1. The Virtual Asset Standards (“VA Standards”) has been developed for LBK EXCHANGE FZE (“LBank” or the “Company”) in compliance with the regulatory framework of the Virtual Assets Regulatory Authority (“VARA”) including, but not limited to, the Virtual Assets and Related Activities Regulations 2023 (“VARA Regulations”), and accompanying rulebooks (“Rulebooks”). All capitalized terms, if not defined, have the same meaning ascribed to them in the VARA Regulations and accompanying Rulebooks.
2. The Compliance Officer/Money Laundering Reporting Officer (“CO/MLRO”) is responsible for maintaining, developing, implementing, and updating this Policy and ensuring compliance with all applicable laws, regulations, and best practices. The Board of Directors of LBank (“Board”) is responsible for approving and monitoring the implementation of the VA Standards and the related procedures.
3. The VA Standards shall be reviewed annually or as otherwise directed by the Board, unless there is a change in applicable laws and regulations that requires the implementation of an earlier update.
4. LBank provides Exchange Services (“Services”) and is licensed by VARA in Dubai. The VA Standards have been developed by LBank to assess the suitability of virtual assets in relation to its Services.
5. To ensure that the virtual assets continue to fulfil the VA Standards, all virtual assets used and/or supported in LBank’s Services shall be checked for compliance with the VA Standards, at least once annually. The VA Standards shall include the following considerations:
a. Market capitalization, fully diluted value, and liquidity:
The market capitalization of the virtual asset reflects its current trading price multiplied by the total supply of the virtual asset. The fully diluted value considers all potential future supply, including rewards for mining or staking. Current liquidity metrics indicate the volume of trading and how quickly the virtual asset can be bought or sold without significantly impacting the price. Historical trends show a detailed analysis of whether these metrics have trended downward, indicating potential concerns for investors. Relevant standards for tracking and reporting these metrics include the use of real-time data aggregation tools and compliance with financial reporting standards.
b. Design, features, and use cases:
The virtual asset is designed with several innovative features, including secure transaction capabilities and enhanced user privacy. Intended use cases may involve peer-to-peer transactions, asset trading, and as a medium of exchange. Standards deployed include adherence to best practices in blockchain development and regular audits to ensure functionality and security.
c. Compliance features:
Key features impacting compliance include transaction transparency, user identity verification processes, and adherence to anti-money laundering (“AML”) and counter-terrorism financing (“CTF”) obligations. LBank maintains robust compliance mechanisms to monitor transactions, aligning with the VARA regulatory framework. Relevant standards include international AML/CTF regulations and local laws, ensuring that the Company’s operations do not breach securities, intellectual property, or other applicable laws.
d. Regulatory treatment by VARA and other authorities:
The virtual asset has undergone rigorous scrutiny under the VARA regulatory framework, with all necessary approvals documented. LBank maintains ongoing communication with VARA and other relevant authorities to ensure compliance and adapt to any regulatory changes. Standards employed include regular compliance reviews and consultations with legal advisors.
e. Prohibition by VARA or other authorities (both inside and outside the UAE): Currently, there are no known prohibitions by VARA or other appropriate authorities regarding the virtual asset. LBank continuously monitors regulatory updates to ensure full compliance and address any potential prohibitive actions swiftly.
f. Security and immutability of DLT protocols:
The underlying distributed ledger technology (“DLT”) protocols are designed with security and immutability at their core. This includes the use of advanced cryptographic techniques and consensus mechanisms to prevent unauthorized changes. Regular security audits are conducted to evaluate and enhance the resilience of these protocols.
g. Future development (roadmap):
The roadmap for the virtual asset includes planned upgrades for scalability and user functionality, with milestones communicated transparently to stakeholders. Development standards align with industry best practices, focusing on user feedback and market needs.
h. Susceptibility to price manipulation:
LBank implements various measures to mitigate the risk of price manipulation, such as transaction monitoring systems and robust compliance checks. The Company’s commitment to transparency and integrity in trading practices supports a fair-trading environment. Relevant standards include adherence to market conduct regulations and ongoing audits.
i. Potential conflicts of interest:
LBank actively manages potential conflicts of interest through strict policies and transparency in operations. Regular training for staff ensures awareness and adherence to ethical standards. Mitigations include separation of duties and clear reporting lines to prevent conflicts from arising.
j. Background of the issuer:
The issuer of the virtual asset has a proven track record in the virtual assets sector, with senior management possessing extensive experience in finance and technology. The Company ensures that any past investigations or claims related to fraud or deceit are thoroughly reviewed and disclosed as part of Lbank’s commitment to transparency.
k. Enforceability of rights:
If the virtual asset represents rights to other assets, LBank ensures that these rights are enforceable under applicable laws. Legal frameworks supporting these rights are regularly reviewed for compliance and clarity.
l. Sufficient assets to satisfy obligations:
LBank maintains a robust financial position, ensuring that sufficient assets are available to meet all obligations while providing Services related to the virtual asset. Financial oversight practices align with industry standards to ensure liquidity and solvency.
m. Terms and conditions associated with the virtual asset:
The terms and conditions governing the virtual asset are designed to protect market integrity and client interests. These terms are regularly reviewed and updated to align with regulatory changes and ensure no adverse impacts on the market.
6. Routine assessment: LBank will periodically review all terms and conditions related to any supported virtual asset to ensure proper alignment with the corresponding physical market, verifying that these terms and conditions comply with the standards and practices of that market. LBank will also conduct ongoing assessments of relevant information to ensure that any virtual asset for which it provides Services continues to meet the applicable VA Standards.
7. Suspension conditions: LBank reserves the right to impose conditions or suspend a virtual asset if it no longer satisfies these VA Standards. LBank will implement the necessary operational procedures and controls to manage such situations effectively.
8. In the event of significant market developments or external factors that may impact a virtual asset’s ability to meet the VA Standards, LBank will promptly review the asset and reconfirm its suitability.
9. Record keeping: All records related to such assessments will be maintained for eight (8) years and made available for inspection by VARA upon request.
10. Notification of non-compliance: LBank will notify VARA promptly if it becomes aware that a virtual asset no longer meets the VA Standards and will follow any directives from VARA to minimize potential negative impacts on LBank’s clients.
11. The VA Standards will be made available on LBank’s website.
