VARA Licensing Explained: Key Virtual Asset Activities Regulated in Dubai

1. Introduction: Why VARA Licensing Matters

Dubai’s Virtual Assets Regulatory Authority (VARA) has established one of the most advanced regulatory frameworks globally for virtual assets (VAs). For Virtual Asset Service Providers (VASPs), obtaining a VARA license in Dubai is no longer optional - it’s a legal requirement for operating in or from the emirate.

Whether you're running a crypto exchange, safeguarding client assets, or offering investment advice, authorization by VARA is mandatory, along with compliance with its detailed rulebooks and operational requirements.

VARA licensing offers both opportunity and accountability:

·         Regulatory clarity and enhanced investor protection

·         Access to Dubai’s expanding digital asset economy

·         A trusted legal framework for sustainable growth

At Pnyx Hill, we guide firms through this process - helping them establish themselves within Dubai’s regulated digital asset ecosystem with full confidence.

2. What Is a VASP Under VARA?

A Virtual Asset Service Provider (VASP) is any business that offers professional services related to virtual assets in or from Dubai.

To operate legally, VASPs must:

·         Apply directly to VARA for authorization

·         Meet compliance standards covering AML/CTF, technology, governance, and market conduct

·         Fulfill capital adequacy and liquidity requirements as defined in the VARA Company Rulebook

3. The 8 Licensed Virtual Asset Activities – Explained

VARA regulates the following eight virtual asset activities. Here's what each entails:

·         Advisory Services : Offering investment advice or guidance on VA issuance.

·         Broker-Dealer Services : Arranging or executing virtual asset transactions on behalf of clients.

·         Custody Services : Safekeeping of client virtual assets and private keys, with asset segregation.

·         Exchange Services : Operating a trading platform for listing, matching, and execution of VAs.

·         Lending & Borrowing Services : Facilitating loans or borrowings in virtual assets.

·         Management & Investment Services : Managing client portfolios with discretionary authority.

·         Transfer & Settlement Services : Moving VAs between wallets and settling payments.

·         VA Issuance : Issuing certain categories of virtual assets, subject to approval and disclosures.

Each service requires separate licensing under VARA, unless explicitly consolidated.

4. Capital Requirements and Net Liquid Assets (NLA)

VASPs must meet both Paid-Up Capital and Net Liquid Asset (NLA) thresholds to ensure operational resilience.

Examples of Paid-Up Capital by Activity:

·         Advisory - AED 100,000

·         Management & Investment - AED 500,000

·         Broker-Dealer - AED 1,000,000

·         Lending & Borrowing - AED 1,000,000

·         Transfer & Settlement - AED 1,000,000

·         Custody - AED 4,000,000

·         Exchange - AED 5,000,000

What is NLA?

Net Liquid Assets refer to liquid resources (e.g., cash or equivalents) available to cover 3–6 months of fixed operating expenses, depending on the type of activity. These buffers are assessed regularly by VARA.

Important Note:

·         Capital is cumulative when applying for multiple activities.

·         Consolidation may be granted, but only at VARA’s discretion.

Example:

A VASP applying for Broker-Dealer (AED 1m) + Custody (AED 4m) + Exchange (AED 5m) must be prepared to inject a total of AED 10 million in capital and maintain adequate NLA based on OPEX.

5. Compliance Obligations Beyond Capital

VARA’s regulatory expectations go far beyond capital requirements. VASPs must implement a full-stack compliance framework covering:

AML/CTF & the Travel Rule

·         Adherence to UAE AML laws and FATF guidelines

·         Collection and transmission of sender/receiver data for VA transfers ≥ AED 3,500

·         Enhanced due diligence for high-risk clients and cross-border activity

Investor Classification & Protection

·         Clients must be categorized as Retail, Qualified, or Institutional

·         Certain services are restricted to Qualified/Institutional clients

·         Retail offerings require transparent disclosures of risks and fees

Technology & Operational Resilience

·         Mandatory IT governance and cybersecurity protocols

·         Annual third-party audits and penetration tests

·         Data protection, system redundancy, and continuity plans

Market Conduct Rules

·         Transparent whitepapers and marketing disclosures

·         Restrictions on proprietary trading, except for treasury and NLA purposes

·         Conflicts of interest management and insider lists

·         Fair and documented complaints handling mechanisms

Governance & Risk Management

·         Appointment of designated Compliance and Risk Officers

·         Robust internal policies across all risk and operational domains

·         Third Party Verification (TPV) required at application and renewal stages

VARA’s framework is not just a checklist — it’s a comprehensive oversight system similar in strength (and often stricter) than the EU’s MiCA regulation.

6. Real-World Scenarios: What VARA Licensing Looks Like in Practice

Scenario 1: Wallet & Custody App Expanding to Dubai

A wallet provider wants to offer crypto custody and transfers to UAE clients.

Required Activities: Custody + Transfer & Settlement

Capital: AED 4m + AED 1m

NLA: ≥ 4 months OPEX

Scenario 2: Tokenized Real Estate Platform

A platform issues real estate tokens and enables secondary trading.

Required Activities: VA Issuance + Exchange + Broker-Dealer

Capital: AED 5m + AED 1m

NLA: ≥ 6 months OPEX

Scenario 3: Neobank Offering Crypto Services

A neobank adds crypto trading and conversion to its banking app.

Required Activities: Broker-Dealer + Exchange (+ Advisory)

Capital: AED 1m–5m

NLA: ≥ 4–6 months OPEX

Scenario 4: Asset Manager for HNWIs

A portfolio manager offers crypto investment strategies for high-net-worth individuals.

Required Activities: Management & Investment + Broker-Dealer + Advisory

Capital: AED 500k–1m

NLA: ≥ 3–4 months OPEX

These examples illustrate that VARA licensing in Dubai is highly adaptable — but detailed planning is essential.

7. How Pnyx Hill Supports VARA Licensing & Compliance

As a trusted VARA compliance advisory firm in the UAE, Pnyx Hill provides:

·         Full VARA Licensing support for all 8 activities

·         Regulatory strategy & VARA engagement

·         Third Party Verification (TPV) coordination

·         Capital & liquidity gap analysis

·         AML/CTF & Travel Rule frameworks

·         Technology governance audits and testing

·         Market conduct policies & investor classification

We help you launch, scale, and stay compliant in Dubai’s virtual asset ecosystem.

8. VARA Licensing Dubai: Dubai as a Global Virtual Asset Hub

Dubai is rapidly becoming a global leader in regulated digital assets. With VARA’s activity-based licensing, firms benefit from transparency, scalability, and investor confidence.

At Pnyx Hill, we guide you through the entire journey, from planning and application to implementation and ongoing compliance.

Book a free discovery call with our team to explore how we can help you secure your VARA license and thrive in the UAE’s fast-evolving virtual asset market.