Dubai’s Virtual Assets Regulatory Authority (Vara) is launching a sophisticated system using artificial intelligence to monitor cryptocurrency transactions in real-time. The new tool, named Vara Connect, is designed to detect illicit activity, flag suspicious accounts, and enable the regulator to take swift action against bad actors, reinforcing Dubai’s position as a secure and regulated digital asset hub.
Direct Integration for Proactive Oversight
The new system marks a significant shift from reactive, periodic reporting to proactive, live supervision. By connecting directly to the platforms of licensed virtual asset service providers (VASPs) through an Application Programming Interface (API), Vara will gain instant access to transactional data. This direct line into the operations of major exchanges like Binance, Bybit, and OKX allows the regulator to identify and address risks far more efficiently. Dan Johnson, general manager of Vara, stated that the goal is to implement “AI-enabled licensing, supervision [and] enforcement tools that can make things more efficient for us as a regulator.”
How The AI System Functions
Vara Connect enhances the regulator’s capabilities by adding its own AI layer on top of data from third-party blockchain analytics providers like Chainalysis and Elliptic. The AI is designed to evolve over time, sifting through thousands of data points to highlight areas of concern. The system will automatically flag red flags such as fund flows from high-risk jurisdictions, transactions involving wallets previously linked to scams or hacks, or patterns that suggest a VASP’s internal compliance and anti-money-laundering controls may be failing. This allows Vara’s supervisors to intervene promptly when a user or platform appears to be compromised.
Setting A New Global Standard
Vara officials are positioning this initiative as a new global benchmark for regulatory oversight in the crypto sector, described by general counsel Ruben Bombardi as “risk management 2.0.” The move directly counters perceptions of Dubai as a “light-touch” jurisdiction. Bombardi emphasized that Vara’s regulatory framework is stringent, aligned with international standards set by the Financial Action Task Force (FATF), and comparable to traditional finance. He noted that the regulator’s direct access to data is “possibly second to none,” reinforcing the seriousness of its supervisory regime. This technology-driven approach aims to foster innovation while ensuring market integrity, creating a safe environment for reputable players in the digital asset space.
About Virtual Assets Regulatory Authority (Vara)
Established in 2022, the Virtual Assets Regulatory Authority (Vara) is the world’s first independent regulator dedicated to virtual assets. It is responsible for licensing and regulating the sector across Dubai’s mainland and free zones, excluding the Dubai International Financial Centre (DIFC). Vara oversees a mix of global companies and startups, working to establish a progressive and secure framework for the virtual asset industry to thrive.
Source: AGBI
