Virtual Assets Regulatory Authority Approval

The Virtual Assets Regulatory Authority (VARA) is responsible for regulating and overseeing the provision, use, and exchange of virtual assets in and from the emirate of Dubai.As the world's first independent regulator for virtual assets, VARA serves as a transparent and trusted guiding authority for the emerging world of virtual assets. VARA aims to take its mission global by creating an easy to replicate framework to regulate the industry.

1.Benefits of VARA for Businesses

2.Virtual Asset Activities

3.Documents Requirements for VASP License Application

4.How to Apply for a VARA License for Virtual Businesses

Benefits of VARA for Businesses

The Virtual Assets Regulatory Authority (VARA) offers numerous advantages for businesses operating in the virtual asset space in Dubai. Below are the key benefits VARA provides to businesses:

Enhanced Credibility and Trust

Operating under VARA's regulatory framework significantly enhances businesses' credibility. The robust licensing process and compliance requirements demonstrate a commitment to transparency and ethical practices, building trust among investors, consumers, and stakeholders.

Access to Dubai's Digital Ecosystem

VARA-licensed businesses gain access to Dubai's thriving digital economy. The emirate's position as a global hub for innovation and technology provides opportunities to collaborate with other forward-thinking companies, access cutting-edge infrastructure, and attract top talent.

Global Expansion Opportunities

VARA's framework is aligned with international regulatory standards, making it easier for businesses to expand operations across borders. By adhering to VARA's stringent guidelines, businesses can demonstrate their compliance and readiness to operate in global markets.

Innovation-Friendly Environment

VARA encourages innovation by providing a structured yet flexible regulatory environment. Businesses can explore emerging technologies like blockchain, DeFi (Decentralized Finance), and tokenisation while ensuring compliance with VARA's regulations.

Legal and Regulatory Support

VARA offers businesses clarity on legal and regulatory requirements, reducing ambiguities that often deter companies from entering the virtual asset space. This support enables businesses to focus on growth and innovation rather than navigating complex regulatory landscapes.

Investor Confidence

VARA's emphasis on market integrity and consumer protection reassures investors about the safety of their investments. This confidence attracts venture capital, institutional investors, and other funding sources essential for business growth.

Protection Against Illicit Activities

By enforcing Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) regulations, VARA helps businesses avoid being unwittingly involved in fraudulent or illegal activities. This protection strengthens the reputation of businesses operating within the virtual asset ecosystem.

Competitive Advantage

Being VARA-licensed sets businesses apart from unregulated entities. This competitive edge helps attract clients and investors and ensures long-term sustainability in a rapidly evolving industry.

Educational and Awareness Initiatives

VARA promotes public awareness of virtual assets and their potential benefits, fostering a knowledgeable consumer base. This indirectly supports businesses by creating a receptive market for virtual asset products and services.

Market Stability

VARA's active market monitoring and risk management measures help create a stable environment for businesses to operate. Reduced market volatility and the mitigation of fraudulent activities make the ecosystem safer and more predictable.

VARA License - Virtual Asset Service Provider (VASP) License

VARA's regulatory framework is built on the principles of fostering responsible and proactive market participation through clear and comprehensive guidelines. Firms, whether based in the UAE or internationally, that align with VARA's principles are encouraged to apply for a Virtual Asset Service Provider (VASP) License.

Any entity intending to engage in virtual asset activities in or from Dubai (excluding DIFC) is legally required to obtain a VARA license before commencing operations.

Applications for licensing can be submitted through:

Dubai Economy and Tourism (DET) for mainland-based firms.

Dubai Free Zones (FZ) for firms operating within free zones in Dubai, excluding DIFC.

Types of VARA Licenses

Virtual Asset Activities

The Virtual Assets Regulatory Authority (VARA) offers a range of licenses tailored to specific virtual asset activities.

