- Regulator probes Fuze
- Unauthorized activities identified
- Remediation plan in progress
Fuze, a crypto infrastructure provider supported by significant regional and global investors, has been penalized by Dubai’s virtual assets regulator for failures in anti-money laundering protocols and violations of licensing requirements.
Operating as Morpheus Software Technology in the UAE, Fuze delivers digital assets-as-a-service infrastructure, enabling banks, payment processors, fintech firms, and traditional businesses across the Middle East, North Africa, and Turkey to offer compliant digital assets, including stablecoins, to their clientele.
The company also manages an over-the-counter trading desk, facilitating private trades for institutions and major investors outside public exchanges, with a minimum transaction size of $25,000.
According to its website, Fuze has handled over $1 billion in transactions for more than 500 institutional clients.
A review initiated in April by the Virtual Assets Regulatory Authority (Vara) “revealed deficiencies in Fuze’s anti-money laundering program, as well as related governance, compliance, and internal control systems,” stated Vara in an enforcement notice this week.
The regulator also determined that Fuze had “deliberately engaged in unlicensed virtual asset activities, breaching its licensing conditions and failing to disclose critical information.”
Vara did not specify the amount of the fine.
A spokesperson for Fuze informed AGBI via email that the company is addressing the regulator’s findings through a “thorough remediation plan currently in progress.”
“The issues pertain to past transactions and associated compliance matters, and upon Vara highlighting these to us, we promptly initiated an internal investigation, suspended the activities in question, and addressed the concerns raised.”
Fuze emphasized that these findings do not impact its business operations, including its main digital assets-as-a-service platform, which continues to provide uninterrupted service to banks and fintechs throughout the region.
Over the past year, Fuze has also appointed a chief compliance officer, a head of risk, and a head of legal.
Governance and oversight have been “improved through the engagement of external compliance consultants and the strengthening of internal systems,” the company noted.
Having obtained a virtual asset service provider license in October 2023, Fuze has garnered prominent investors.
In May, it secured $12.2 million in a Series A funding round, the first substantial venture capital investment following seed funding, led by Galaxy, the US digital asset investment firm established by billionaire Michael Novogratz, and e& Capital, the venture division of UAE telecommunications group e&, formerly known as Etisalat.
This followed a $14 million seed investment in 2023 led by Further Ventures, the investment arm of Abu Dhabi’s sovereign wealth fund ADQ, which oversees approximately $250 billion in assets.
Further reading:
Fuze was established by Mohammed Ali Yusuf, Arpit Mehta, and Srijan Shetty, who were featured in Forbes Middle East’s 30 Under 30 Class of 2023.
Despite Dubai’s reputation as a crypto-friendly hub, Vara head Matthew White stated to AGBI last year that their approval processes are stringent, with only a small fraction, fewer than 5 percent, of license applicants gaining approval.
Launched in March 2022 as the world’s first independent regulator for virtual assets, Vara oversees the sector across Dubai’s mainland and free zones, excluding the Dubai International Financial Centre.
It actively monitors companies and issues alerts to protect consumers.
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