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Understanding VARA Regulations for Virtual Assets in Dubai

The United Arab Emirates (UAE) is recognized as the top global destination for innovation and investment in Virtual Assets. The Virtual Assets Regulatory Authority (VARA) was established in the year March 2022 under Law No. 4 of 2022. This launch made VARA the world’s first independent regulatory authority responsible for handling the Virtual Assets sector.

The VARA regulations are built and created to set a detailed Virtual Assets (VA) framework that is developed on the principles of economic sustainability and financial security for cross-border transactions. Therefore, if you are looking to start a business in the thriving virtual asset market of Dubai as a Virtual Assets Service Provider (VASP), it is important to understand the VARA regulations for Virtual Assets in Dubai and licensing guidelines.

As a new entrepreneur, you can also take help from Enterslice, the leading business consultant, to navigate the regulatory landscape, ensure compliance, and simplify the licensing process for a successful business setup in Dubai.

Why Dubai?

Dubai is known as the leading investment hub because of its thriving economy, tax benefits, world-class infrastructure and commitment to innovation. Therefore, Dubai offers various opportunities that attract investors to invest in the flourishing economy of the Emirate. Dubai also provides an excellent business-friendly environment for start-ups, small and medium-sized enterprises (SMEs), and multinational companies.

 The Emirate’s solid economic backbone is the result of strategic government policies, diversified economic sectors, and a strong regulatory framework that fosters sustainable growth and global competitiveness, making Dubai an excellent choice for global business.

What are Virtual Assets (VAs)?

The virtual assets are digital assets that can be digitally transferred, digitally traded or used for transactions and investments such as Cryptocurrencies, NFTs, and other digital tokens. A virtual asset can be sold, bought or even exchanged for other virtual assets. The major benefit of owning a virtual asset is that the payment transactions are cheaper and faster. Virtual assets also offer reduced reliance on traditional banking systems.

VARA Regulations for Virtual Assets in Dubai

The Virtual Assets Regulatory Authority (VARA) is the primary authority established by the Dubai World Trade Centre Authority (DWTCA). VARA is the regulatory authority that handles and manages the virtual assets, supervises the transactions, provides licensing, and oversees the virtual assets, such as cryptocurrency and blockchain, in the Emirate of Dubai.

The Virtual Assets Regulatory Authority also manages the two locations of Dubai, that is the Special Development Zones and Free Zones in Dubai. VARA is also the world’s first independent regulator of virtual assets. It’s main aim is to make Dubai the leading international hub for virtual assets.

VARA’s Regulatory Framework

The Virtual Assets Regulatory Authority’s (VARA) framework is for managing the virtual assets in Dubai. The VARA regulatory framework brings structure to the key virtual asset activities, such as:

• Advisory Services
• Custody Services
• Exchange Services
• Broker-Dealer Services
• Lending and Borrowing Services
• Management and Investment Services
• Payments and Remittances Services

Key Aspects of the VARA Regulations    

Given below are the key aspects of the VARA regulations-

• Classification and Licensing

VARA is the regulatory authority to categorise the different types of virtual assets based on their characteristics and regulatory compliances, i.e., to classify the virtual assets. VARA also helps identify which virtual assets are prohibited or regulated by the Central Bank of the UAE and provides licensing for Virtual Assets Service Providers (VASPs).

• General Prohibition

VARA ensures strict compliance where an individual without a VARA authorization in Dubai is not allowed to conduct business activities related to virtual assets. It also ensures that the VASP license is not used by anyone else apart from the license holder.

• Exempt Entities

A few registered professionals, such as lawyers, accountants, and business consultants, might not need a VASP license if their work with virtual assets is a minor part of their regular professional job. However, they still need to have professional indemnity insurance and be approved by their professional organisations.

• Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)

The Virtual Assets Regulatory Authority (VARA) supervises the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) in Dubai. When you apply for the VASP license, you must strictly follow AML and CFT regulations under the license, ensuring compliance with the central government laws.

• Marketing and Promotion

If you wish to conduct marketing and promotion of your virtual assets, you will have to ensure compliance with the regulations of VARA governing marketing through social media, events, etc, advertising, and promotion of your virtual assets. The promotions must also be transparent and honest.

