Navigating the VARA licensing process in Dubai
Navigating the regulatory landscape in Dubai can be a complex endeavour, especially when it comes to obtaining and maintaining a Virtual Assets Regulatory Authority (VARA) licence. In this article, Balbeer Singh, Governance, Risk & Compliance Advisor at Equiom, explores the scope of the VARA licensing framework and outlines what businesses need to know to successfully obtain and maintain a VARA licence in Dubai. Additionally, Balbeer will outline how our team can support you throughout this journey, from initial assessment to ongoing compliance.
The Virtual Assets Regulatory Authority was established by the Government of Dubai to oversee Virtual Asset activities across the Emirate. As the first regulator of its kind, VARA plays a pivotal role in building a stable, secure digital-finance ecosystem. Any firm wishing to offer Virtual Asset services in Dubai (outside the DIFC) must obtain a VARA licence. Key Definitions Under Law No 4 of 2022 (the “Virtual Assets Law”), VARA defines its terms broadly, ensuring flexibility as the market and its underlying technology evolve.
- Virtual Asset: A digital representation of value that may be traded, transferred or used as an exchange or payment tool—or held for investment. This includes Virtual Tokens and any other value as determined by VARA.
- Virtual Token: A digital representation of a set of rights that can be offered and traded on a Virtual Asset platform.
Why obtain a VARA licence?
Obtaining a licence from VARA not only provides legal authorisation, but can also boost your business’s operational credibility, grant access to a regulated market and facilitate partnerships with banks, payment providers and technology firms. It also ensures regulatory certainty, which can foster investor confidence and support scalable business growth.
What activities require a VARA licence?
You will need VARA approval to carry out any of the following within Dubai:
- Advisory services – advising clients on buying, selling or investing in Virtual Assets.
- Broker-dealer services – soliciting, matching and executing orders on behalf of others.
- Custody services – securely storing clients’ Virtual Assets.
- Exchange services – operating platforms for trading cryptocurrencies or tokens.
- Lending & borrowing services – facilitating loans backed by Virtual Assets.
- Virtual Asset management & investment services – managing portfolios that include Virtual Assets, for retail or institutional clients.
- Transfer & settlement services – handling the transfer and settlement of Virtual Asset transactions.
- NFT marketplace services – running platforms for trading Non-Fungible Tokens (licence requirements depend on the precise activity). Even proprietary trading firms may need to register or secure a No-Objection Certificate (NOC) if their trading volumes exceed certain thresholds.
How are clients classified under VARA licences?
The classification of clients under VARA licences determines the level of investor protection, risk exposure, and regulatory oversight applied to each category.
- Retail investors face the highest level of consumer protection due to limited experience and capital. Compliance obligations may require enhanced disclosures, suitability assessments, and investor safeguards.
- Qualified investors meet specific financial and knowledge thresholds, allowing firms to offer more sophisticated products and services with fewer restrictions compared to retail clients.
- Institutional investors include licensed entities with advanced expertise, typically operating under minimal restrictions, as they are presumed to have the capacity to assess risks independently.
A firm’s license may determine whether it can offer services to all client categories or be restricted to qualified and institutional clients only.
Capital and governance requirements for Vara-regulated firms.
- Minimum capital varies by activity, from AED 100,000 for advisory services to AED 1.5 million for exchange services (or a percentage of fixed annual overheads, whichever is higher).
- Net liquid assets: At all times, liquid assets must exceed current liabilities by at least 1.2 times monthly operating expenses.
- Reserve assets: You must hold reserve assets equal to 100 per cent of client liabilities, in the same Virtual Asset, to safeguard client holdings.
Insurance requirements for VASPs (Virtual Asset Service Providers)
VASPs must maintain appropriate insurance coverage based on the size and nature of their business. As per VARA rules, this includes:
- Professional indemnity insurance
- Directors’ & officers’ liability insurance
- Commercial crime insurance (or equivalent) for assets in hot wallets
- Any further insurance VARA specifies
These measures are intended to mitigate operational and liability risks across all virtual asset activities.
Breakdown of governance and management roles and responsibilities
- Board of Directors: “Fit and proper” individuals approved by VARA, responsible for strategy, oversight, compliance and risk management.
- Responsible Individuals: At least two senior, full-time UAE residents or passport holders, approved by VARA and accountable for regulatory compliance.
- Senior Management: Clearly defined roles, experienced in Virtual Asset markets, reporting to the Board.
- Compliance Officer: A full-time UAE resident with at least five years’ relevant experience, approved by VARA.
- Company Secretary: Independent of senior management, reporting to the Board, responsible for governance documentation and disclosures.
The VARA licensing journey VARA’s process comprises two stages:
Stage 1: Approval to Incorporate (ATI)
- Submit an Initial Disclosure Questionnaire (IDQ) via the Department of Economy and Tourism or relevant Free Zone Authority.
- Provide your business plan, details of beneficial owners and senior management.
- Pay 50 per cent of the licence fee.
- Once approved, obtain ATI—allowing legal incorporation and operational setup
Note: At this stage, you are not authorized to conduct any Virtual Asset activities.
Stage 2: Full VASP Licence Application
- Submit detailed policies (compliance, risk management, governance) and financial projections.
- VARA will review, which may involve interviews and further queries.
- Pay the remaining 50 per cent of the fee plus first-year supervision charges.
- Upon approval, receive your operational licence, possibly with specific conditions.
How Equiom can support you with VARA licensing
Obtaining a VARA licence is a critical step for businesses looking to operate in Dubai's Virtual Assets market. By adhering to the outlined requirements and understanding the importance of each step, companies can achieve regulatory compliance and foster investor confidence. Equiom provides end-to-end assistance throughout the VARA licensing process from regulatory advisory and business-model assessment to operational setup and outsourced professionals for key roles. A full breakdown of assistance includes:
- Regulatory advisory & business-model assessment to identify the right licence category.
- Business plan & financial projections compliant with VARA requirements.
- Compliance-framework development, including AML/CFT, risk management and governance manuals.
- Operational setup, from office establishment to Free Zone coordination.
- Outsourced professionals for key roles (Compliance Officer, Risk Officer, Company Secretary) to ensure ongoing regulatory compliance.
Contact our Governance, Risk and Compliance team today to discuss how we can support your VARA licensing journey.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations, and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.
