Web3 wallet firm Backpack is set to debut its crypto exchange in Dubai after receiving a Virtual Asset Service Provider (VASP) license from the Dubai Virtual Assets Regulatory Authority (VARA). The announcement highlighted the company’s global ambitions as it revealed the acquisition of operational licenses in various jurisdictions over the recent five months.
Backpack’s newfound VASP license permits the company to provide crypto exchange services within Dubai. However, it restricts the firm from rolling out any other virtual asset offerings in the region. Some standout features of the soon-to-launch Backpack Exchange include zero-knowledge (ZK) proof-of-reserves, low-latency order execution, and multi-party computation (MPC) for enhanced custody.
It’s noteworthy that Backpack’s core product, the Backpack Wallet, is currently unregulated. The wallet aims to facilitate users’ transition from traditional fiat currencies to blockchain-based applications. Addressing the prevailing concerns about the transparency of crypto exchanges, Backpack’s CEO and co-founder, Armani Ferrante, emphasized the need to eliminate the ambiguity surrounding such platforms.
Ferrante criticized the industry’s standard practice of running expansive crypto exchanges without proper proof-of-reserves or accountability. He shared Backpack Exchange’s vision:
“Our goal is to redefine standards using cryptographic techniques like zk-proofs, MPC, and state machine replication. With Backpack Exchange, we hope to set new benchmarks in transparency and regulatory compliance. In the crypto space, the mantra should be: Don’t just trust, verify.”
Backpack has slated a phased rollout for its exchange. Initial access will be exclusive to existing Backpack and Mad Lads users from November 2023. Plans to open to the broader public are on the cards for Q1 2024. As the exchange evolves, Backpack aims to integrate sophisticated trading features like derivatives, margin, and cross-collateral offerings.
As Dubai continues its ascent as a crypto-enthusiastic jurisdiction, VARA has been proactive in issuing various operational licenses to crypto platforms. The regulatory authority enhanced its oversight in February 2023, rolling out guidelines for VASPs. These mandates emphasize stringent adherence to marketing, advertising, and promotional standards. Non-compliance could attract penalties ranging from 20,000 UAE dirhams ($5,500) to a steep 500,000 dirhams ($135,000) for recurrent violators.