A Step-by-Step Guide on How to Obtain a VARA License in Dubai

As Dubai portrays itself as a global leader in digital assets and cryptocurrencies, securing a Virtual Assets Regulatory Authority (VARA) license has become increasingly important for companies in this area. This tutorial walks you through the full process of how to obtain a VARA license, from comprehending the rules and regulations to submitting your application and ensuring compliance.

Step 1: Understand the VARA Framework

Before beginning the application procedure, you ought to educate yourself with the VARA regulatory framework. Learning VARA's role and requirements will provide the core knowledge required to successfully navigate the licensing procedure.

What is VARA?

The Virtual Assets Regulatory Authority (VARA) was established in March 2022 to regulate virtual asset activity in Dubai. Its main objectives include:

Ensuring Security: Providing a secure environment for virtual asset transfers.

Promoting Innovation: Advancing technology and innovation in the financial sector.

Investor Protection: Ensuring the interests of investors and improving market transparency.

Step 2: Determine Your Business Model

Defining your company model is an important stage in the licensing process. This clarity will assist you in determining the proper license type and streamlining your application.

Step 3: Prepare the Required Documentation

Comprehensive documentation is required when applying for a VARA license. Preparing these documents ahead of time can speed up the procedure. Business plans, identification documents, legal structures, financial statements, and compliance rules are examples of typical necessary documents.

Step 4: Register Your Business in Dubai

Before you can apply for a VARA license, your business must be officially registered in Dubai.

Step 5: Submit the VARA License Application

You can now submit your VARA license application after registering your business and preparing the necessary papers.

Step 6: Await Review and Approval

After you submit your application, VARA will conduct a thorough review. This procedure normally consists of numerous stages, such as document examination, clarification requests, and approval time frames.

Step 7: Meet Regulatory Requirements

You will receive your VARA license once your application has been approved. However, compliance doesn't stop there.

Types of License

Virtual Assets Advisory Services: ‘Advisory Services’ refers to offering, providing or agreeing to provide a personal recommendation to a client, either upon its request, or on the initiative of the Entity providing the recommendation, in respect of one or more actions or transactions relating to any Virtual Asset.

Virtual Assets Broker Dealer Services: Broker-Dealer Services’ refers to any of the following –

*As per Regulation II – Issuing Virtual Assets, any Entity in the Emirate that Issues a Virtual Asset in the course of a business, must comply with the VA Issuance Rulebook [latest version that is aligned with the issuance date].

[a] arranging orders for the purchase and/or sale of Virtual Assets between two Entities;

[b] soliciting or accepting orders for Virtual Assets, and accepting currency, or other Virtual Assets for such orders;

[c] facilitating the matching of transactions in Virtual Assets between buyers and sellers;

[d] entering into Virtual Asset transactions as a dealer on behalf of the Entity for its own account;

[e] making a market in Virtual Assets using client assets; or

[f] providing placement, distribution or other issuance* related services to clients issuing Virtual Assets.

Virtual Assets Custody License: *Custody Services’ refers to safekeeping Virtual Assets for, or on behalf of, another Entity and acting only on verified instructions from/on behalf of such Entity*.

*All VASPs shall be subject to Rules regarding the storage and custody of clients’ Virtual Assets. Only VASPs which segregate each client’s assets in separate VA Wallets will qualify for a Custody Services Licence.

Virtual Assets Exchange Services: ‘Exchange Services’ refers to any of the following:

[a] conducting an exchange, trade or conversion between Virtual Assets and currency;

[b] conducting an exchange, trade or conversion between one or more Virtual Assets;

[c] matching orders between buyers and sellers, and conducting an exchange, trade or conversion between [i] Virtual Assets and currency or [ii] one or more Virtual Assets; or

[d] maintaining an order book in furtherance of items [a], [b] or [c] above.

Virtual Assets Lending and Borrowing Services: ‘Lending and Borrowing Services’ refers to carrying out a contract under which a Virtual Asset shall be transferred or lent from one or more parties [the Lender(s)] to one or more other party [the Borrower(s)] where the Borrower(s) shall commit to return the same, at the request of the Lender(s), at any time either during or at the end of the period agreed upon, either to its interest or on behalf of others interest.

Virtual Assets Management and Investment Services: ‘VA Management and Investment Services’ refers to acting on behalf of an Entity as an agent, or fiduciary, or otherwise taking responsibility for the management, administration or disposition of that Entity’s Virtual Assets.
Examples may include but shall not be limited to –

[a] investment management services or otherwise managing VAs; and
[b] taking responsibility for the ‘staking’ of VAs for the purpose of earning fees or other values paid to validators and/or node operators of a ‘proof-of-stake’ DLT.

Virtual Assets Transfer and Settlement Services: “Transfer and Settlement services’ Includes firms engaged in transmission or transfer of Virtual Assets from one Entity to another Entity or from one Entity to another VA Wallet, address or location.

Virtual Assets Issuance Category 1: ‘Issuance Category 1’ refers to, but not limited to Fiat-Referenced Virtual Assets [FRVAs], defined as types of VA that purport to maintain a stable value in relation to the value of one or more fiat currencies, but do not have legal tender status in any jurisdiction, as more fully defined in the FRVA Rules.

Other Virtual Assets Liability:
 

Proprietary Trading

VA Proprietary Trading will require a No Objection Certificate [NoC] from VARA to confirm that the activity may be undertaken with regulatory oversight without a VA Licence. Additionally, proprietary trading above certain trading volumes is an activity that must be registered with VARA.

To obtain a Propriety Trading NOC, VASPs need to contact their commercial licensors (Free Zones or DET) to complete their Initial Disclosure Questionnaire (IDQ).

Virtual Asset Issuance Category 2

All issuances which do not constitute a Category 1 VA issuance and defined per VARA Virtual Assets Issuance Rule Book Part I, Section C – ‘VA issuance categories and prior requirements’

Entities must fill a VARA Issuance Approval Form [Category-2] and must provide information including the purpose and use of the VA, the nature of the business and activities for which the VA will be used.

• Entities should provide a Whitepaper, and full details of the issuer, amongst other requirements. VARA may request further information as it deems necessary to inform any decisions.
• Entities must exhibit compliance with AML CFT requirements.
• Entities must ensure compliance with technical, information security, data privacy, and cryptographic controls. Anonymity enhanced tokens are prohibited.

Obtaining a VARA license in Dubai is a critical step for organizations seeking to operate in the fast changing cryptocurrency market. Following this step-by-step approach on how to obtain a VARA license will help you navigate the licensing process more effectively and prepare you for success.

A VARA license grants you not only respectability, but also access to a plethora of prospects in one of the world's major digital asset markets. Preparing extensively, knowing the regulatory climate, and maintaining compliance can set your company up for success in Dubai's thriving ecosystem.