The UAE is gaining prominence in the digital currency industry because it has adopted policies to encourage the usage of digital currencies throughout the region. The government is promoting the usage of digital assets to aid global development, and currently 35% of individuals in the nation are using cryptocurrencies, with adoption projected to expand in the coming years.
Dubai has also established the Virtual Asset Regulatory Authority, the principal cryptocurrency authority responsible for combating money laundering and terrorism funding. This regulatory framework has raised many questions for entrepreneurs looking to launch or continue crypto operations in the UAE.
Why the UAE Is Gaining Prominence in Digital Currency
The UAE is becoming increasingly important in the digital currency industry due to its supportive policies and active promotion of digital asset usage. As adoption continues to grow, the country is positioning itself strongly within the regional crypto space.
- Policies encourage the usage of digital currencies throughout the region
- The government is promoting digital assets to aid global development
- 35% of individuals in the nation are using cryptocurrencies
- Adoption is projected to expand in the coming years
Dubai’s Virtual Asset Regulatory Authority
Dubai established the Virtual Asset Regulatory Authority, known as VARA, as the principal cryptocurrency authority. Its role includes responsibility for combating money laundering and terrorism funding.
VARA is described as a major development for crypto entrepreneurs across the globe, while Dubai is presented as a strong destination for crypto entrepreneurs and the forthcoming crypto revolution.
What Crypto Activities Are Regulated by VARA?
VARA regulates a wide range of crypto-related activities in the UAE. Even trading for yourself comes under regulation in the UAE under VARA.
Main Regulated Categories
- Crypto exchange
- Crypto custody
- Crypto staking
- Broker dealer
- Advisory services
- Management and investment services
- Payment remittance
Payment Remittance Status
Payment remittance is still under process, and applications are not being accepted for that category. All other categories are open for application under VARA.
Is a VARA License Required for All Crypto-Related Activities?
Any activity involving digital assets in the UAE requires VARA approval. If an individual wants to trade digital assets for themselves, that activity also falls under the regulatory scope.
In the case of proprietary trading, a person may need a VARA NOC. After crossing a certain amount, a proper license from VARA is required. Anyone in the UAE doing business in the crypto space needs to apply for a VARA license or a VARA NOC. Without that, operations cannot continue in the UAE.
Key Requirement
- Crypto businesses in the UAE need a VARA license or VARA NOC
- Proprietary trading also falls within the regulatory framework
- Without approval, operations cannot be run in the UAE
Dubai Residency and Local Presence for VARA Applications
A Dubai resident is required in the process of applying for a VARA license. If an applicant is not a Dubai resident, they must have someone who is a Dubai resident involved in the application.
VARA requires someone locally with a proven track record. This means applicants need local support and handholding in Dubai, either through their own residency or through a Dubai resident associated with the application.
How Long Does It Take to Get a VARA License?
VARA is taking longer than some other countries to grant licenses. In other countries, licenses for crypto exchanges may be found in one, two, or three months, but VARA is taking more time.
If the paperwork is in order and everything is in line, the typical timeline is around 4 to 6 months. VARA is a new and very strict regulator, and applicants must prove their worth, which is one reason the process can take time.
NFT Marketplace Regulation in Dubai
If someone was already running an NFT marketplace, crypto exchange, or OTC business before VARA’s inception and wants to continue, they need to apply for a VARA license. Without a VARA license, crypto operations cannot continue.
Although some claim that NFTs are not crypto and should not be regulated, the rules and regulations clearly specify that if someone is running an NFT marketplace, they must either apply for a crypto exchange license or go for the broker dealer route. Otherwise, the operation cannot continue.
For Existing NFT Marketplace Operators
- Apply for a VARA license immediately
- Consider the crypto exchange license route
- Consider the broker dealer route
- Without action, enforcement may follow
Annual Renewal of VARA Licenses
VARA licenses must be renewed every year. The renewal cost depends on the licensing category, such as custody, exchange, or another category.
The renewal cost has already been defined, so annual renewal involves a category-based cost.
Using a Foreign Crypto License in the UAE
If a business holds a license in another country and wants to offer services in the UAE, VARA NOC and approval are required first. Without VARA NOC and approval, those services cannot be offered in the UAE.
FAQ
Why is the UAE gaining prominence in the digital currency industry?
The UAE has adopted policies to encourage the usage of digital currencies throughout the region, and the government is promoting digital assets to aid global development.
How many people in the UAE are using cryptocurrencies?
Currently, 35% of individuals in the nation are using cryptocurrencies.
What is VARA in Dubai?
VARA is the Virtual Asset Regulatory Authority, the principal cryptocurrency authority in Dubai responsible for combating money laundering and terrorism funding.
What activities are regulated by VARA?
VARA regulates crypto exchange, crypto custody, crypto staking, broker dealer activity, advisory services, management and investment services, and payment remittance, although payment remittance is still under process.
Can individuals trading for themselves fall under VARA regulation?
Yes. Even if someone trades for themselves, that activity comes under regulation in the UAE under VARA.
Is a Dubai resident required for a VARA application?
Yes. An applicant needs to be a Dubai resident or must have someone as a Dubai resident involved in the application, as VARA requires someone locally with a proven track record.
How long does it usually take to get a VARA license?
If the papers are in order and everything is aligned, it typically takes 4 to 6 months to get the license.
Do NFT marketplaces need a VARA license in Dubai?
Yes. If someone is running an NFT marketplace, they need to apply under VARA, either through a crypto exchange license or the broker dealer route.
Do VARA licenses need to be renewed yearly?
Yes. Licenses must be renewed every year, and the renewal cost depends on the category.
Can a company with a foreign crypto license offer services in the UAE directly?
No. VARA NOC and approval are required first before offering services in the UAE.
Reference Video
Omar Al-Sharif lives and works in the UAE and is involved in the blockchain technology industry. He writes articles on Bitcoin and digital assets as a personal passion, explaining complex topics in simple and understandable language.
