How VARA is Enabling Global Crypto in Dubai

Companies like Binance, OKX, and Crypto.com have expanded operations to the UAE in the last few years. Dubai currently hosts 40+ licensed VASP companies and the common thread enabling this move is Dubai’s key regulator: VARA.

What is VARA?

The Virtual Assets Regulatory Authority (VARA), established in 2022, is the world's first independent regulator dedicated solely to virtual assets. It governs all virtual asset activities in Dubai outside the DIFC financial free zone.

VARA isn't a light-touch regime. It provides clear, rigorous guidelines for virtual asset service providers in Dubai. As a result, projects that operate under this regime can plan around specific requirements for the long term, rather than guessing what might trigger enforcement.

Who Needs a VARA License?

Any entity providing virtual asset services in or from Dubai (excluding DIFC) must obtain a VARA license before operating. This applies to UAE-incorporated companies and foreign entities serving Dubai-based customers. There's no "small operator" exemption. If you're facilitating virtual asset transactions, custody, or advisory services, you need authorization.

License Categories

VARA licenses cover seven core VASP activity categories:

1. Exchange services
2. Broker-dealer services
3. Custody services
4. Lending and borrowing services
5. VA Transfer and settlement services
6. VA Management and investment services
7. Advisory services

Virtual asset issuance is regulated separately under a distinct approval process. Each category comes with specific capital requirements, operational standards, and compliance obligations.

Why are Projects Moving to Dubai?

The migration to Dubai isn't primarily about tax benefits. It's about being able to build a business without existential regulatory uncertainty, which VARA provides.

VARA operates with a transparent model:

• Explicit license categories with defined requirements
• Predictable timelines with clear roadmaps for the full licensing cycle
• Detailed rulebooks covering company operations, compliance, technology, and market conduct
• Direct engagement with the regulator before and during the application process

The full licensing journey, from initial application through MVP to full operational license, typically takes 9 to 15 months for well-prepared applicants. For founders and investors, this predictability has direct value: business models can be validated against specific rules, investors can underwrite regulatory risk with confidence, and institutional partners will actually engage.

What VARA Compliance Requires

VARA's requirements are substantial and comprehensive.

Security and Technical

Smart Contract Audits: Independent third-party audits required annually and before any new deployment.

Penetration Testing: Annual vulnerability assessments and penetration testing by qualified independent auditors, covering infrastructure, applications, and blockchain-specific attack vectors.

Key Management: Secure cryptographic key and wallet management, including auditing key generation, storage, access controls, and backup procedures. Single points of failure must be eliminated.

Incident Response: Documented procedures for detecting, responding to, and recovering from security incidents.

24-Hour Reporting Requirement: Critical incidents affecting personal data must be reported to VARA within 24 hours. This means having incident detection, triage, and reporting procedures ready before you need them. Any other material cybersecurity event, or event triggering the business continuity and disaster recovery plans must be reported to VARA no later than 72 hours from detection.

Transaction Monitoring and Wallet Screening: Distributed ledger tracing software to screen all virtual asset transactions and wallet addresses, reporting any suspicious activity as part of AML/CFT policies.

Financial Integrity

Proof of Reserves: Reserve assets maintained 1:1 with client liabilities, with daily reconciliations and independent audits.

AML/KYC Integration: Full compliance with UAE's AML/CFT framework, including transaction monitoring, risk scoring, and regular client risk assessments.

Capital Requirements: Minimum paid-up capital varies by license type, held in UAE-based bank accounts or as surety bonds.

Operational

Physical Presence: VASPs must maintain a physical office in Dubai.

Responsible Individuals: Two designated responsible individuals required, residents of the UAE or holders of a UAE passport, validated by VARA.

CISO Appointment: A Chief Information Security Officer must oversee compliance, data protection (CISO can also be appointed as DPO), and security management.

Marketing Approval: All marketing activities must be cleared by VARA before public release.

What's Prohibited

• Privacy-focused tokens (Monero, Zcash) banned outright
• Algorithmic stablecoins prohibited; foreign fiat-backed stablecoins permitted under strict FRVA rules (Dirham-backed stablecoins regulated separately by the UAE Central Bank)
• Proprietary trading must be segregated into a separate legal entity
• Custody services must operate as distinct legal entities

Enforcement in Practice

VARA enforces its rules. In the past, VARA has suspended licenses for missed compliance deadlines, fined unlicensed operators, and shut down entities violating marketing rules. Penalties can reach AED 50,000,000 (~$13,600,000), with license revocation for serious violations.

This protects the legitimacy of licensed operators and supports VARA’s aim to foster consumer protection and prevent illicit finance.

Comparing Alternatives

Europe (ESAs’ MiCA): Comprehensive rules, but implementation varies by member state. Viable, but slower and more fragmented.

Hong Kong (SFC’s VA licensing framework): Structured licensing regime competing directly with Dubai for Asian crypto business.

Singapore (MAS’s licensing for DPT): Tightened requirements significantly. Many projects that once targeted Singapore now look at Dubai.

United States: Comprehensive federal crypto legislation still pending.

What This Means for Web3 Businesses

For Founders: Jurisdiction strategy is now a first-order business decision. If you need regulatory clarity to attract institutional customers, banking relationships, or serious capital, Dubai belongs on your shortlist. The compliance infrastructure you build for VARA works as a template for engaging with regulators elsewhere.

For Investors: A VARA-licensed entity has demonstrated it can meet rigorous requirements in a jurisdiction with predictable enforcement. That removes a category of risk that has historically plagued crypto investments.

For the Industry: VARA shows that crypto regulation can work with clear rules, reasonable timelines, and actual enforcement. Other jurisdictions are paying attention and will likely follow suit in the years to come.

Getting Started with VARA

1. Determine which license category fits your business model
2. Incorporate a legal entity in Dubai (mainland or eligible free zone)
3. Begin compliance buildout: AML policies, security documentation, capital structuring
4. Engage third-party auditors for smart contract and penetration testing
5. Submit Initial Disclosure Questionnaire to VARA

Most founders underestimate the documentation and security requirements. Starting the audit and compliance process six or more months before your target application date is advisable.

The Bottom Line

While other jurisdictions debated whether crypto should be regulated at all, Dubai built a framework and started licensing early on, becoming a first mover. While the U.S. litigated against exchanges, VARA published rulebooks.

For projects building compliant, institutional-grade crypto businesses, jurisdiction choice now matters as much as product choice. Dubai made its case. The industry is responding.

How CertiK Supports VARA Compliance

CertiK works with VASPs at every stage of the VARA licensing process:

• Smart Contract Audits meeting VARA's annual and pre-deployment requirements
• Skynet Enterprise for counterparty risk evaluation and regulatory compliance workflows
• Penetration Testing covering infrastructure, applications, and blockchain-specific vectors
• SkyInsights for real-time AML wallet and transaction monitoring
• Proof of Reserves Audits with independent verification and VARA-ready reporting

Talk to our VARA compliance team today.