Global: Open Exchange Faces $2.7 Million Fine for Violating UAE Crypto Regulations

Dubai has imposed a substantial fine of nearly $3 million on cryptocurrency company Open Exchange for violating the nation’s regulations on digital assets.

The Virtual Assets Regulatory Authority (VARA) of the country announced in a regulatory notice on Tuesday (August 15, 2023) that a fine of 10 million dirhams (approximately $2.7 million) was issued against Open Exchange (OPNX) in May and remains unpaid.

Previously, the company, which is linked to the founder of the unsuccessful crypto hedge fund Three Arrows Capital, had already paid fines of 200,000 dirhams (around $54,000) for four individuals within the company. These fines were imposed due to the failure to comply with Dubai’s regulations concerning the marketing, advertising, and promotion of cryptocurrencies.

The regulatory notice stated, “VARA shall determine consequential actions warranted against OPNX, which may include further fines, penalties, and/or taking any actions necessary to recover payment and definitively remedy the behavior, including but not limited to referring the matter to any law enforcement agency(ies) or competent courts.”

Three Arrows Capital was once a prominent player in the cryptocurrency sector. However, it filed for bankruptcy last summer following a decline in assets, partly triggered by the collapse of the Terra blockchain.

VARA has been intensifying its enforcement efforts in the crypto space as the United Arab Emirates strives to be removed from the Financial Action Task Force’s (FATF) “gray list” of countries that are considered insufficient in combatting illicit funds.

Despite this, crypto companies are increasingly embracing the UAE. In May, Coinbase expressed its interest in considering the country as a potential international hub. Coinbase CEO Brian Armstrong highlighted that the UAE’s regulatory approach to cryptocurrencies has been more progressive compared to the U.S.

In the meantime, Open Exchange expanded its platform last month to incorporate FTX claims. This move allows holders of FTX bankruptcy claims to unlock their locked liquidity by trading the claims or utilizing them as collateral for trading crypto futures.

This initiative aims to aid individuals who have been constrained by locked liquidity due to FTX’s bankruptcy proceedings. While some have used over-the-counter (OTC) markets to liquidate their claims, the associated legal and intermediary fees have limited this option mainly to larger creditors.