset exchange FTX, requesting additional information from applicants like Binance, as per a Bloomberg report.

As part of this tightened scrutiny, the Virtual Assets Regulatory Authority (Vara) of Dubai has requested additional information from license applicants such as Binance, regarding their ownership structure, governance, and auditing procedures.

This increased level of scrutiny applies to all international companies seeking permits. This new approach may pose a challenge for Binance CEO Changpeng “CZ” Zhao, who resides in Dubai and has made the city the cornerstone of the company’s expansion in the Middle East, as he is already facing mounting pressure from US regulators.

The emirate is trying to balance fostering innovation with the need to have proper oversight of an industry that’s been mired in high-profile scandals in the past year.

“Vara wants to turn Dubai into a capital for the digital-assets economy while safeguarding its business ties with Western jurisdictions like Europe that are adopting more muscular crypto regulations,” said Sam Blatteis, CEO of The Mena Catalysts, which provides government-relations advice to fintech multinationals expanding in the Persian Gulf.

In late March, the US Commodity Futures Trading Commission (CFTC) sued Binance and Zhao for allegedly violating derivatives regulations and accused the firm of having “sham” compliance procedures. Binance has called the lawsuit “unexpected and disappointing.”

“We have disclosed all necessary answers to Vara on a proactive basis and in line with our regulatory and fiduciary responsibilities,” Binance said in an emailed answer to questions from Bloomberg News.

The company also said it has provided information on its local entity’s ownership structure and external auditor.

The United Arab Emirates (UAE), of which Dubai is a part, has cracked down on dozens of over-the-counter crypto exchanges that set up there without licences.

Those efforts are part of a broader push to get the UAE off the Financial Action Task Force’s “gray list” of jurisdictions that don’t do enough to uncover illicit funds.

The UAE’s foreign ministry didn’t immediately respond to messages seeking comment.

The regulator’s public virtual-asset service provider register shows four companies in addition to Binance that hold licences: Komainu, Hex Trust, GC Exchange and

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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