VARA Licensing Requirements for Crypto Firms in Dubai - 2025 Complete Guide

Key Takeaways

• VARA issues six license types covering exchanges, broker‑dealers, custody, transfers, wallets and token issuance.
• Capital requirements range from AED100,000 to AED5million per service; combined services add up (e.g., broker‑dealer+custody+exchange = AED10million).
• Application fees: AED40,000‑100,000; annual supervision fees: AED80,000‑200,000.
• Fit‑and‑proper checks, AML/CFT systems, cybersecurity standards and insurance are mandatory.
• Privacy tokens like Monero and Zcash are prohibited; marketing needs VARA pre‑approval.

What Is VARA?

VARA is the Virtual Assets Regulatory Authority, Dubai's dedicated regulator for virtual assets established in 2022. It sits alongside the Dubai International Financial Centre (DIFC) regulator, the Dubai Financial Services Authority (DFSA), but VARA governs all crypto activity outside the DIFC free‑zone. Its mission is to turn Dubai into a global hub for crypto businesses by offering clear rules, modern infrastructure and tax‑efficient benefits that align with international standards such as the Financial Action Task Force (FATF) recommendations.

Six License Categories You Need to Know

VARA requires a licence for any Virtual Asset Service Provider (VASP) offering the following services:

1. Exchange Services - platforms that enable buying, selling or swapping virtual assets.
2. Broker‑Dealer Services
   • Fiat‑to‑VA conversion
   • VA‑to‑VA trading
3. Custody Services - secure storage of client assets, with mandatory insurance and audit trails.
4. Transfer Services - moving virtual assets between parties, including cross‑border flows.
5. Wallet Provision Services - offering digital wallets for users to hold and manage assets.
6. Token Issuance
   • Category1: requires a VARA licence plus a specific approval for each token.
   • Category2: can be distributed through a licensed intermediary.

Some closed‑loop tokens may be exempt from a full licence but still fall under VARA oversight.

Capital & Fee Structure - How Much Money Do You Need?

Capital requirements depend on the services you plan to offer. Below is a snapshot:

When you combine services, the caps stack. For example, a VASP wanting broker‑dealer (AED1M), custody (AED4M) and exchange (AED5M) must hold at least AED10million in paid‑up capital.

Fees are separate from capital:

• Application fee: AED40,000‑100,000 (depends on service mix).
• Annual supervision fee: AED80,000‑200,000.
• Additional costs: legal drafting, compliance software, external audit fees.

Step‑by‑Step Application Process

1. Incorporate a Dubai‑based legal entity. The company must be registered with the Dubai Department of Economic Development (DED) and have a physical office.
2. Prepare fit‑and‑proper documentation for board members, senior managers and the compliance officer. VARA checks criminal records, financial history and professional competence.
3. Draft a detailed business plan covering services, target markets, projected volumes, risk‑management framework and financial forecasts.
4. Build AML/CFT infrastructure:
   • KYC automation (ID verification, source‑of‑funds checks).
   • Transaction monitoring with AI‑driven alerts.
   • Reporting procedures for suspicious activity.
5. Implement cybersecurity standards-ISO27001‑style policies, regular penetration testing, encrypted key storage and disaster‑recovery plans.
6. Secure insurance coverage for operational risk, cyber‑risk and client asset loss (minimum AED5million for custody providers).
7. Submit the digital application through VARA’s online portal, upload all supporting documents and pay the application fee.
8. Undergo VARA review. Expect a back‑and‑forth on capital adequacy, AML systems and governance. The regulator may request additional evidence or a site visit.
9. Receive the licence and start the onboarding of clients. Ongoing supervision includes quarterly reports, annual audits and mandatory marketing approvals.

Compliance Essentials - AML/CFT, KYC and Data Security

VARA’s AML/CFT rules mirror FATF standards. Key obligations:

• Customer identification: capture full name, nationality, proof of address and government‑issued ID. For corporate clients, collect ultimate beneficial owner (UBO) details.
• Transaction monitoring: set thresholds (e.g., AED50,000) and watch for rapid, high‑volume movements.
  Automated systems must flag unusual patterns and generate SAR (Suspicious Activity Report) filings within 24hours of detection.
• Record‑keeping: store all transaction data, KYC files and audit logs for at least five years, accessible to VARA on demand.
• Staff training: conduct quarterly AML workshops and certify compliance officers with recognized credentials (e.g., CAMS).
• Data protection: follow UAE’s Data Protection Law, encrypt data at rest and in transit, and perform annual privacy impact assessments.

Restricted Tokens & Marketing Rules

VARA Administrative Order 2023/2024 bans privacy‑focused tokens such as Monero and Zcash because of their anonymous transaction capabilities. Attempting to list or trade these assets can result in licence suspension.

Any promotional material-web banners, social media posts, webinars-must be pre‑approved by VARA. The regulator checks that claims are not misleading, that risk disclosures are clear, and that targeting is not directed at retail investors lacking sufficient sophistication.

How VARA Compares with Other UAE Crypto Regulators

Choosing VARA often makes sense if you aim for a Dubai‑wide presence and want to tap into the emirate’s emerging fintech ecosystem. However, firms that need proximity to international banks or wish to operate inside the DIFC may prefer the DFSA route.

Common Pitfalls and How to Avoid Them

• Under‑estimating capital: Remember that combined services stack. Run a capital calculator early to avoid a costly re‑application.
• Skipping fit‑and‑proper checks: VARA scrutinizes every senior person. A prior criminal record-even overseas-can derail the licence.
• Weak AML tech: Manual KYC won’t cut it. Invest in an API‑driven verification platform that can handle high‑volume onboarding.
• Ignoring the marketing pre‑approval: Publishing a tweet about a new token before VARA signs off can trigger fines.
• Neglecting insurance: Custody providers without a minimum AED5million policy will be asked to provide additional guarantees.

Next Steps for Your Crypto Business

If you’re ready to apply, follow this quick checklist:

1. Confirm the exact mix of services you’ll offer.
2. Calculate total paid‑up capital needed.
3. Hire a VARA‑experienced legal advisor (preferably with a track record of approved licences).
4. Select an AML/KYC provider that integrates with VARA reporting templates.
5. Set up a Dubai office and register the company with DED.
6. Prepare the business plan, risk‑management framework and insurance certificates.
7. Submit the online application and pay the fee.
8. Respond promptly to any VARA queries-speed matters.

Once licensed, maintain a compliance calendar: quarterly AML audits, annual financial statements, and semi‑annual marketing approvals. Staying ahead of regulatory updates (e.g., upcoming DAO guidelines) will keep your licence in good standing.