In the ever-evolving landscape of digital assets, the UAE stands at the forefront, embracing innovation while upholding regulatory standards. As businesses increasingly turn to digital assets for various purposes, ensuring compliance with regulations becomes paramount. The UAE offers different options in terms of licensing and regulators, which can (broadly) be divided into five categories:
- SCA (sits above all other regulators and focuses on setups in Abu Dhabi mainland)
- FSRA (regulates licences and activities in the ADGM)
- DFSA (regulates licences and activities in the DIFC – including the Innovation Hub)
- VARA (regulates licences and activities within Dubai and its free zones, except for DIFC)
- RAK DAO (a recently launched freezone in RAK, which offers a wide range of unregulated activities specific to digital assets)
VARA (Virtual Assets Regulatory Authority) licences are considered appropriate for most digital assets-specific businesses looking to expand into the region. In most cases, this demand is for activities around tokenisation, trading and exchange services. In these areas, VARA licences offer the most comprehensive array of relevant activities. Therefore, they are unsurprisingly the most sought after by entrepreneurs and startups looking for more crypto-friendly environments.
When applying to VARA, it needs to be robust, defensible and complete, as any rejections will not only represent a monetary cost but will also entail a significant sunk cost in terms of time. Aside from the standard application and administrative requirements that go with it, which are not dissimilar to those of any corporate setup in the UAE, businesses will need to complete an initial disclosure questionnaire (IDQ) to ascertain the nature of the company. This consists of 30 open-ended and multiple-choice questions, requiring the business to describe its target client, intended activity, target jurisdiction, and existing experience, among others. Given the interpretative nature of some of the questions, it is always advisable to seek guidance when completing the questionnaire.
Besides completing the IDQ, businesses will be expected to submit supporting documentation such as:
- Business plan and roadmap of the project
- Whitepapers for existing or proposed products
- Policies and procedures where relevant
- Standard AML/KYC documentation
While most companies will have the above to hand, collating these documents and reformatting where needed to satisfy the regulator’s checklist should not be taken lightly, as minor discrepancies can result in increased lead times of back-and-forth requests.
When the application is accepted, VARA will present the client with an invoice for Dh50,000 to pay for the detailed review of the entire suite of documents and IDQ. The regulator will provide feedback/requests for clarification or additional documentation. This process can take three to nine months, depending on the level of scrutiny the licence demands (see below). Once the review process is complete, a second invoice from VARA will be raised for an additional Dh50,000 to issue the licence. Yearly, the renewal of this licence will cost Dh200,000, which will be paid directly to the regulator.
Considering the above, and especially how failing to comply with requirements will keep clients from progressing past the initial approval stage, streamlining the accreditation process with VARA is key. It is, therefore, advisable to engage with reputable, experienced professionals specialised in the industry to help navigate the process and ensure that nothing is overlooked and that time and money aren’t wasted.
One of the primary aspects of streamlining the accreditation process involves clarity in requirements and procedures. VARA approval, in one way or another, is currently required for any of the nine licences it oversees. These nine licences fall under three distinct segments, based on the perceived risk of the consumer by the regulator, each with its associated timeline and costs:
| Scope | Licences | Timeline |
| Requirement of an NOC from VARA | Crypto Proprietary Trading DLT Licence | 1 – 3 months |
| Requirement of a token-issuer licence from VARA | Broker-Dealer Services VA Management and Investment Services Advisory Services Transfer and Settlement Services | 3 – 6 months |
| Requirement of a fully regulated licence from VARA | Exchange Services Custody Services Lending and Borrowing Services | 6 – 9 months |
In conclusion, understanding the accreditation process with VARA and taking the appropriate steps to be compliant from the beginning is essential in streamlining the task of obtaining approval for your business. By engaging with industry experts with the proper experience and network, businesses give themselves the best chance of becoming a fully regulated VASP (Virtual Asset Service Provider) while avoiding unnecessary costs. This streamlined approach not only facilitates smoother navigation of regulatory requirements for applicants but also strengthens the integrity and stability of the digital asset ecosystem in the UAE, which fosters its reputation internationally and ultimately benefits everyone involved.
