Dubai VARA Virtual Asset Regulatory Trends
Dubai is emerging as the next global hub for virtual assets.
The world’s largest virtual asset exchange, Binance, has signed an agreement with the UAE’s Securities and Commodities Authority (SCA) to establish a global hub for virtual assets.
In early 2022, the UAE enacted the Dubai Virtual Assets Law (Law No. 4 of 2022 Regulating Virtual Assets in the Emirates of Dubai: "DVAL"), creating a legal foundation for virtual asset businesses. This law provides predictability to businesses and investors, fostering industry growth.
Based on DVAL, the Dubai Virtual Assets Regulatory Authority (VARA) was established. VARA issues licenses for virtual asset service providers (VASPs) and oversees their operations. Activities covered by VASPs include the trading, exchange, transfer, storage, and management of virtual assets.
However, despite the enactment of DVAL, certain activities overlap with regulations under existing federal laws. Businesses engaged in financial services related to virtual assets, such as payment services, must comply with federal laws and acquire additional permits. Prospective operators should take this into account.
VARA Licensing Process
To obtain a VARA license, virtual asset businesses must go through the following four stages:
- Provisional Permit
- Preparatory Permit
- MVP (Minimum Viable Product) Operating Permit
- FMP (Full Market Product) Permit
As of February 28, 2023, no FMP permits have been issued. VARA has only granted Provisional and Preparatory Permits thus far. Exchanges such as Binance, Bybit, Crypto.com, Equiti, FTX, Huobi, and OKX have proactively applied and are under review.
Binance and FTX received MVP Operating Permits. However, due to recent developments, FTX’s process has been suspended. VARA’s VASP licenses involve rigorous requirements, making them challenging to obtain quickly.
Key Considerations
To legally operate a virtual asset business, such as an exchange in Dubai, obtaining a VARA license is mandatory. Dubai’s ambition to become a hub for the virtual asset industry extends beyond infrastructure, with proactive national policies and regulatory frameworks in place.
Since national policies on virtual assets differ widely, and licensing and regulatory details vary significantly, confusion can arise. Nevertheless, businesses aiming for global markets must stay informed about regulatory trends in each country and take proactive steps to comply.
