Virtual Asset Activities Under VARA

VARA has identified eight distinct Virtual Asset (VA) activities that categorise the regulatory perimeter. The list of activities is designed to be flexible and evolutionary as the sector grows and develops over time. The industry is encouraged to view this list of activities as a solid foundation that offers room for innovation, rather than a finite register.

VASPs seeking to offer the below activities must apply for and receive a licence from VARA before undertaking VA activities in Dubai.

1. Virtual Asset Advisory Services

2. Broker-Dealer Services

3. Virtual Asset Custody Services

4. Virtual Asset Exchange Services

5. Virtual Asset Lending and Borrowing Services

6. Virtual Asset Management and Investment Services

7. Virtual Asset Transfer and Settlement services

8. Issuance Category 1

Virtual Asset Advisory Services

Advisory Services refers to offering, providing or agreeing to provide a personal recommendation to a client, either upon its request, or on the initiative of the Entity providing the recommendation, in respect of one or more actions or transactions relating to any Virtual Asset.

Virtual Asset Advisory Services in Dubai, offered by licensed Virtual Asset Service Providers (VASPs) , guide individuals and businesses on navigating the virtual assets landscape, including investments and related activities.

What is Virtual Asset Advisory?

Advisory on Virtual Assets: Helping clients understand, invest in, or manage virtual assets such as Bitcoin, Ethereum, NFTs, and other digital tokens.

Investment Guidance: Providing advice on buying, selling, or holding virtual assets to optimize returns or manage risks.

Regulatory Compliance: Assisting clients in understanding the legal and regulatory framework related to virtual assets, especially in jurisdictions like Dubai.

Risk Management: Advising on security measures, fraud prevention, and safeguarding digital wallets and assets.

Market Analysis: Offering insights on virtual asset market trends, price movements, and technological developments.

Who Provides Virtual Asset Advisory?

Specialized firms or consultants with expertise in blockchain technology, finance, and regulations.

Financial advisors or wealth managers expanding into digital asset classes.

Companies licensed by regulatory authorities (e.g., Dubai’s VARA) to provide such services legally.

Virtual assets are complex and volatile. Advisory services help individuals or businesses make informed decisions, comply with regulations, and minimize risks associated with digital asset transactions.

If you're considering starting a virtual asset advisory business, you need to be licensed (VASP license by VARA) and have strong knowledge in finance, technology, and compliance.

Broker-Dealer Services

Broker-Dealer Services’ refers to any of the following –

[a] arranging orders for the purchase and/or sale of Virtual Assets between two Entities;

[b] soliciting or accepting orders for Virtual Assets, and accepting currency, or other Virtual Assets for such orders;

[c] facilitating the matching of transactions in Virtual Assets between buyers and sellers;

[d] entering into Virtual Asset transactions as a dealer on behalf of the Entity for its own account;

[e] making a market in Virtual Assets using client assets; or

[f] providing placement, distribution or other issuance* related services to clients issuing Virtual Assets.

Virtual Asset Advisory Services

What kind of licenses does VARA issue for broker-dealers?

VARA licenses a broad range of virtual asset activities, ranging from advisory services to crypto exchanges. The relevant activity for broker-dealer operations is:

VA Broker-Dealer Services: Entities facilitating the buying and selling of virtual assets on behalf of clients.

- means any of the following—

1. transmitting orders for buying or selling VAs;

2. soliciting or accepting orders for Virtual Assets and accepting fiat currency, or other Virtual Assets, for such orders;

3. arranging transaction matching between market players;

4. entering into Virtual Asset transactions as a dealer on behalf of the Entity for its own account;

5. market making activities using client assets; or

6. providing placement, distribution or other related services to Virtual Asset issuers.

What are the capital requirements for VARA broker-dealer licensed companies?

VARA also requires licensed firms to maintain an expense-based capital, that is calculated as at least 1.2 times their monthly operational expenses. This expense-based capital has to be maintained as liquid assets, such as cash in the bank.

The VASP is expected to meet the capital requirements for each activity applied for separately, in case it is authorised to conduct multiple regulated activities.

Paid-Up Capital shall, at all times, be held and maintained in a trust account in a UAE-based bank, or as a surety bond (or any other manner as specified by VARA) with VARA as the beneficiary of the instrument.

Virtual Asset Custody Services

Custody Services refers to safekeeping Virtual Assets for, or on behalf of, another Entity and acting only on verified instructions from/on behalf of such Entity.

All VASPs shall be subject to Rules regarding the storage and custody of clients’ Virtual Assets. Only VASPs which segregate each client’s assets in separate VA Wallets will qualify for a Custody Services Licence.

This Custody Services Rulebook applies in addition to all other requirements in the Regulations as may be in force from time to time. As such, VASPs Licensed by VARA to carry out Custody Services must also comply with the following Rulebooks applicable to all VASPs—

Virtual Asset Exchange Services

Exchange Services’ refers to any of the following:

[a] conducting an exchange, trade or conversion between Virtual Assets and currency;[b] conducting an exchange, trade or conversion between one or more Virtual Assets;[c] matching orders between buyers and sellers, and conducting an exchange, trade or conversion between [i] Virtual Assets and currency or [ii] one or more Virtual Assets; or[d] maintaining an order book in furtherance of items [a], [b] or [c] above.

Lending and Borrowing Services

Lending and Borrowing Services refers to carrying out a contract under which a Virtual Asset shall be transferred or lent from one or more parties [the Lender(s)] to one or more other party [the Borrower(s)] where the Borrower(s) shall commit to return the same, at the request of the Lender(s), at any time either during or at the end of the period agreed upon, either to its interest or on behalf of others interest.

VA Management and Investment Services

VA Management and Investment Services’ refers to acting on behalf of an Entity as an agent, or fiduciary, or otherwise taking responsibility for the management, administration or disposition of that Entity’s Virtual Assets.

Examples may include, but shall not be limited to –

[a] investment management services or otherwise managing VAs; and

[b] taking responsibility for the ‘staking’ of VAs for the purpose of earning fees or other values paid to validators and/or node operators of a ‘proof-of-stake’ DLT.

VA Transfer and Settlement services

Transfer and Settlement services’ Includes firms engaged in transmission or transfer of Virtual Assets from one Entity to another Entity or from one Entity to another VA Wallet, address or location.

Issuance Category 1

refers to, but not limited to Fiat-Referenced Virtual Assets [FRVAs], defined as types of VA that purport to maintain a stable value in relation to the value of one or more fiat currencies, but do not have legal tender status in any jurisdiction, as more fully defined in the FRVA Rules.