Dubai’s VARA establishes formal derivatives regime and clarifies virtual asset issuance rules

The move comes as the VARA also issued new guidance, on how it expects the market to comply with existing virtual assets issuance rules set out in the Virtual Asset Issuance Rulebook, bringing greater clarity on how virtual assets are created and brought to market in Dubai.

New Exchange Traded Derivatives Framework

Exchange traded derivatives (ETDs) are instruments whose value is derived from, or fluctuates by reference to, the price of one or more underlying assets and whose pricing or settlement is denominated in a virtual asset.

Under VARA’s framework, ETDs may take a range of forms, including contracts for difference, futures and options linked to virtual assets, as well as other derivative instruments designated by the regulator from time to time as part of its pilot to permanent regulatory approach.

VARA has issued an updated exchange services rulebook which, for the first time, formalises a comprehensive regulatory framework specifically for ETDs, following months of controlled pilot programmes and supervisory testing.
Under the new rules, which took effect immediately, ETD services may only be offered to clients who meet strict eligibility and suitability standards, embedding institutional grade market structure and safeguards for both retail and professional participants.

Retail investors will face additional safeguards, including caps on leverage, mandatory suitability assessments and access to training and educational tools designed to explain how derivatives work and the risks involved.

Marie Chowdhry, a fintech expert with Pinsent Masons in Dubai, said the changes represented a major shift in VARA’s regulatory approach.

“Until last year, virtual asset derivatives operated under indirect supervision, with firms relying on general conduct and risk obligations,” she said.
“From a commercial perspective, the changes provide greater regulatory certainty for compliant platforms and institutional participants, but also raise operational and compliance expectations across product design, governance and risk management.
“Firms offering derivatives will also be required to provide clear, fair and ongoing communications to clients. This includes regular updates on open positions, margin requirements, potential liquidation risks and material market events.”
VARA said the move to a dedicated framework reflected the growing maturity and complexity of virtual asset markets, and the need to codify supervisory expectations following successful pilot activity.

Jessica White, an expert in financial regulations at Pinsent Masons, explained that firms offering futures, options or perpetual derivatives would now need to reassess not just their own products and risk controls, but also how their relationship with clients.

“The updated framework strengthens governance expectations, requiring exchanges to incorporate ETD exposure into operational exposure calculations and their broader risk management frameworks,” she said.

“By introducing a dedicated ETD regime, VARA has positioned Dubai among a small group of jurisdictions regulating virtual asset derivatives through bespoke, sector specific rules rather than informal or principles based supervision.”

Clarification for Virtual Asset Issuances

Meanwhile VARA has also launched new guidance for its virtual asset issuance rulebook, which provides more detailed clarification on regulating the issuing of virtual assets – including when licences are required – and shifts regulatory focus upstream to how virtual assets originate, rather than solely how they trade.

Under the new guidance, issuances may proceed as Category 2 without a licence, but only when issued via an already VARA licensed distributor and under specific circumstances, with responsibility for due diligence and ongoing validation sitting firmly within the regulated perimeter.  Category 1 licences will be required for issuing fiat‑ and asset‑referenced tokens, however.

Clearer expectations over risk disclosures are also spelled out in the guidance, including a prohibition on excluding civil liability, with whitepapers and risk disclosure statements treated as enforceable instruments rather than informational documents, and with Category 2 issuers facing due diligence and monitoring requirements.

Chowdhry warned that businesses operating in the region would now need to carry out gap analysis on their existing and planned issues to see if they could trigger the licencing requirements.

“The guidance materially raises the compliance bar for virtual asset issuances in Dubai, particularly around disclosure quality and governance,” said Chowdhry.

“Asset‑referenced and stable‑value tokens will face the highest impact, with VARA reinforcing expectations around reserve assets, redemption mechanics and legal opinions.

“The guidance seeks to ensure that innovation in tokenisation and digital asset structures is underpinned by clarity, discipline and transparency at an early stage, rather than imposed after products are already in market.”