APPLY FOR A VASP LICENSE
IN DUBAI

License Application & Process

Following the establishment of the Dubai Virtual Assets Regulatory Authority (VARA) which is authorised under Law No. (4) of 2022 Regulating Virtual Assets in the Emirate of Dubai (Dubai VA Law), prospective Virtual Asset Service Providers (‘VASPs’) require a license in order to conduct virtual asset related business in Dubai.

VARA is the world’s first independent regulator for Virtual Assets and Virtual Asset Service Providers. VARA aims to position Dubai as a regional and international hub for Virtual Assets and related services with an easy to replicate framework to regulate the industry, while encouraging innovation and promoting real opportunity.

Blog post by FAI Comply - Dubai introduces a New Law & Separate Regulator for Cryptos and

Category A – MVP Applicants that are currently in the process of securing a VARA License

Applicants already in the midst of the MVP process will be advised accordingly by VARA whether they should continue or transition to the FMP Licensing process.

The MVP License is a 3-step process

Step 1: Starting with Provisional Permit
Step 2: Progressing to a Preparatory License
Step 3: Culminating at an Operating License

Category B – Existing Local (Legacy) VASPS that are required to come under VARA

The following options exist under the above category:

Apply for a Full Market Product (‘FMP’) Regulated License; OR
Apply for FMP Registration (noting that applicants may also be required to fall under regulatory supervision at any time in the future at VARA’s sole and absolute discretion)
Secure a No Objection Certificate (NOC) – for operations which do not fall within VARA’s regulatory scope, however the operations are permitted provided they do not breach any other applicable Laws of the State or the operations are so low risk that they are exempt from VARA regulatory oversight

Process

Step 1: All Legacy ‘in-market’ VASPS that have not been engaged with VARA through the MVP process thus far, are required to complete the Information Disclosure Questionnaire (IDQ) with the underlying self-declaration of the Virtual Activities being offered or enabled by the entity.

Failure to complete the self-declaration will be considered as intent not to undertake or continue to undertake any activities associated with Virtual Assets (directly or indirectly) in the Emirate of Dubai. Entities that are already providing or enabling access to Virtual Asset linked serviced must hence ensure complete winding down of associated business operations no later than 31 May 2023.

Step 2: Post submission of the IDQ, entities will receive an Application Acknowledgment Notice (AAN) from VARA that will include instructions on whether they are required to be fully Regulated, Registered or will be provided with a NOC.

Step 3: Applicants required to apply for a Regulated License or to be Registered under VARA, must complete the application process prior to 31 August 2023.

Category C: New applicants seeking a VARA License in order to offer Virtual Asset services in Dubai

All applicants who do not fall within the permit of Category A or B, who wish to progress with a VARA License for services, following issuance of the Virtual Assets and Related Activities Regulations 2023 can apply through their prospective licensor or the through VARA where a commercial operating zone in Emirates has not yet been determined.

Process

Step 1: The Applicant must submit the completed IDQ to VARA through DET or FZA or directly if new entrant to Dubai.

Step 2: Following successful submission the applicant will receive Initial Approval, which will allow the entity to complete all operational set-up and establishment of incorporation processes including office space and employee onboarding.

Step 3: After completing all arrangements regarding incorporation, VASPs may submit a full FMP License Application to VARA through DET or FZA or in special cases to VARA directly.

Step 4: Upon final approval of the FMP License, the VASP can then undertake regulated Virtual Asset activities in Dubai.

In deciding whether to grant a License VARA may regard any judgement, opinion, or actions taken by any other regulator or authority inside or outside of the Emirate which VARA deems relevant.

VARA may incorporate in the License such limitations and stipulations as it considers appropriate and specify a narrower or wider description of a Virtual Asset Activity than that to which a licensing application relates. VARA may also grant a License for the carrying on of a Virtual Asset Activity for a specific period or time.

PROCESS & Fees

Supervision and Authorisation Fees

VARA Regulation

VARA shall have the sole and absolute discretion in determining whether an Entity may conduct a Virtual Asset Activity by way of business. Virtual Assets and Virtual Asset Service Providers will fall within the scope of the Virtual Assets and Related Activities Regulations 2023 and as such its Full Market Product (FMP) Regulations.

