Dubai's Virtual Asset Regulatory Authority (VARA) has granted a Virtual Asset Service Provider (VASP) license to Backpack, a cryptocurrency wallet and exchange, paving the way for the launch of Backpack Exchange. However, it's important to note that Backpack's VARA license is specific to offering cryptocurrency trading services in Dubai; the company is not authorized to provide other virtual asset products and services. The announcement about Backpack Exchange highlights several noteworthy features, including zero-knowledge (ZK) proof of reserve, managed multi-party computation (MPC), and low-latency order execution.
Over the past five months, Backpack Exchange has been diligently securing operating licenses in multiple jurisdictions worldwide. Currently, its flagship product, Backpack Wallet, operates without regulation. Still, it is designed to facilitate users' transition from traditional fiat currencies to on-chain applications in the future. Backpack's CEO and co-founder, Armani Ferrante, has expressed a commitment to enhancing the transparency of cryptocurrency exchanges, arguing against the conventional model characterized by single points of failure, a lack of proof of reserves, and auditability.
Ferrante emphasized the deployment of cryptographic technologies such as zk-proofs, MPC, and state machine replication as a means to elevate transparency and compliance standards within the industry. The motto for Backpack Exchange is "Don't believe, verify." To access Backpack Exchange, existing users of Backpack and Mad Lads will have the first opportunity, starting in November 2023, with a public rollout scheduled for Q1 2024. During this time, Backpack plans to introduce various trading features, including derivatives, margin trading, and cross-collateralization.
Dubai's VARA regulator has been actively granting various levels of operating licenses to numerous cryptocurrency exchanges over the past year, reinforcing its reputation as a crypto-friendly jurisdiction. In February 2023, VARA issued new guidelines for VASPs operating in Dubai, with a specific focus on marketing, advertising, and promotional activities. Non-compliant exchanges could face fines ranging from AED 20,000 (USD 5,500) to AED 200,000 (USD 55,000), while repeat offenders may encounter penalties of up to AED 500,000 (USD 135,000).
