Dubai is quickly becoming one of the most innovative financial centers around the world, and its aspirations go far beyond banking. Over the last decade, the city has connected European and Asian banks, pursued a “smart economy,” and adopted new technologies including blockchain, Web3, and cryptocurrency with gusto. There is no question that this strategy has made Dubai a destination for fintech innovators and capital allocation for fintech founders.
However, as digital assets became more mainstream, the digital risks associated with them were also more apparent. Price volatility, fake projects, hacks, clean wallets, etc., all became common attributes of the global crypto industry. Many jurisdictions began to take the challenge of balancing and regulating new markets in the digital asset space, preserving the original objectives of innovation while protecting investors.
In absolute defiance of global practices, Dubai capitalized on its own newness and made a bold and audacious leap in the evolution of innovation and investor protection. In March 2022, the government of Dubai launched the Virtual Assets Regulatory Authority (VARA) the world’s first regulator with an entire mandate exclusively focused on virtual assets, in which the VARA license is a crucial pillar. The VARA license permits individuals/crypto-related businesses to conduct and settle business in Dubai and escape jurisdiction, which also aligns to global standards of compliance.
In this guide, we’ll break down what is a VARA license, why it is important, what types of VARA licenses there are, who is eligible to fit under the VARA license, and of course what the process looks like to obtain a VARA license, going over some of the benefits, obligations and risks that will be avoided should you choose to operate under the VARA license.
What is the VARA License?
The VARA License is an official license issued by Dubai’s Virtual Assets Regulatory Authority to any company that provides services related to virtual assets like cryptocurrencies, NFTs, tokenized assets, and activities including blockchain and crypto finance.
What does this mean?
The VARA license guarantees that businesses operate to a high operational, financial, and security standard. There are two purposes of the license:
- To protect investors and trust in the financial ecosystem.
- To support the development of a regulated yet innovative virtual asset ecosystem.
Activities under the VARA License
The VARA covers a wide variety of activities including (but not limited to):
- Operating crypto exchanges.
- Providing broker-dealer services for digital assets.
- Providing custody and wallet services.
- Providing investment or advisory services.
- Providing token issuance or ICOs under a regulated framework.
Why is this important for crypto businesses in Dubai?
Operating without a VARA license can expose your company to serious legal risks and reputational risk. If Dubai is going to be the world’s centre of Web3, then obtaining a VARA license is not just about compliance, its about credibility, growth, and sustainability.
Why Dubai Came Up with the VARA License
Dubai has recognized that crypto regulation isn’t merely about regulatory enforcement; it’s also about enabling innovation in a manner that is responsible. The VARA framework was created with a goal in mind:
- Protecting Investors: Rapid growth of the crypto sector barrelled in both serious entrepreneurs and nefarious actors. VARA provides protections to businesses to protect customer funds, provide risk disclosures, and to prevent lying and stealing.
- Futility of Financial Crime: Rectifying unregulated crypto activity can lead to money laundering, tax evasion, and terrorism financing. Dubai avoids this risk with the breadth of its regulation and thorough AML and KYC compliance, bringing the emirate in line with respect to international financial security.
- Empowering Blockchain Innovation: While some jurisdictions have gone so far as to build speculative frameworks where crypto activity is restricted, Dubai has embarked on a path where the aim is empowering entrepreneurs. Introducing clear guidelines allows for startups to know exactly how they can build innovative products for the Long-Game without regulatory uncertainty.
- Building Dubai’s Narrative: Dubai seeks to reign in fintech, blockchain and the metaverse. By building the VARA framework, Dubai is already ahead of cities like London, Singapore, and Hong Kong without waiting indefinitely to create a holistic crypto ecosystem.
VARA License Types
Each crypto company has different risk appetites. Consequently, VARA has various types of licenses:
Advisory Services License
For consulting firms giving professional advice for blockchain adoption, compliance, token issuance and investing.
- Example: A firm helping traditional firms navigate opportunities in Web3.
Broker-Dealer License
For firms who buy, sell and trade cryptocurrencies.
- Example: A firm providing OTC trading desks to larger institutional clients.
Custody Services License
For firms who offer a custodian service and securely store digital assets.
- Example: Cold storage firm who stores crypto for institutions.
Exchange Services License
For platforms which allow users to trade tokens for each other.
- Example: Centralized Exchange (CEX) regulated Decentralized Exchange (DEX).
