Dubai’s VARA Licensing Framework for Virtual Asset Businesses: A Practical Roadmap

Dubai’s VARA licensing regime follows a clear two-stage process, Approval to Incorporate and Full VASP License, balancing innovation with robust compliance and operational substance. While demanding, it offers regulatory clarity, global credibility, and a stable base for virtual asset firms operating from the UAE.

Dubai has positioned itself as a global hub for virtual assets through the establishment of the Dubai Virtual Assets Regulatory Authority (VARA) in 2022 (Dubai Law No. 4 of 2022). Operating under the Dubai World Trade Centre (DWTC) Authority, VARA regulates all virtual asset activities in the Emirate, excluding those in the Dubai International Financial Centre (DIFC), which remains under the Dubai Financial Services Authority (DFSA).

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To balance innovation with market integrity, VARA implements a two-stage licensing framework for Virtual Asset Service Providers (VASPs). This structured pathway provides regulatory clarity while ensuring that applicants meet governance, compliance, and operational resilience standards before commencing activities.

For international crypto exchanges, blockchain service providers, and fintech firms seeking to establish in Dubai, understanding this staged process is essential for realistic planning, compliance readiness, and investor confidence.

Overview of VARA’s two-stage licensing model

VARA’s authorization process consists of:

1. Stage One – Approval to Incorporate (ATI):
   A preliminary regulatory clearance allowing the applicant to establish a legal entity and prepare for full licensing.
2. Stage Two – Full VASP License:
   A comprehensive regulatory review leading to authorization to conduct regulated virtual asset activities in or from Dubai.

This phased model reflects VARA’s risk-based regulatory approach, ensuring that only fully compliant and operationally robust firms are allowed to serve the market.

Stage One: Approval to incorporate

1. Initial approval from the incorporation authority

Applicants must first obtain initial approval from the relevant Dubai licensing authority:

• Mainland: Dubai Department of Economy and Tourism (DET)
• Free Zones: DMCC, DWTC, or other approved Dubai free zones

This step confirms that the proposed business activity is permissible and that the entity may proceed with incorporation. Required submissions typically include:

• Corporate structure and ownership details
• Proposed activities
• Shareholder and management information
• Basic compliance disclosures

Initial approvals are generally valid for around 60 days and are conditional on lease execution, document verification, and fee payments.

2. Submission of the Initial Disclosure Questionnaire (IDQ)

Applicants must complete VARA’s Initial Disclosure Questionnaire (IDQ), which captures:

• Proposed virtual asset activities
• Business model overview
• Shareholder and Ultimate Beneficial Owner (UBO) details
• Senior management profiles
• A high-level business plan

This step allows VARA to determine whether the applicant’s activities fall within its regulatory perimeter.

3. VARA’s preliminary assessment

VARA conducts an initial screening to:

• Verify completeness of disclosures
• Confirm regulatory scope
• Identify structural or governance gaps

Applicants may be asked for clarifications or additional information at this stage.

4. Payment of initial fees

Once the IDQ is deemed substantially complete, VARA issues an invoice – typically 50 percent of the total licensing fee, depending on the activity category (e.g., exchange, brokerage, custody, advisory).

Payment is required before progressing further.

5. Issuance of Approval to Incorporate (ATI)

Upon fee confirmation, VARA issues the ATI, which allows the applicant to:

• Legally incorporate the entity
• Secure office premises
• Build IT and operational infrastructure
• Hire staff
• Open UAE bank accounts

However, no virtual asset services may be offered, and the ATI cannot be publicly announced. It is strictly a preparatory authorization.

Typical ATI issuance timelines range from one to two months, depending on application quality and responsiveness.

Stage Two: Full VASP License

6. Compilation of comprehensive documentation

After operational setup, VARA requires a detailed application package covering:

• Business and revenue model
• Technology architecture
• Cybersecurity and wallet management
• Risk management and governance
• Shareholders and UBOs
• Senior management and compliance officers
• Financial projections

Crucially, applicants must submit tailored internal policies aligned with VARA’s rulebooks, including:

• Corporate governance and ethics
• AML/CFT frameworks
• Risk management and business continuity
• IT security and data protection
• Client disclosures and marketing standards
• Asset custody and pricing policies

VARA typically sets a three-month deadline for this submission after ATI issuance.

7. Formal submission and regulatory review

VARA then conducts a detailed assessment of:

• Regulatory compliance
• Operational readiness
• Financial and technological resilience
• Consumer protection measures

This review phase usually takes around one month, though timelines vary based on complexity and regulatory workload.

8. Gap lists and clarifications

Most applicants receive gap lists requesting:

• Additional documents
• Policy revisions
• Structural adjustments
• Personnel changes
• Enhanced compliance measures

This iterative process may involve multiple rounds of clarification, typically requiring responses within 30 days per round.

VARA may also impose pre-licensing conditions, such as appointing additional compliance officers or modifying the business model.

9. Final Fee Payment

Once all requirements are satisfied, VARA issues an invoice for:

• The remaining 50% of the licensing fee
• The first year’s supervision fees

Payment is mandatory before license issuance.

10. Grant of the VASP License

Following confirmation, VARA issues the Virtual Asset Service Provider License, authorizing the firm to operate legally in Dubai.

Licenses may include ongoing operational conditions, such as:

• Periodic audits
• Enhanced reporting
• Compliance reviews
• Cybersecurity testing

Failure to maintain these standards can result in fines, restrictions, or license revocation.

Typical timeline for securing a VASP License in Dubai

The full licensing process usually spans six to twelve months, depending on:

• Application completeness
• Responsiveness to VARA queries
• Complexity of the business model
• Regulatory workload

Well-prepared applicants with robust compliance frameworks tend to progress faster, while complex structures may take longer.

Strategic considerations for foreign investors

Regulatory substance matters

VARA’s framework reflects the UAE’s broader shift toward substance-based regulation. Shell structures or lightly staffed entities are unlikely to succeed. Firms must demonstrate:

• Local decision-making
• Strong compliance leadership
• Real operational presence
• Robust risk controls

Banking and compliance alignment

Opening UAE bank accounts remains a critical hurdle for crypto firms. Demonstrating VARA engagement, strong AML controls, and transparent governance significantly improves banking outcomes.

Market reputation and investor confidence

VARA licensing is increasingly viewed as a credibility marker in global markets, helping firms attract institutional partners, venture funding, and enterprise clients.

Conclusion

Dubai’s VARA licensing regime offers one of the world’s most structured and transparent regulatory pathways for virtual asset businesses. While demanding, the two-stage framework provides:

• Regulatory clarity
• Investor confidence
• Market credibility
• Long-term operational stability

For firms seeking a compliant Middle East base with global reach, early preparation, policy alignment, and responsive regulatory engagement are key to navigating the six-to-twelve-month journey successfully.

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