Establishing a Virtual Asset Service Provider (VASP) in Abu Dhabi in 2022
As the demand and interest for virtual assets continue to grow exponentially, the Financial Services Regulatory Authority (FSRA) pioneered to provide a safe and regulated infrastructure, for the Abu Dhabi Global Market (ADGM) to become the world’s first jurisdiction to introduce and implement a comprehensive virtual assets regulatory framework.
The ADGM welcomes responsible virtual asset players like multilateral trading facilities, brokers, custodians, asset managers and other intermediaries carrying out virtual asset activities. ADGM aims to offer a high-standard regulatory regime which fosters market confidence and encourages groups, corporations, and individuals to involve with the virtual asset market. Thus, the FSRA’s role focuses more on proper governance and oversight, as well as ensuring transparency within the market.
In the following commentary the SALVUS Crypto-Assets team provides valuable information for establishing a Virtual Asset Service Provider (VASP) in Abu Dhabi, as follows:
1. What is a virtual asset?
2. Which virtual asset activities are regulated by the FSRA?
3. What are the regulatory fees and capital requirements?
4. How long is the application procedure?
5. How SALVUS can assist your FSRA application
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1. What is a virtual asset?
A virtual asset is considered a digital representation of value that can be digitally traded, and functions as:
- a medium of exchange; and/or
- a unit of account; and/or
- a store of value but does not have legal tender status in any jurisdiction.
A virtual asset is neither issued nor guaranteed by any jurisdiction and fulfils the above functions only by agreement within the community of users of virtual assets. It is distinguished from fiat currency and e-money.
2. Which virtual asset activities are regulated by the FSRA?
Businesses engaged or intended to be engaged in virtual asset activities within the ADGM are required to apply and hold the relevant license as per the provisions of the Financial Services and Markets Regulations (FSMR). The following list consists of the FSRA regulated activities relating to virtual assets:
- Dealing in Investments as Principal
- Buying or selling virtual assets as principal.
- Dealing in Investments as Agent
- Buying or selling virtual assets as agent.
- Arranging Deals in Investments
- Making arrangements with a view to another person buying or selling a specified virtual asset.
- Making arrangements with a view to another person who participates in the arrangements buying or selling a specified virtual asset.
- Advising on Investments or Credit
- Advice on the merits of buying or selling a virtual asset.
- Providing Custody
- Safeguarding virtual assets.
- Administering virtual assets for safeguarding.
- Operating a Multilateral Trading Facility (MTF)
- The operation of a Multilateral Trading Facility on which virtual assets are traded.
- Managing Assets
- Managing on a discretionary basis assets belonging to another person if the assets include any virtual asset.
The FSRA is an activities-based regulator. Thus, each entity is required to apply for a Financial Services Permission (FSP) covering only the regulated activities it proposes to conduct.
3. What are the regulatory fees and capital requirements?
Operating as a Virtual Asset Service Provider entails higher regulatory fees and capital requirements compared to other FSRA activities, recognising the substantial risks posed. The following table provides the relevant information divided for VASP operating as MTF and for VASP providing intermediary activities.
| Features | MTF | MTF and Virtual Asset Custodian | Non-Custody Intermediary Activities | Non-Custody Intermediary Activities and Virtual Asset Custodian |
|---|---|---|---|---|
| FSRA Authorisation fee | 125,000 USD | 145,000 USD | 20,000 USD | 40,000 USD |
| FSRA Supervision fee | 60,000 USD | 75,000 USD | 15,000 USD | 30,000 USD |
| ADGM Registration fee | 15,000 USD | 15,000 USD | 15,000 USD | 15,000 USD |
| ADGM Annual Renewal fee | 13,300 USD | 13,300 USD | 13,300 USD | 13,300 USD |
| Capital requirements | 12-month operational expenses | 12-month operational expenses | 6-month operational expenses | 6-month operational expenses |
4. How long is the application procedure?
VASP regulated entities seeking to be authorised for conducting regulated activities relating to virtual assets shall be prepared to have a strong engagement with the FSRA.
The completion of the entire procedure, from the applicant’s first contact with the FSRA until going live is estimated between 12 to 24 months. This is based on the complexity of the proposed business model and activities and the applicant’s preparedness to fulfil the FSRA requirements.
5. How SALVUS can assist your FSRA application
The SALVUS Crypto-Assets team is composed of professionals, equipped with significant experience and expertise relating to the registration and licensing of varying fintech projects. We process every enquiry through our project management outlook, guiding you in selecting the structure and set of regulated activities that correspond to your business model and objectives.
Furthermore, we introduce you to the regulator and we work closely with your team to collect the required information and fulfil the necessary documents and questionnaires, ensuring the submission of a complete application.
Please contact us at info@salvusfunds.com or call us at +357 7000 7898 if you are interested in setting up a VASP in Abu Dhabi or providing virtual asset services in the United Arab Emirates.
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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.