VASPs who fulfill VARA’s licensing requirements will be obliged to comply with four Compulsory Rulebooks:

Company (see below for more information regarding Part VI of the Company Rulebook: Capital and Prudential Requirements)
Compliance & Risk Management
Technology & Information, and
Market Conduct

Activity Specific Rulebooks

In addition to seven activity specific Rulebooks, broken down into the following:

Advisory
Broker-Dealer
Custody
Exchange
Lending & Borrowing
Payments & Remittances and
Management & Investments

Notably all market participants whether licensed by VARA or not must adhere to the Marketing, Advertising and Promotions regulations.

In accordance with the regulation no Entity may carry out any Virtual Asset Activity by way of business or promote, offer, or purport to do so, in the Emirate, unless it is authorised and licensed by VARA for the Virtual Asset Activity or an employee carrying on or otherwise facilitating a Virtual Asset Activity on behalf of its employer who is licensed by VARA or Exempt.

Professional Exemptions apply to the fully duly registered professionals who carry out Virtual Asset Activity in a manner that is wholly incidental to their professional practice provided they remain at all times appropriately authorised by a competent professional body to operate in the Emirate and maintain professional indemnity insurance as applicable to their profession:

Practicing lawyers
Accountants
Other professionally licensed business consultants

Notably, VARA has the sole and absolute discretion in determining whether an Entity has appropriately relied on the Professional Exemption in respect of any Virtual Asset Activities it has carried out.

Dubai Regulations

What Can FAI Comply do for Your Business?

We undertake the preparation and submission of applications for VARA licensing and provide post-submission support leading up to the granting of the license, which authorizes companies to conduct Virtual Asset Activities in Dubai in accordance with the applicable regulations.

Consulting on services, and design of the VASP application structure

Preparation of the IDQ Form and supporting documentation to be submitted to the regulator

Completion of the Application Form and checklists to be submitted to the regulator
With input from you, where required, preparation of the applicant’s:
- Internal Operations and AML Manuals according to EU regulations;
- Business Plan

With input from you, where required, preparation of the applicant’s:

Internal Operations and AML Manuals according to the regulatory requirements;
Business Plan.
Other supporting documentation.

Application follow-up during the process of assessment by the regulator

Assistance with recruitment and appointment of Staff (extra service fee may be required)

Capital and Prudential Requirements

As per Part VI of the Company Rulebook – Capital and Prudential Requirements, the VASPs must at all times, maintain a paid-up capital in the following amounts:

Advisory Services - Paid-Up Capital Requirements - AED 100,000

Broker- Dealer Services - Paid-Up Capital Requirements -

Broker – Dealer Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process: the higher of:

AED 400,000 or
15% of fixed annual overheads,

In any other instances the higher of:

AED 600,000 or
25% of fixed annual overheads.

Custody Services - Paid-Up Capital Requirements -

The higher of:

AED 600,000 or
25% of fixed annual overheads

Exchange Services - Paid-Up Capital Requirements -

Exchange Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process: the higher of:

AED 800,000 or
15% of fixed annual overheads.

In any other instances, the higher of:

AED 1,500,000 or
25% of fixed annual overheads.

Lending and Borrowing Services - Paid-Up Capital Requirements -

The higher of:

AED 500,000 or
25% of fixed annual overheads.

Payments and Remittances Services - Paid-Up Capital Requirements -

The higher of:

AED 500,000; or
25% of fixed annual overheads.

Virtual Asset Management and Investment Services - Paid-Up Capital Requirements -

Virtual Asset Management and Investment Services using a VASP Licensed by VARA to provide Custody Services or otherwise approved during the licensing process, the higher of:

AED 280,000 or
15% of fixed annual overheads.

In all other instances, the higher of:

AED 500,000 or
25% of fixed annual overheads.

Multiple Virtual Asset Activity

Where the VASP is licensed to carry out more than one Virtual Asset activity, the VASP must hold the amount of Paid-Up Capital specified for each Virtual Asset Activity for which the VASP is licensed using the fixed annual overheads for that Virtual Asset Activity only, provided the combination of all Paid-Up Capital is accounted for in aggregate. On top of the Paid-Up Capital the VASP shall at all times maintain sufficient current liquid assets such that their surplus over current liabilities is worth at least 1.2 times their monthly operating expenses.

Dubai Capital & Prudential Req