Virtual Asset Advisory Services License

Virtual Asset Broker-Dealer Services License

Virtual Asset Custody Services License

Virtual Asset Exchange Services License

Virtual Asset Lending and Borrowing Services License

Virtual Asset Management and Investment Services License

Virtual Asset Transfer and Settlement Services License

Virtual Asset Issuance License (Category 1)

Applying for a VASP Licence is completed in two stages: First, application for an Approval to Incorporate [ATI] to establish a legal entity and to commence operational setup, then an application for VASP Licence.

Documents Requirements for VASP License Application

General Business and Compliance Documentation

Virtual Asset White Paper (if applicable)

Enterprise Risk Management Framework and Methodology

Latest Enterprise Risk Assessment

Compliance Manual

Compliance Monitoring Program

Group Compliance Breaches

AML/CFT Policy and Procedures

Current AML/CFT Program Status

Anti-Bribery and Corruption (ABC) Policy and Procedures

Outsourcing Policy

Outsourcing Agreements

Conflicts of Interest Policy

Insider Lists

Customer Journey Workflows

Terms and Conditions (Client Agreements)

Privacy Policy

Marketing Policy and Plan

Sample Marketing Materials

New Product Policy

Market Conduct Policy

VA Listing Policy (if applicable)

VA Assets Analysis

Records Management Policy

For Asset Managers (if applicable)

Fund(s) Managed

Assets Exposure

Technology and Security Documentation

Technology Infrastructure Design

Technology Risk Assessment Framework and Methodology

Business Continuity Management and IT Disaster Recovery Plan

Key and Wallet Management Policy (if applicable)

UAE Public Keys and Wallet Addresses (if applicable)

Information Security Policy

Penetration Testing Results

Activity-Specific Documentation

Proprietary Trading Supporting Information (if applicable)

DeFi Activities Supporting Information (if applicable)

VA Payment Supporting Information (if applicable)

How to Apply for a VARA License for Virtual Businesses

The process of obtaining a Virtual Asset Service Provider (VASP) License from the Virtual Assets Regulatory Authority (VARA) involves distinct steps for both new and existing firms. This guide provides an overview of the application process for new entities and the transition process for legacy operators.

Applying for a VARA License [New Firms]

The application process for new firms consists of two stages:

Stage 1: Initial Approval

This stage involves setting up the firm's legal and operational structure.

Submit Initial Disclosure Questionnaire (IDQ): File the IDQ with either the Dubai Economy & Tourism (DET) or the relevant Free Zone (FZ) authority.

Provide Additional Documentation: Submit supporting documents such as a business plan, details of beneficial owners, and senior management profiles.

Pay Initial Fees: Remit 50% of the license application fee to initiate the application review process.

Receive Initial Approval: Once granted, the firm can proceed with legal incorporation and operational setup, including office space rental and employee onboarding.

Important Note: Firms cannot conduct Virtual Asset activities during this stage. VARA reserves the right to deny Initial Approval if the firm's activities fall outside its regulatory scope or fail to meet required standards.

Stage 2: VASP License Application

Upon receiving Initial Approval, firms can proceed to apply for the full VASP License:

Prepare and Submit Documentation: Follow the guidelines provided by VARA after receiving Initial Approval.

Engage with VARA: VARA may request additional information, hold meetings, or conduct interviews during the review process.

Pay Remaining Fees: Complete payment of the remaining license application fees and the first year's supervision fees.

Obtain VASP License: The license may include operational conditions as outlined by VARA.

Applying for a VARA License [Existing Firms]

In 2023, the Virtual Assets Regulatory Authority (VARA) provided a structured pathway for existing firms engaged in Virtual Asset (VA) activities prior to February 7, 2023, to transition to its regulatory framework through the Dubai Legacy Programme.

As part of this process:

Registration with VARA: Firms were required to submit an Initial Disclosure Questionnaire (IDQ) to VARA.

Application Acknowledgment Notice (AAN): Upon acknowledgement, firms could proceed to apply for the Legacy Operating Permit (LOP) or a No Objection Certificate (NOC).

Legacy Operating Permit (LOP): The LOP allowed firms to comply with VARA's full regulatory regime over a 12-month period, provided they met baseline requirements. Benefits included:

Up to a 50% reduction in licensing fees.

Reduced capital requirements.