Dubai is tightening scrutiny of crypto license seekers in the wake of last year's bankruptcy of digital-asset exchange FTX, requesting additional information from applicants like Binance, people familiar with the matter said.
Officials at Dubai's
Dubai's stricter approach is a potential headache for Binance Chief Executive Officer Changpeng "CZ" Zhao, who lives there and has made it the linchpin of expansion in the Middle East, as he faces
"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 U.S. Commodity Futures Trading Commission 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. Spokespeople at VARA didn't respond to multiple calls and emails seeking comment.
VARA officials are also seeking information on ownership, auditing and board procedures at the global group level of Binance, the people said. Because of Binance's size and complexity, those queries are taking longer to address, according to two of the people. Binance doesn't have a global headquarters and rather than a regular board of directors, it has a
Binance also has a complicated corporate structure, with several holding companies — including three named in the CFTC lawsuit — and an array of local entities.
In early February, a senior executive said Binance has been working to
UAE clampdown
The United Arab Emirates, of which Dubai is a part, has cracked down on dozens of
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 licenses: Komainu, Hex Trust, GC Exchange and
Hex Trust, which has an Operational MVP license, confirmed that it's received requests for additional information on ownership, auditing and board procedures from VARA. That hasn't prolonged the process of getting a permit, said Filippo Buzzi, managing director for Middle East and North Africa, in an email. VARA requested such details in the early stages of the application process, he added.
"From the very beginning the regulatory requirement was on par if not more stringent than what we faced in other jurisdictions in Europe or Asia," Laurent Girouille, head of Komainu's regional office in Dubai, said in an email. The only additional request for information it received was about any potential exposure to bankrupt FTX "and we had none," he added.
Crypto.com and GE Exchange had no comment on their interactions with the regulator.
Binance plans to offer crypto trading in Dubai through its Binance FZE entity, which it said has a board of directors and is audited by Mazars. The launch of Binance FZE has been delayed "due to operational reasons," Binance said without specifying. Ownership data for Binance FZE aren't publicly available on a federal registry of firms operating in the UAE.
The exchange is working to upgrade to an Operational MVP license, which would allow it to cater to institutions and qualified investors, and then to a Full Market Product permit. FMPs will be issued from the end of June, according to VARA, and recipients will be allowed to offer crypto trading to all retail investors.
