Guide to Obtaining a Virtual Asset License in Dubai (VARA)
The regulation of virtual assets in Dubai is overseen by the Virtual Assets Regulatory Authority (VARA), an independent body established by Law No. (4) of 2022. VARA's jurisdiction covers all zones in the Emirate of Dubai, with the sole exception of the Dubai International Financial Centre (DIFC).
LICENSED ACTIVITIES
VARA classifies virtual asset activities into distinct categories, each requiring a specific license. The main categories are:
- Advisory Services: Providing professional advice on virtual assets.
- Broker-Dealer Services: Facilitating the buying and selling of virtual assets for clients or on behalf of the firm.
- Custody Services: Safekeeping and securing clients' virtual assets.
- Exchange Services: Operating a marketplace for trading virtual assets.
- Lending and Borrowing Services: Facilitating lending and borrowing activities.
- Investment and Portfolio Management: Managing investment portfolios that include virtual assets.
- Transfer and Settlement Services: Providing infrastructure for virtual asset movement.
- VA Issuance: Issuing and distributing virtual assets. This activity is divided into two main categories:
- Category 1: Requires a license from VARA and applies to high-risk assets like stablecoins (FRVAs) and asset-backed tokens (ARVAs).
- Category 2: Does not require a license for the issuer but mandates that a VARA-licensed distributor handles the placement and distribution. This category includes assets like utility tokens, governance tokens, and NFTs.
Note: The issuance of anonymity-enhanced virtual assets (privacy tokens) is prohibited.
CAPITAL & FEE REQUIREMENTS
VARA mandates that VASPs maintain a specific amount of paid-up capital, which is the higher of a fixed amount or a percentage of the company's annual fixed overheads.
Source: https://rulebooks.vara.ae/rulebook/b-paid-capital
a. Paid-Up Capital
| VA Activity | Paid-Up Capital Requirement |
|---|---|
| Advisory Services | AED 100,000. |
| Broker-Dealer Services | Broker-Dealer Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process: the higher of (i) AED 400,000; or (ii) 15% of fixed annual overheads. |
| In all other instances, the higher of (i) AED 600,000; or (ii) 25% of fixed annual overheads. | |
| Custody Services | The higher of (i) AED 600,000; or (ii) 25% of fixed annual overheads. |
| Exchange Services | Exchange Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process: the higher of (i) AED 800,000; or (ii) 15% of fixed annual overheads. |
| In all other instances, the higher of (i) AED 1,500,000; or (ii) 25% of fixed annual overheads. | |
| Lending and Borrowing Services | The higher of (i) AED 500,000; or (ii) 25% of fixed annual overheads. |
| VA Management and Investment Services | VA Management and Investment Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process: the higher of (i) AED 280,000; or (ii) 15% of fixed annual overheads. |
| In all other instances, the higher of (i) AED 500,000; or (ii) 25% of fixed annual overheads. | |
| VA Transfer and Settlement Services | The higher of (i) AED 500,000; or (ii) 25% of fixed annual overheads. |
| Category 1 VA Issuance | 1. FRVA (Fiat-Referenced Virtual Assets)- The paid-up capital requirement equals to the total of:
|
2. ARVA (Asset-Referenced Virtual Assets)- The paid-up capital requirement equals to the value of at least the higher of:
| |
| Category 2 VA Issuance | This category covers all other types of virtual asset issuances that are not classified as Category 1, such as utility tokens, governance tokens, and NFTs. No prior approval or specific capital requirement is mandated. However, the placement and distribution of these assets must be carried out by a VARA-licensed distributor only. |
Note: In addition, VASPs must hold and maintain sufficient liquid assets at all times, with a value of at least 1.2 times their monthly operating expenses.
b. Application & Supervision Fees
The following fees are applicable for each regulated activity.
Source: https://rulebooks.vara.ae/rulebook/schedule-2-supervision-and-authorisation-fees
| VA Activity | Licence Application Fee (for one regulated VA Activity only) | Licence Extension Fee (for each additional regulated VA Activity) | Annual Supervision Fee (for each regulated VA Activity) |
|---|---|---|---|
| Advisory Services | AED 40,000 | 50% of lower Licence Application Fee(s) | AED 80,000 |
| Broker-Dealer Services | AED 100,000 | AED 200,000 | |
| Category 1 VA Issuance | AED 100,000 | AED 200,000 | |
| Custody Services | AED 100,000 | AED 200,000 | |
| Exchange Services | AED 100,000 | AED 200,000 | |
| Lending and Borrowing Services | AED 100,000 | AED 200,000 | |
| VA Management and Investment Services | AED 100,000 | AED 200,000 | |
| VA Transfer and Settlement Services | AED 40,000 | 50% of lower Licence Application Fee(s) | AED 80,000 |
Note: For each additional regulated activity, a smaller fee applies
COMPREHENSIVE APPLICATION PROCESS
1. Initial Disclosure & Legal Incorporation
An Initial Disclosure Questionnaire (IDQ) must be submitted to the relevant commercial licensing authority in Dubai (e.g., Department of Economy and Tourism). Upon review, an Approval in Principle (AIP) is granted, which allows for legal incorporation in Dubai.
2. Fit & Proper Assessment
VARA conducts a stringent "Fit and Proper" test for all directors, senior officers, and ultimate beneficial owners (UBOs) to assess their integrity, competence, and financial soundness.
3. Application Submission
A full application package must be prepared and submitted. This includes:
- A comprehensive Regulatory Business Plan.
- AML/CFT Policies: A complete manual outlining all procedures.
- Corporate Governance Framework: A clear structure for the company's internal governance and risk controls.
- Documentation: A full set of corporate and personal documents, including business licenses, constitutional documents, CVs, and police clearance certificates for key personnel.
4. The MVP Phase
Upon receiving a provisional permit, the applicant enters the MVP phase, a controlled launch to prove operational readiness and compliance.
5. Full License Approval
Once the MVP phase is successfully completed, VARA grants the final Full Market Product (FMP) license.
TAXATION OVERVIEW
Dubai's tax regime is highly favorable for virtual asset businesses.
- Corporate Tax: A 9% corporate tax is applied to profits exceeding AED 375,000 annually. For businesses with profits below this threshold, the tax rate is 0%.
- VAT: A 5% Value Added Tax (VAT) may apply to the provision of virtual asset services.
- Personal Tax: Individuals are not subject to income tax or capital gains tax on their virtual asset earnings.
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