VARA License in Dubai

VARA License in Dubai: Requirements, Process and Costs Explained

The Virtual Assets Regulatory Authority (VARA) regulates virtual assets and activities related to virtual assets in Dubai. Businesses that conduct virtual asset activities must get an appropriate license or authorization from VARA, depending on the activities. The license issued by VARA is authorised under Dubai Law No. 4 of 2022, with separate rulebooks and laws. The Dubai International Financial Centre (DIFC) operates as an independent financial free zone in Dubai governed by Dubai Law No. 5 of 2021, and its financial activities are regulated independently by the Dubai Financial Services Authority (DFSA). Businesses planning to offer virtual-asset services should understand which activities require VARA authorisation, paid-up capital and the application process.

Entities That Require a VARA licence

A licence from VARA is required in Dubai’s free zones and mainland. It would help businesses with restructuring, costs and delays in the process. Therefore, businesses registered with the DIFC have separate operational rules and VARA’s rules do not apply here. Businesses should assess their activities rather than relying on how to describe their services. They should also understand that jurisdiction is not restricted to geography. If you target or service clients in Dubai from abroad, or operate “in or from” the region, you can still fall under VARA’s regulatory scope.

VARA Activities in Dubai

For a business, it is crucial to understand that VARA has eight activities under virtual assets activities. Separate licenses are issued for specific activities with different rulebooks, capital requirements, and operational standards. All services are operated differently with a specific license. These services are as follows:

  • 1
    Advisory Services
  • 2
    Broker-Dealer Services
  • 3
    Custody Services Exchange Services
  • 4
    Exchange Services
  • 5

    Lending and Borrowing Services

  • 6

    Management and Investment Services

  • 7

    Transfer and Settlement Services

  • 8

    Category 1 Virtual Asset Issuance

VARA Licensing Process

1. Complete the Initial Disclosure Questionnaire:

To prepare documents for the license, it is important to fill out the Initial Disclosure Questionnaire (IDQ). Questions will be related to your business, ownership, management, and potential risks involved. Moreover, the VARA application requires substantial evidence for paid-up capital and other regulatory plans. After the business assessment, it will issue an Approval to Incorporate (ATI) to set up your business in Dubai if satisfied.

2. Detailed Application:

The detailed license application will include your business plan, policies, cybersecurity measures, employees, evidence of sufficient capital and governance structure. After submitting your application, VARA will assess it and then decide whether to issue an In-Principle Approval (IPA) for your business or not.

3. Meet the IPA conditions:

When the business has met the conditions set by VARA, it will have to make arrangements. It includes: a physical office, sufficient capital and hiring staff. These steps would indicate that the business is ready to operate.

4. Approval by VARA:

When all conditions are met that are set by VARA, business gets the license for approved activities. However, compliance and reporting become a major task for companies.

A timeline cannot be guaranteed. Therefore, businesses should keep documents ready. The regulatory authorities take time to review every business like a new case.

Cost for Licensing in Dubai

For costs and budget, VARA’s updated fee schedule shall be reviewed. Currently, the VARA fee schedule is divided into different parts.

Advisory Services: AED 40,000 application fee + AED 80,000 annual supervision fee

Broker-Dealer: AED 100,000 + AED 200,000 annual supervision

Custody: AED 100,000 + AED 200,000

Exchange: AED 100,000 + AED 200,000

Lending & Borrowing: AED 100,000 + AED 200,000

Management & Investment: AED 100,000 + AED 200,000

Transfer & Settlement: AED 40,000 + AED 80,000

Category 1 VA Issuance: AED 100,000 application + AED 200,000 annual supervision.

In other words, the VARA licensing budget has to be sufficient to pay for legal, technical and audit services.

Why Are Applications Delayed by VARA?

For several reasons, companies face delays in the VARA licensing process.

  1. Selection of Wrong License Category

The business activity chosen and the license applied for the activity may not fall in the same category. It is not mishandled on purpose, but businesses often confuse activity and license.

  1. Compliance Documents

Often, business owners think that compliance is just a formality and they can submit generic documents. Often, those documents may not meet VARA’s requirements.

  1. Wrong Location for Business Set Up

Businesses should understand that VARA operates and authorises activities conducted within Dubai or for customers from Dubai. Choosing a business location in the wrong jurisdiction can lead to complications in documents and license verification.

Take Legal Advice in the UAE

Before establishing a business, legal consultation is beneficial in the UAE. Whether you have a new business or are opening a branch in Dubai, hiring legal experts in the UAE is a good start to setting up your business. The lawyers will review the business activities, ensure regulatory requirements are met, and advise investors on further steps.

Make an Excellent Case

There are mistakes that people make when trying for a VARA license. Businesses should demonstrate a credible business model. However, virtual assets are new in technology, and so individuals do not really believe in those assets unless they find them a secure business. Therefore, businesses have to ensure proper documentation, sufficient funds and an operational office space. Without anything substantial in the business, VARA will not authorise the license.

At ASK THE LAW, we provide legal consultation as well as full legal service that would help you in business operations. Also, our professional lawyers will assess your case in terms of funds and policies to ensure compliance with VARA requirements. All you need to do is book a consultation, share your business model and get the right legal advice. Let your business grow today!

Frequently asked questions

Yes, businesses that have been authorised by VARA can provide exchange services and do virtual-asset activities. However, this does not involve the DIFC, as it is regulated by the DFSA.

There is no fixed timeline. It takes time from submitting the IDQ to final approval of the licence. It also depends on the activity and preparation of documents.

VARA has several activities. Each activity has a different cost. The business investment should be looked into before establishing it in Dubai. Also, it is important to look for VARA’s current fee schedule before you make the budget.

VARA has allowed VASPs to run activities under one license, except when Custody Services are concerned.

Yes. While submitting documents for a VARA license, businesses should have an operational space to establish real business operations.

Note:

ASK THE LAW is the Online Legal Entity of Al Shaiba Advocates & Legal Consultants, a full-service Emirati Law Firm. The blog is just for legal knowledge, which can be outdated with time with the inventions of new laws or modifications in previous laws. There might be some human errors too in the blog content. Therefore no liability is taken or owned, and we suggest consulting our experts for any decision or proceedings.