Establishing a Virtual Asset Service Provider (VASP) in Dubai in 2023
Since its inception in March 2022, the Virtual Assets Regulatory Authority (VARA) has taken the helm in Dubai, serving as the pioneering global regulator for virtual assets. VARA’s mission is to empower investors, enhance awareness of virtual asset activities and products, and foster innovation. VARA is entrusted with the task of regulating, supervising, and overseeing virtual assets and their related activities across all zones within the Emirate of Dubai.
In close partnership with the Dubai Department of Economy & Tourism (DET) and the Dubai Free Zone Authorities (FZA), VARA is adopting industry-leading standards in consumer protection and security across Dubai’s mainland and free zones. This collaborative effort is a driving force behind Dubai’s continuous economic and financial growth.
Within the following sections, the SALVUS Crypto-Assets Licensing team provides comprehensive insights for those considering the establishment of a Virtual Asset Service Provider (VASP) in Dubai. Our commentary covers key aspects, including:
1. Regulated virtual asset activities – an exploration of which virtual asset activities fall under VARA’s regulatory purview.
2. Regulatory fees and capital requirements – a breakdown of the financial obligations and capital requirements associated with the VASP license.
3. Application procedure duration – insights into the timeframe involved in the application process.
4. How SALVUS can assist your VARA application
We regularly share bite-sized insights on LinkedIn such as those found in this article
1. Regulated Virtual Asset Activities
Businesses involved in virtual asset activities within or from Dubai, or those planning to engage in such activities, are required to apply for and maintain the appropriate license in compliance with VARA’s provisions. Below is a comprehensive list of VARA-regulated activities related to virtual assets:
- Advisory Services
- Offering, providing, or agreeing to provide a personal recommendation to a client, either upon its request or on the initiative of the entity providing the recommendation, in respect of one or more actions or transactions relating to any virtual assets.
- Broker-Dealer Services
- Arranging orders for the purchase and sale of virtual assets between two entities.
- Soliciting or accepting orders for virtual assets and accepting fiat currency, or other virtual assets for such orders.
- Facilitating the matching of transactions in virtual assets between buyers and sellers.
- Entering into virtual asset transactions as a dealer on behalf of the entity for its own account.
- Making a market in virtual assets using client assets.
- Providing placement, distribution or other issuance-related services to clients issuing virtual assets.
- Custody Services
- Safekeeping virtual assets for or on behalf of another entity and acting only on verified instructions from or on behalf of such entity.
- Exchange Services
- Conducting an exchange, trade or conversion between virtual assets and fiat currency.
- Conducting an exchange, trade or conversion between one or more virtual assets.
- Matching orders between buyers and sellers and conducting an exchange, trade or conversion between:
- virtual assets and fiat currency, or
- one or more virtual assets.
- Maintaining an order book in furtherance of the above-mentioned exchange services.
- Lending and Borrowing Services
- Carrying out a contract under which a virtual asset shall be transferred or lent from one or more parties, the lenders, to one or more other parties, the borrowers, where the borrowers shall commit to return the same, at the request of the lenders, at any time during or at the end of the period agreed upon.
- Virtual Asset Management and Investment Services
- Acting on behalf of an entity as an agent, fiduciary, or otherwise taking responsibility for the management, administration, or disposition of that entity’s virtual assets.
- Virtual Asset Transfer and Settlement Services
- The transmission or transfer, and/or settlement of virtual assets from one entity to another entity or from another entity to another virtual asset wallet, address, or location.
VARA reserves the authority to issue a license permitting a VASP to engage in one or multiple virtual asset activities that align with the licensing application details provided.
2. Regulatory fees and capital requirements
Obtaining a VASP license from VARA requires the settlement of the license application fees which are only due at the time of submission of the license application. In case the applicant requests authorisation for more than one virtual asset activity, the license extension fee* is payable for each additional virtual asset activity. VASP-licensed entities are further required to pay VARA an annual supervision fee for each virtual asset activity licensed.
| Virtual Asset Activity | Application fee | Supervision fee |
|---|---|---|
| Advisory Services | AED 40,000 | AED 80,000 |
| Broker-Dealer Services | AED 100,000 | AED 200,000 |
| Custody Services | AED 100,000 | AED 200,000 |
| Exchange Services | AED 100,000 | AED 200,000 |
| Lending and Borrowing Services | AED 100,000 | AED 200,000 |
| Virtual Asset Management and Investment Services | AED 100,000 | AED 200,000 |
| Virtual Asset Transfer and Settlement Services | AED 40,000 | AED 80,000 |
*In all cases the license extension fee is 50% of lower license application fee
VASP licensed entities are obliged to sustain paid-up capital, at all times, in accordance with the virtual asset activities they are licensed for and the way of providing custody services. Where a VASP is licensed for the provision of multiple virtual asset activities, it must maintain the specified amount of paid-up capital for each of the activities it is authorised to provide.
| Virtual Asset Activity | Paid-Up Capital Requirement |
|---|---|
| Advisory Services | AED 100,000 |
| Broker-Dealer Services | If the VASP is collaborating with a VARA licensed VASP to provide Custody Services or otherwise approved by VARA, the higher of: • AED 400,000, or • 15% of fixed annual overheads In all other instances, the higher of: • AED 600,000 • 25% of fixed annual overheads |
| Custody Services | The higher of: • AED 600,000 • 25% of fixed annual overheads |
| Exchange Services | If the VASP is collaborating with a VARA licensed VASP to provide Custody Services or otherwise approved by VARA, the higher of: • AED 800,000 • 15% of fixed annual overheads In all other instances, the higher of: • AED 1,500,000 • 25% of fixed annual overheads |
| Lending and Borrowing Services | The higher of: • AED 500,000 • 25% of fixed annual overheads |
| Virtual Asset Management and Investment Services | If the VASP is collaborating with a VARA licensed VASP to provide Custody Services or otherwise approved by VARA, the higher of: • AED 280,000 • 15% of fixed annual overheads In all other instances, the higher of: • AED 500,000 • 25% of fixed annual overheads |
| Virtual Asset Transfer and Settlement Services | The higher of: • AED 500,000 • 25% of fixed annual overheads |
Separate registration and renewal fees are applicable for establishing and maintaining a legal entity in the mainland or within one of Dubai’s free zones, excluding the Dubai International Financial Centre (DIFC).
3. Application procedure duration
The entire application process, from the applicant’s initial contact with VARA to the commencement of operations, depends greatly on the applicant’s choice of virtual asset activities and products. The duration of this process is notably influenced by the complexity of the proposed business model and activities, as well as the applicant’s preparedness to meet VARA’s stipulated requirements.
4. How SALVUS can assist your VARA application
The SALVUS Crypto Assets Licensing team comprises industry-leading professionals specialising in fintech project registration and licensing. Leveraging our project management expertise, we assist you in selecting virtual asset activities aligned with your business model and objectives.
We take the lead in introducing you to regulatory authorities and work closely with your team to compile and submit all necessary documentation for a comprehensive application. Our primary objective is to support you in meeting VARA’s requirements while optimising the allocation of your financial resources.
Contact us at info@salvusfunds.com if you are interested in establishing a VASP in Dubai or engaging in virtual asset activities 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.
