In Brief:
- As global regulators strive to keep pace with the rapid evolution of digital assets, Dubai has positioned itself at the forefront with an innovative and comprehensive regulatory approach. Central to this is the Virtual Assets Regulatory Authority (“VARA”), established to oversee all virtual asset activities in the Emirate. While Dubai’s ambition and regulatory clarity attract global interest, securing a license under VARA is a rigorous, multi-stage process requiring strategic planning, legal precision, and operational readiness. This article addresses the key steps, challenges, and considerations involved in navigating Dubai’s VARA licensing regime for Virtual Asset Service Providers.
As jurisdictions around the globe grapple with the complexities of regulating digital assets, Dubai has emerged as one of the most ambitious and sophisticated regulatory hubs in the space. However, beyond the headlines and high-level frameworks lies a complex, multi-stage licensing process - one that demands more than just a good idea and a whitepaper.
Dubai took a definitive and pioneering step by establishing the Virtual Assets Regulatory Authority (“VARA”) pursuant to Law No. (4) of 2022 Regulating Virtual Assets in the Emirate of Dubai. VARA’s mandate is to oversee, license, and supervise all entities conducting virtual asset activities (“VA Activity”) in or from Dubai (excluding the Dubai International Financial Centre (“DIFC”)), thereby ensuring that the Emirate maintains a secure, transparent, and innovation-aligned virtual asset ecosystem. For companies seeking to operate within this regulatory framework, particularly those classified as Virtual Asset Service Providers (“VASPs”), the VARA licensing regime presents both a significant opportunity and a complex compliance undertaking.
The VARA licensing process comprises of two principal stages, each of which involves multi-layered regulatory and legal requirements. Prior to engaging with VARA, an applicant must make a foundational decision regarding the jurisdiction in which it intends to incorporate. This choice is between onshore Dubai, governed by the Department of Economy and Tourism (“DET”), and one of Dubai’s several free zones, each with its own authority and licensing rules. Among the more prominent free zones suitable for digital asset operations are the Dubai World Trade Centre Free Zone (“DWTC”), where other prominent virtual assets companies are presently registered, and the Dubai Multi Commodity Centre Free Zone (“DMCC”) Crypto Centre, which offers a crypto-focused ecosystem. The choice of jurisdiction carries regulatory implications and will determine the licensing authority to which initial applications must be submitted, as well as the location of the registered office, lease arrangements, and corresponding procedural steps.
Once the licensing authority (DET or relevant Free Zone Authority (“FZA”)) has reviewed and approved the preliminary application for incorporation, the applicant will be required to submit a suite of documents and disclosures to VARA.
In connection with any preliminary assessment of whether the company's proposed activity falls within VARA’s regulatory scope, reference should be made to the regulatory perimeter outlined in VARA’s Regulations (“Regulations”). The Regulations define each regulated VA Activity in detail and should be consulted to determine whether a license is required in respect of the specific services to be offered.
One significant requirement is the Initial Disclosure Questionnaire (“IDQ”), a comprehensive form capturing details of the company’s ownership, governance structure, business activities, target clients, financial projections, and regulatory policies. The IDQ must be supported by a robust business plan that outlines the applicant’s proposed VA Activities, revenue model, transactional flows (with diagrams), and customer journey.
VARA places significant emphasis on the quality and granularity of the business plan; applications lacking in detail or clarity may be rejected at this early stage. Whilst rejection does not prohibit amendment or subsequent applications, they do unnecessarily extend the application process and timeframe.
Following VARA’s review of the submitted IDQ and supporting documents, and assuming VARA is satisfied with the contents, the applicant will receive the Approval to Incorporate (“ATI”). The initial application process generally takes up to three (3) months to complete and is also largely dependent on the level of preparedness of the applicant.
It is important to note that the ATI does not authorise the applicant to conduct any VA Activities. Rather, it permits the applicant to proceed with incorporating the legal entity, obtaining its trade license, and undertaking the necessary operational and compliance preparations. The ATI will also be accompanied by a licensing checklist, which sets out the detailed requirements the applicant must satisfy in order to proceed to Stage 2 of the licensing process.
One of the most important requirements at Stage 2 is the incorporation of the company. At this point, legal formalities concerning the corporate structure of the applicant become critical. Where the applicant is to be a subsidiary of a foreign parent entity, legalisation and attestation of parent company documents is required.
Once the company has been incorporated and its commercial license has been issued by the DET or the relevant FZA, VARA will request submission of internal governance policies, AML/KYC procedures, compliance manuals, organisational charts, and detailed information on key personnel, including C-suite executives and directors. The timeline for Stage 2 depends on the quality and completeness of the submission, as well as the responsiveness of the applicant to VARA’s queries.
Upon successful completion of Stage 2, and subject to satisfaction of all regulatory conditions, VARA will issue the Full Operating License. Only at this stage is the applicant legally authorised to conduct VA Activities in or from Dubai. The final licensing step also involves the payment of the licensing fee.
The VARA fees vary depending on the specific VA Activity. As at the date of this article, the application fee for one (1) regulated VA Activity ranges from AED 40,000 to AED 100,000, while the annual supervision fee ranges between AED 80,000 and AED 100,000.
As part of the licensing process, applicants must attend to the capital and prudential requirements applicable to their selected VA Activities. Certain activities, such as proprietary trading or virtual asset custody, are subject to standalone licensing and may not be combined with other virtual asset activities within the same entity.
Based on our experience, the entire generally takes three (3) to six (6) months.
We must emphasise that securing a VASP license from VARA is not a simple procedural formality but a complex regulatory process. The regime is among the most comprehensive and detailed in the region and is clearly designed to ensure that only well-structured, well-capitalised, and fully compliant businesses are permitted to operate in the Emirate. Accordingly, applicants are advised to engage experienced legal counsel from the outset to assist with jurisdictional analysis, corporate structuring, document preparation, regulatory engagement, and post-licensing compliance obligations. Missteps at any stage may result in significant delay, additional cost, or ultimately the refusal of a license.
Hadef & Partners has extensive experience advising on the legal, regulatory, and operational aspects of VARA licensing and virtual asset structuring in the UAE. Our team combines regulatory insight with commercial pragmatism to ensure that applications are strategically positioned for approval and aligned with evolving regulatory expectations. Whether you are an early-stage blockchain startup or an established global VASP entering the Dubai market, we are well placed to guide you through the VARA framework and assist you in the establishment of a compliant and scalable presence in the region.
For more information, please contact Bilal Snaineh, Partner, Corporate and M&A at b.snaineh@hadefpartners.com