Part III – Additional Compliance Obligations of ARVA Issuers
A. Value of an Asset-Referenced Virtual Asset
1. All Entities seeking to issue an ARVA shall clearly demonstrate to VARA—
a. the rights and/or value that the ARVA grants, or purports to grant, to the owners and/or holders of the ARVA; and b. a clear and detailed policy on how the Entity will ensure the ARVA derives and maintains its value.
2. Reference Asset. All Entities seeking to issue an ARVA shall clearly demonstrate to VARA the type and composition of Reference Assets and whether the Reference Asset may change and, if so, the circumstances in which any such changes may take place.
B. Direct Right of Ownership
1. All VASPs Licensed to issue an ARVA which represents, or purports to represent, a direct right of ownership of the Reference Asset, or a fractional proportion thereof, shall ensure—
a. the right of ownership is legally and validly established and that such right of ownership is transferred in the event of a transfer of ownership of the ARVA; b. where transactions in the Reference Assets are subject to legal or regulatory requirements relating to their settlement, completion and/or transfer of title, that such legal or regulatory requirements are satisfied, in order to give effect to the transfer of ownership in the event of a transfer of ownership of the ARVA; and c. that the VASP will respond to transactions in the ARVA not resulting in a corresponding transaction in the Reference Asset being legally settled, completed and/or transferred, and shall implement mitigating measures to ensure all transactions in the ARVA result in a corresponding transaction in the Reference Asset being legally settled, completed and/or transferred.
2. Legal opinion. VASPs Licensed to issue ARVAs may be required to provide VARA with a legal opinion, provided by a professional and duly registered lawyer, confirming any explanation made either to VARA or any information contained in a Whitepaper.
C. Reserve Assets
1. VASPs Licensed to issue ARVAs which purport to maintain a stable value in respect of any Referenced Asset, shall hold and maintain sufficient and acceptable Reserve Assets such that—
a. the risks associated with the rights and/or to the value that the ARVA grants, or purports to grant, owners of the ARVA are secured; and b. the liquidity risks associated with any rights of redemption granted to the owners and/or holders are mitigated and managed.
2. VASPs Licensed to issue ARVAs shall, at all times, manage Reserve Assets effectively and prudently, at least by—
a. maintaining Reserve Assets only with custodians or other Entities which are validly licensed and qualified to hold such assets; b. ensuring Reserve Assets are segregated from the VASP’s own funds; c. ensuring newly added Reserve Assets are held in custody in accordance with Rule III.C.2.a by no later than the time period stipulated by VARA as a condition of its approval of the VASP to issue the ARVA; d. having in place policies and procedures to ensure Reserve Assets can be promptly accessed to process and complete any redemption requests in accordance with Rule III.E, including but not limited to conversion into AED where the redemptions are being paid in AED; and e. conducting regular risk assessments to evaluate the appropriateness of the composition of Reserve Assets in ensuring compliance with this Rule III.C .
3. VASPs Licensed to issue ARVAs shall, to the furthest extent permitted by applicable laws, ensure that Reserve Assets—
a. are legally segregated from its estate and the Reserve Assets of any other Virtual Assets; b. are not rehypothecated, or subject to any pledges or encumbrances which would prevent the Issuer from processing any redemption request in accordance with Rule III.E; and c. will not otherwise be subject to any recourse by the creditors of the VASP, the custodian of the Reserve Assets or any other third parties, in particular, in the event of any party becoming Insolvent.
4. Legal opinion. VASPs Licensed to issue ARVAs shall be required to provide VARA with a legal opinion, provided by a duly registered practising lawyer, confirming compliance with Rule III.C.3 above. 5. Conflicts of interest. VASPs Licensed to issue ARVAs shall take all appropriate steps to prevent, identify, manage and publicly disclose conflicts of interest arising from the constitution and management of Reserve Assets.
D. Audits and Reporting
1. For the purposes of complying with this Rule III.D, VASPs Licensed to issue ARVAs shall appoint an independent third-party auditor and promptly notify VARA of the full name and contact details of the auditor upon appointment. 2. VASPs Licensed to issue ARVAs shall—
a. every six (6) months, commission an independent audit of—
a. the number and value of the ARVAs in public circulation; b. the composition and value of the Reserve Assets, if applicable; and
b. commission an independent audit of their financial statements to produce an annual report, which shall be promptly made available to VARA upon request.
3. The Senior Management of the VASP Licensed to issue ARVAs shall, as soon as practicable upon its completion, submit to VARA an attestation as to the accuracy of each independent audit in accordance with Rule III.D of these ARVA Rules.
E. Redemptions
1. To the extent an ARVA provides owners and/or holders with a right of redemption, the VASP Licensed to issue the ARVA shall, at all times, ensure owners and/or holders of the ARVA have the right to redeem the ARVA for an equal value denominated in—
a. AED; and b. other forms as may be determined by the VASP and disclosed in the Whitepaper.
2. To the extent an ARVA provides owners and/or holders with a right of redemption, the VASP Licensed to issue the ARVA shall, at all times, ensure owners and/or holders of the ARVA have the right to redeem the ARVA—
a. against the VASP; or b. otherwise in respect of the Reserve Assets in the event that the VASP is unable to process and complete redemption requests.
3. VASPs Licensed to issue ARVAs must ensure all requests made by owners and/or holders to redeem such ARVAs for an equal value of RWAs shall be processed and completed within a reasonable period of such requests being made, provided the owner and/or holder, or their designee, has successfully onboarded with the VASP and any other conditions necessary to permit redemption in compliance with all applicable laws, Regulations, Rules and Directives have been met. 4. VASPs Licensed to issue ARVAs shall process and complete redemption requests without charging any fees. 5. VASPs Licensed to issue ARVAs shall establish, maintain and implement clear and detailed policies and procedures to ensure compliance with this Rule III.E.
F. Marketing
1. No Entity may, in the Marketing of any Virtual Asset in the Emirate, use the term ‘stablecoin’ or include language suggesting that the value of a Virtual Asset is maintained stable relative to a particular RWA, unless—
a. it is a VASP Licensed by VARA to issue ARVAs and has received VARA’s approval to issue the ARVA and such approval has not been revoked; b. such ARVA purports to maintain a stable reference to the value of one RWA only; and c. the VASP maintains Reserve Assets in accordance with Rule III.C of these ARVA Rules.
2. VASPs Licensed to issue ARVAs shall, in all Marketing relating to any ARVA, include clear and unambiguous statements that such ARVA is not covered by any investor protection or deposit guarantee schemes.
G. Capital Requirements
1. VASPs Licensed to issue ARVAs shall always maintain Paid-Up Capital equal to the value of at least the higher of—
a. AED 1,500,000; and b. 2% of the average market value of the Reserve Assets (where applicable) calculated over the preceding twenty-four (24) months.