Each license has a different capital requirement, compliance obligations based on the license obtained, and delivery expectations based on the risk level of the firm to the customer.
Virtual Asset Issuance License
For entities launching new tokens, stablecoins, or NFTs under Dubai’s regulated framework.
This license ensures transparency in tokenomics, whitepapers, and investor protections.
- Example: A blockchain startup issuing a regulated stablecoin pegged to AED.
Transfer & Settlement Services License
Covers firms facilitating the transfer, clearing, and settlement of digital asset transactions, ensuring smooth and compliant payments across borders.
- Example: A fintech offering crypto remittance services to global customers.
Lending, Borrowing, Management & Investment Services License
This category allows companies to offer DeFi-style services in a regulated environment.
It includes lending and borrowing platforms, crypto investment funds, and portfolio management firms.
- Example: A regulated platform allowing users to earn yield by lending stablecoins under VARA supervision.
Eligibility Requirements
There are several strict requirements that need to be fulfilled in order to obtain a VARA license and they include:
- Company Registration in Dubai: The business must show there is a legal presence, which will often be in a designated zone like the Dubai World Trade Centre (DWTC), or DIFC.
- AML & KYC Policies: Companies must have policies in place to effectively ensure customers identity and monitor for suspicious trends.
- Cybersecurity Policies: Since 2021, crypto hacking has been rampant, so each firm must provide protections in layers and abide by cybersecurity audits.
- Qualified Management: Each manager must have some experience in finance, compliance, or blockchain. VARA looks closely at the capability of management.
- Business Plan and Documents: Applicants will need to provide documents that include financial models, operational workflows, customer service structure and governance policies.
Step-by-Step Process to Obtain a VARA License
Acquiring a VARA license in Dubai is a formalized process which aims to ensure that only qualified and compliant businesses are able to operate in the market. While the process may seem overwhelming, taking it step by step will help make the process clearer. Here’s a guide.
Step 1: Identify the Relevant License
The first step is to identify which of VARA’s seven license types fits your business model best. Each type requires differing obligations and varying capital levels to meet the requirements, so getting the license type right is essential.
- If you are going to be an exchange, you will need the Exchange Services License.
- If you are going to be storing digital assets for clients, it will be the Custody Services License.
- If you will be issuing tokens or NFTs, you will have to apply for the Virtual Asset Issuance License.
Step 2: Register Your Company in Dubai
Before you can apply for the VARA license, you will first have to set up a legal entity in Dubai.
Most crypto businesses register in one of the free zones (most popular being the Dubai World Trade Centre (DWTC) or Dubai International Financial Centre (DIFC)) because these were set up to promote the development of fintech and blockchain companies.
Incorporation is when you choose a type of business (LLC, Branch office, or representative office), reserve a trade name, and get the initial approvals.
Step 3: Prepare the Required Documentation
This is one of the most important steps, a strong, well-written application increases the likelihood of a fast approval. Here are some of the most important documents:
- Articles of Incorporation / Memorandum of Association – This is a record of your company’s legal structure.
- Detailed Business Plan – Including services, revenue model, customer base, market strategy.
- AML/KYC Framework – A compliance manual that outlines how you will prevent money laundering, conduct customer due diligence, and report suspicious activity.
- Cybersecurity Policies – Evidence of comprehensive security of digital assets, a strategy for data protection, and disaster recovery plan.
- Financial projections – Cash flow forecasts, capital reserves, and proof of workability.
- Management Team and Team Profiles – CVs and credentials of the management team, showing experience in finance, technology, or compliance.
Step 4: Submit your Application to VARA
After incorporation, and your documentation is prepared, the next step is the application to the Virtual Assets Regulatory Authority.
You generally will submit your application through VARA online portal.
At this point, you will also pay the initial licensing fees, which vary dependent on the type of licensing required. VARA will follow up with any clarifications or additional documentation they require at this stage.
Step 5: Compliance & Due Diligence Review
After submission, and then VARA will engage in its thorough review process to ensure your business is compliant. This is the most detailed stage of the registration process and may include:
Background checks on your company directors, shareholders, and senior management.
Financial due diligence to review the liquidity positions and capital adequacy.
Operational reviews to verify the readiness of operational base functions, such as testing of your AML/KYC systems.
IT & cybersecurity audits to verify your technical infrastructure is adequately configured.