• Licensing and Fees

When you apply for the VASP license, you must pay for the application and supervision fee annually. A yearly supervision fees for each virtual asset activity must be paid. Sometimes, specific limitations on the VASP license or time-bound license may be imposed by VARA.

• Registration of Large Proprietary Traders

If you wish to invest USD 250 million or more in virtual assets, you will have to register with the Dubai Virtual Assets Regulatory Authority (VARA) within 30 days of investment.

• Fines and Penalties

If you do not comply with the rules and regulations of the Dubai Virtual Assets Regulatory Authority (VARA), you will have to pay fines and result in penalties. You may be required to pay a fine of AED 50 million, or you will be required to pay 15% of your annual revenue for VASPs.

How to Comply with VARA Rules in 2025?

The Dubai Virtual Assets Regulatory Authority (VARA) has implemented stricter compliance policies and regulations to make sure that Virtual Asset Service Providers (VASPs) meet the requirements for offering virtual asset services to potential customers. The key compliance regulations of VARA are:

• Compliance Management

As a Virtual Assets Service Provider, you will be required to implement strategies to comply with the rules and regulations of VARA. Therefore, creating a compliance management system (CMS) is mandatory, along with appointing a compliance officer to manage the day-to-day compliance issues of virtual assets.

It will be the responsibility of the compliance officer to identify the violation, ensure compliance with the standards set by VARA and report any non-compliance to VARA.

• Risk Management

The Virtual Assets Service Provider must ensure risk management by creating policies and procedures to identify, manage, measure and monitor risks depending on your virtual assets business activity in Dubai. The different types of risks are:

1. Operational Risks: The Virtual Assets Service Providers (VASPs) should protect themselves against risks caused by failed processes, system failures, or outside events by putting strong safety measures in place.
2. Market Conduct Risk: Consistently doing market conduct risk such as client onboarding risks, risks in the structure of VASP and risk in cybersecurity can be prevented by regularly reviewing financial statements and checking the impacts of damaging market movements.
3. Liquidity Risk: It is important for VASP to create concentration limits, check the mismatch fundings, and create default procedures to handle and manage the challenges in virtual assets business activities.

• Audit & Tax Reporting

As a Virtual Assets Service Provider (VASP), you will need to follow a few important steps in compliance with VARA. You will be required to conduct internal audits and external audits; you will also be required to appoint an independent auditor to annually audit the financial statements. Internal audits must be quarterly and must be submitted to the senior management, and must comply with all tax reporting and auditing regulations.

• Regulatory Reporting

The Virtual Assets Service Provider are required to conduct monthly, quarterly, and annual reporting to VARA in compliance with the different reporting requirements. The monthly VARA reporting will include the submission of financial statements, balance sheets, profits loss statements, and cash flow along with a VA wallet address. If there are any updates, it must be informed to VARA immediately.

• Compliance with AML/CFT Laws

It is mandatory for the Virtual Assets Service Provider (VASP) to comply with the Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT). Therefore, VASP must supervise and monitor transactions and enforce robust AML/CFT systems.

VARA has also made it mandatory to appoint a Money Laundering Reporting Officer (MLRO) to the Virtual Assets Service Provider.

• Customer Due Diligence (CDD)

The Virtual Assets Service Provider (VASP) must verify the clients and customers and conduct identification of ultimate beneficial ownership (UBO) before any business transactions are started.  

• Client Screening and Monitoring

VARA has made client screening and the monitoring of illegal activities and transactions mandatory for VASPs. Strong AML/CFT systems must be implemented to monitor virtual asset transactions.

• Risk Assessments and Suspicious Transactions Reporting (STR)

Risk assessment and suspicious transactions reporting are mandatory as this reporting ensures that VASPs are operating transparently, and that gives confidence to the customers and the

VARA’s Updated Rulebook 2025

The Virtual Assets Regulatory Authority (VARA) announced the release of its updated activity rulebook, which is known as the publication of Version 2.0. This updated rulebook will ensure that Dubai is committed to offering a regulatory framework that is meant for the future to balance and safeguard market resilience through innovation.

