Dubai Mandates Crypto Asset Platforms to Cover 100% of Client Funds

Dubai's Virtual Assets Regulatory Authority (VARA) has issued a circular regarding the audit of reserve assets, detailing the minimum requirements for independent audits of virtual asset service providers, as reported by ChainCatcher following the publication of the circular on October 6.

The circular obligates service providers to maintain reserves of at least 100% of client liabilities throughout the review period, held in the exact same virtual assets on a 1-to-1 basis, along with performing daily reconciliations between reserves and liabilities.

The audit scope must cover hot, warm, and cold wallets, third-party wallet infrastructure, and assets held with external custodians, while verifying the segregation of client assets, wallet control, and whether any restaking, lending, or other asset utilization scenarios exist.

The circular comes as Dubai tightens its supervision over the crypto asset sector, reinforcing customer protection by requiring platforms to prove they hold sufficient assets to cover all their liabilities at any given time, rather than only at the end of the period.

What Do These Terms Mean?

Virtual Asset Service Provider (VASP): A licensed company providing services related to cryptocurrencies and crypto assets, such as trading, custody, or brokerage.

Reserve Assets: Assets held by the platform to cover client funds, which must be sufficient to refund them in full upon request.

Segregation of Client Assets: Keeping client funds separate from company funds so they are not used in corporate activities if the firm faces financial trouble.