Laser Digital Secures Inaugural License in Dubai
Laser Digital, a digital asset branch of Japan’s Nomura Investment Bank, has achieved a significant milestone by securing the inaugural license from Dubai’s Virtual Asset Regulatory Authority (VARA) to provide regulated over-the-counter (OTC) cryptocurrency options. Announced on Wednesday, this ‘limited license’ permits Laser Digital to cater to institutional clients, offering services under stringent regulatory supervision.
Importance of OTC Desks
This advancement is particularly notable as OTC desks facilitate large-scale trades directly between parties, thereby reducing slippage and allowing for more adaptable pricing mechanisms. Such desks are predominantly utilized by hedge funds, asset management firms, and trading companies that typically engage in high-volume transactions.
Growing Demand for Regulated Crypto Derivatives
This new capability positions Laser Digital to benefit from the growing need for regulated crypto derivatives in Dubai. The firm aims to introduce various tools designed for hedging, generating yield, and managing volatility, while regulatory bodies evaluate market preparedness and necessary risk management protocols for a broader rollout.
Global Regulatory Landscape
Globally, the regulation of OTC crypto options is still in its infancy, though an increasing number of regions, including Dubai and the UK, are starting to establish rules for these desks. In December 2023, UK’s M&G, a major pension fund, invested $20 million in GFO-X, the country’s first regulated Bitcoin derivatives exchange, as part of a $30 million Series B funding aimed at launching an FCA-regulated platform for Bitcoin futures and options.
In the European Union, broader financial regulations such as MiFID II and EMIR govern crypto derivatives, imposing requirements for reporting and clearing. However, numerous EU countries have not yet implemented specific licenses for OTC crypto transactions. Meanwhile, in the United States, the Commodity Futures Trading Commission (CFTC) allows some institutional trading of crypto derivatives, but lacks a specific framework for OTC options.
Dubai’s Regulatory Framework
Contrastingly, Dubai introduced a thorough crypto regulatory framework in early 2023, creating detailed guidelines for exchanges, custodians, broker-dealers, and token issuers through VARA. While the UAE’s derivatives market is currently modest compared to that of the US, which was valued at approximately $167 million in 2024 with an expected annual growth rate of 3.7% until 2031, there are signs of consistent expansion and diversification.
Traditional platforms, such as the Dubai Gold & Commodities Exchange (DGCX) and OTC service providers like ADSS, have historically catered to the region’s commodity and foreign exchange sectors. However, the UAE is now shifting focus to develop its digital asset and institutional finance offerings. As it positions itself to compete with established US exchange giants like CME and CBOE, Dubai aims to provide a regulated environment for innovative asset classes such as cryptocurrencies.
