Launching and Structuring Crypto Business in Dubai Under VARA  

Virtual assets are emerging as an important part of the global financial markets and are significantly transforming the worldwide financial sector. The UAE, especially Dubai, with its progressive business landscape and welcoming dynamic ecosystem, has already established itself as a global centre for virtual assets. As a result, crypto businesses, being one of the key segments within the broader virtual asset industry are gaining increasing prominence. Properly structuring your crypto business in Dubai under the VARA regulations will enable you to leverage Dubai’s key advantages and harness its core strengths as a global destination in its vision for a borderless economy. 

The VARA Regulations 

The Virtual Assets Regulatory Authority (VARA), established in 2022, is the sole designated entity responsible for regulating, supervising, and overseeing virtual assets (VA) and their activities in all zones across the emirate of Dubai, excluding the Dubai International Financial Centre (DIFC). World’s first independent regulator for virtual assets, the VARA, brings a clear governance framework to protect VA firms in the UAE and overseas and also establishes international standards for the participants in the virtual asset industry. Virtual Asset Service Provider Licence (VASP Licence), provided by the VARA, remains a mandatory pre-requisite for the legal conduct of VA businesses in Dubai. 

Structure your Crypto Business in Dubai 

Starting a crypto business in Dubai under the VARA regulations entails a multi-step process, emphasising transparency, security and compliance with international standards: 

• Choosing Your Business Model and License Type – The VARA offers various types of licenses based on different business categories. A crucial step, the business model you select determines the specific VARA license your business must apply for. Some of the virtual assets activities licensed by the VARA include (but are not limited to): 

• Advisory Services  

• Broker-Dealer Services 

• Custody Services of digital assets 

• Exchange Services 

• Lending and Borrowing Services 

• VA Management and Investment Services 

• VA Transfer and Settlement Services 

• VA Issuance of new Tokens or Coins, etc. 
  Businesses planning to operate in multiple VA activities can apply for more than one license. However, for each additional activity, an additional license extension fee shall be charged. 
• Choosing the Right Jurisdiction – Selecting the right jurisdiction – free zone or mainland, based on your business model, objectives, and goals, is one of the most important and fundamental steps in structuring any business. 
  Major free zones in Dubai, including the Dubai International Financial Centre (DIFC), Dubai Multi Commodities Centre (DMCC), and Dubai World Trade Centre (DWTC), offer the most favorable environment for developing your crypto business. 
  Each free zone in the UAE offers distinct advantages to various aspects of the crypto and digital asset industry. Depending on the nature of the business, certain free zones may provide more suitable regulatory frameworks, infrastructure, and commercial support. It is important to assess each jurisdiction based on the specific business model and operational requirements. The Dubai International Financial Centre (DIFC) under its own  digital asset regulatory framework, offering a unique structure for firms seeking to establish within a common law jurisdiction. 
• Establishing a Legal Entity in Dubai and Securing Approval – To establish a virtual asset  business in Dubai, it is essential to establish a legal entity holding the VARA license. The entity shall have a registered office in Dubai. The business shall also maintain a minimum paid-up capital as mandated by the VARA guidelines and additional operating expenses sufficient for at least six to twelve months of business operation.  

• Submitting the Required Initial Documents – The applicant must first submit an Initial Disclosure Questionnaire (IDQ). For businesses incorporated in the mainland, the document should be submitted to Dubai Economy & Tourism (DET).  

• Initial Payment of Application Fees – The applicant then proceeds to pay the initial application fee, typically about 50% of the total license fee, to initiate the review process. 

• Approval to Incorporate (ATI) – For accepted applications, the VARA shall issue an ATI (Approval to Incorporate). Upon receipt of this, the business can finalise processes such as registration, leasing office space,hiring staff and other operational requirements as required. However, this approval does not yet permit the business to officially or legally conduct any VA activities. activities yet.  

• Ensuring Transparency in Ownership – VARA  mandates that the business to entail a clear chain of ownership, detailing the business’s controlling entities and the ultimate beneficial owners. Businesses intending to bring any material changes to their structure shall obtain VARA’s written approval. 
  VASPs must ensure that their Board is composed of appropriately qualified individuals who possess the necessary skills, knowledge, and expertise, in alignment with the scope of their responsibilities and the Virtual Asset Activities undertaken by the VASP where the VARA also mandates a comprehensive training for the members, since they shall be responsible for the operations, compliance, risk management, and communication of the VA activities.  
• Submitting the Full VASP License Application – Once the initial processes of ATI and other steps are completed, the business shall then proceed to submit the full VARA VASP license application to the VARA. Here, the applicant shall provide business incorporation documents, its detailed business plan and scope of services, required financial statements, and cybersecurity policies as per the VARA’s guidelines . Along with the aforesaid documents, the applicant shall also provide a comprehensive Anti-Money Laundering (AML) and Know-Your-Customer (KYC) policies in compliance with VARA’s regulatory standards.  

• Payment of the Remaining Fees – Upon submitting the full license application, the VARA shall review and provide the required feedback. Then, depending on the VA activity of the business, the remaining license fees plus the first year’s annual supervision fee shall be paid.  

The VARA shall then issue your business’s official Virtual Asset Service Provider (VASP) license, enabling your business to officially operate the virtual asset activities you applied for which may be subject to operational conditions.  

Once licensed, the business shall ensure ongoing compliance with the regulatory requirements and the core VARA Rulebooks. This includes maintaining robust AML procedures, ensuring proper segregation of client assets, filing annual fees, reports, and audits. Non-compliance with the regulatory procedures can attract penalties ranging from AED 200,000 to AED 20 million, license suspension or revocation, and public enforcement actions. 

As the notion of a borderless economy evolves, crypto is the new future. Dubai’s long-standing commitment to transforming the emirate into an innovation powerhouse for virtual assets brings in a progressive regulatory climate for companies and investors within the UAE and overseas. However, unlocking its key benefits entails a strict and efficient compliance with the VARA regulations. Our legal team is specialised in this specific area and can offer expert legal guidance in ensuring proper compliance and a seamless structuring of your crypto business.