Stage 6: Approval & Licensing
After completing the due diligence stage, if your business is able to pass this step, VARA will issue your operational license. Once you have the operational license, you can:
- Legally operate your virtual asset business in Dubai.
- Your company is also listed in VARA’s public register of licensed entities, which improves credibility; and
- You must comply with ongoing reporting, audit, and operational requirements to maintain your license.
Stage 7: Post-License Operational Readiness
You have achieved approval; however, businesses are also required to demonstrate to VARA that they have the capacity to operate responsibly after approval. This may include:
- Finalizing technology integrations (exchanges, custody systems, settlement platforms).
- Hiring compliance officers and anti-money laundering (AML) officers.
- Training the organization on know your customer (KYC) procedures and cybersecurity awareness; and
- Organizing customer onboarding that follows regulatory requirements.
Compliance Obligations After Licensure
The work does not cease once you have received the license. Continuing compliance is imperative.
- Routine Reporting: Licensed firms must report to VARA regularly with regard to their operations, customer activity, and exposure to risk.
- Independent Audit: A firm that has received a license may be subject to an audit of its financial records, and an IT audit, to ensure that it maintains compliance.
- Ongoing AML/KYC Monitoring: Customer data must continue to be updated and monitored against known global watchlists.
- Cybersecurity: Ongoing penetration testing, disaster recovery processes, and encrypted infrastructure are expected.
- Disclosure Obligations: Customers must always receive reasonable and clear disclosure on support fees, risks, terms and conditions surrounding a purchased service.
Benefits of Holding a VARA License
Why should businesses go through this rigorous process? The benefits are substantial:
- Legal Recognition
Operate without fear of shutdowns or penalties. - Investor Trust
Regulatory oversight boosts confidence among clients and institutions. - Global Market Access
Dubai’s reputation attracts cross-border partnerships and funding. - Enhanced Credibility
Licensed firms enjoy stronger branding and competitive positioning. - Regulatory Clarity
Unlike some regions with vague rules, Dubai provides clear, actionable frameworks.
Risks of Operating Without a VARA License
Businesses operating without VARA approval face serious consequences:
- Financial Penalties – Hefty fines for non-compliance.
- Business Closure – Illegal operations may be shut down.
- Blacklisting – Risk of being barred from future regulatory approval.
- Loss of Trust – Customers and partners avoid unregulated firms.
- Legal Consequences – Potential criminal liability in cases of fraud or financial crime.
Case Studies: VARA in Action
Case Study 1: Binance in Dubai
Binance, the world’s largest exchange, worked with VARA to establish a regulated presence in Dubai. Its cooperation with local regulators demonstrated the importance of aligning business strategy with compliance.
Case Study 2: Startups in Dubai Free Zones
Numerous crypto startups have flocked to Dubai World Trade Centre because of VARA. These businesses range from NFT marketplaces to blockchain gaming platforms—all benefiting from regulatory clarity.
Future of VARA and Dubai’s Role in Crypto
VARA is not static—it evolves as the industry changes. Future developments may include:
- Regulations for DeFi protocols.
- Licensing for stablecoin issuers.
- Oversight of metaverse-based assets.
Dubai’s ambition is to be the world’s number one Web3 hub. With VARA, it is laying the foundation for a long-term, regulated, and thriving crypto ecosystem.
Frequently Asked Questions (FAQs)
Q1: How long does it take to get a VARA license?
Typically, the process may take 3–6 months depending on documentation readiness and compliance reviews.
Q2: How much does it cost to obtain a VARA license?
Fees vary by license type. Advisory licenses are less expensive than exchange licenses, which require significant capital reserves.
Q3: Can foreign companies apply?
Yes, but they must establish a legal entity in Dubai before applying.
Q4: Is VARA the same as DIFC regulation?
No. DIFC regulates traditional finance, while VARA exclusively regulates virtual assets in Dubai.
Q5: Is Dubai friendly to crypto businesses?
Yes. Dubai actively promotes blockchain adoption, provided companies follow VARA’s compliance rules.
Dubai’s VARA License is more than just a regulatory requirement—it is a strategic enabler. By obtaining this license, businesses gain legal certainty, access to global investors, and the trust needed to thrive in a competitive industry.
As Dubai cements itself as a global crypto hub, firms that embrace regulation today will be best positioned for success tomorrow.