In this version 2.0, the key changes have been made to promote better discipline in the market, transparency in risk, and resilience in operations across Dubai’s entire virtual assets ecosystem. The changes include stronger rules for margin trading and token distribution services, clearer definitions to arrange collateral wallets and consistent compliance requirements for all licensed virtual asset activities. 

To make it easier for you, VARA is giving a 30day transition period and you must fully comply by 19th June 2025. The Supervision Teams of VARA will directly engage with every licensed business to offer activity-specific guidance as required.

The Updated Rulebook of VARA is for the Following Virtual Asset Activities-

• Advisory services
• Exchange services
• Custody services
• Exchange services
• Broker-dealer services
• Lending and borrowing services
• VA transfer and settlement services
• Virtual Asset Issuance Rulebook
• VA management and investment services

What is the Procedure of Applying for the VARA License?

The Virtual Assets Regulatory Authority (VARA) has its own compliance and regulations. Any individual looking to start virtual asset activities in Dubai must apply for a VARA license, and each license holder must comply with the regulations and must have qualified management.

There are two stages of the VARA licensing process; stage 1 is the initial approval to incorporate the business (ATI), and stage 2 is to apply for a VASP license.

The process of applying for a VARA license in Dubai is as follows:

• Stage 1: Initial Approval (Approval to Incorporate – ATI)

In the first stage, you will be required to submit an Initial Disclosure Questionnaire (IDQ) to Dubai Economy & Tourism (DET), or if you choose to set up in the free zone, it will be to the relevant Free Zone (FZ) authority. You will have to include additional documents, such as a detailed business plan and details on shareholders and senior management. After which, you will be required to pay the initial fees and receive the approval from the legal corporation.  

• Stage 2: Application for full VASP License to VARA

The stage 2 process will come after you receive the initial approval for incorporation. You will be required to gather the necessary documents and submit them to the Virtual Assets Regulatory Authority (VARA). The documentation must be according to the guidelines set to obtain a VASP license. After this, VARA will provide any additional feedback if required, and you will be required to pay the remaining fees.

The Objectives of VARA: Article 5 of the Dubai Virtual Assets Law

The objectives of VARA, according to Article 5 of the Dubai Virtual Assets law, are:

1. VARA aims to promote Dubai as the leading local and global hub for Virtual Assets and to develop Dubai’s digital economy.
2. VARA wants to promote innovation in virtual assets management and increase awareness of its products and investment opportunities in Dubai.
3. VARA’s objective is to encourage individuals and companies to operate their virtual assets business activities based in Dubai and also attract more investment.
4. VARA is working on developing strict regulations to protect investors and holders of virtual assets. It also aims to stop illegal practices in virtual assets services by working with the concerned authorities.
5. VARA strictly monitors the regulation, supervision, and management of virtual asset platforms, Virtual Asset Service Providers (VASPs), licensing, and other related aspects by establishing clear standards and regulations.

In a Nutshell

Dubai is quickly becoming a global hub for regulated digital assets. Therefore, if you wish to apply for the Virtual Asset Service Providers (VASPs) license, understanding Dubai’s Virtual Assets Regulatory Authority (VARA) requirements will help you build credibility, secure approvals faster and stay competitive in a compliant market.

 Choosing Dubai as your business destination for virtual asset operations positions you at the centre of innovation, trust, and global opportunity.

To succeed in the thriving landscape of Dubai, you will also need a trusted partner. We, at Enterslice have the expertise to simplify compliance, from applying for your VASP license to handling your Customer Due Diligence (CDD). We will guide you through every step of the VARA licensing process, ensuring you meet all regulatory requirements smoothly.  

Why Choose Enterslice?

Are you looking to understand what is the Dubai Virtual Assets Regulatory Authority (VARA)? Enterslice is the answer for you! We are here to back you up with expert guidance, compliance solutions and the best team of business consultants and financial experts, including investors, legal advisors, accountants and auditors.

Contact us today to speak with our experts or visit our website to learn more: you can visit at https://enterslice.com.

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