Virtual Asset Service Provider (VASP) – VARA of Dubai
What are the DET, FZA and VARA and what do they do?
The Dubai Department of Economy & Tourism (DET) serves as the primary governing body responsible for overseeing and advancing the economic and tourism sectors in Dubai. The Dubai Free Zone Authorities (FZA) maintain a pivotal role in bolstering and elevating Dubai’s reputation as a hospitable and globally renowned hub for entrepreneurial ventures and groundbreaking innovation. The Virtual Assets Regulatory Authority (VARA) holds the mandate to govern and supervise the provision, utilisation, and exchange of virtual assets in and from the emirate of Dubai. In synergy, DET, FZA and VARA establish industry-leading standards in consumer protection and security across Dubai’s mainland and free zones, fostering Dubai’s economic and financial growth.
Why establish a Virtual Asset Service Provider in Dubai?
A Virtual Asset Service Provider (VASP) in Dubai benefits from:
- Dubai’s strategic location, situated at the crossroads of East and West, serves as a global gateway to two-thirds of the world’s most attractive growth markets.
- A resilient, dynamic, and well-diversified economy supported by strong economic foundations.
- Forward-looking regulations and regional governance standards, government effectiveness, and institutional empowerment.
- The highest rate of talent retention in the region, accompanied by exceptional living standards.
- A smart city, embracing a culture of innovation and digitisation.
Virtual Asset Activities
VARA, at its sole and unrestricted discretion, 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. The following table outlines the virtual asset activities that can be offered within and from Dubai.
| Virtual Asset Activities |
|---|
| • 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 either 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, or fiduciary, or otherwise taking responsibility for the management, administration, or disposition of the 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 one entity to another virtual asset wallet, address, or location. |
Paid-Up Capital Requirements
Virtual Asset Service Providers are required to sustain paid-up capital, at all times, in accordance with the virtual asset activities they are licensed for. 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 that it is authorised to engage in, as per the table below.
| 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 |
Application Fees
The application fees encompass both the VARA authorisation fee, required for obtaining a VASP license, and a separate registration fee for establishing a legal entity in the mainland or within one of Dubai’s free zones. The VARA authorisation fee varies based on the specific virtual asset activities and the VASP’s intended provision of custody services for virtual assets. On the other hand, the legal entity registration fee remains constant and is not contingent on the types of virtual asset activities planned for offering.
Annual Fees
The annual fees consist of two components, the VARA supervision fee, which applies to each regulated virtual asset activity, and the renewal fee for maintaining a legal entity in the mainland or in one of Dubai’s free zones. Similar to the application fees, the VARA supervision fee varies based on the specific virtual asset activities. Conversely, the renewal fee for the legal entity is fixed and is not contingent on the types of virtual asset activities being conducted.
Licensing Timeframe
The entire application process, starting from the applicant’s initial contact with VARA and concluding with the commencement of operations, is highly dependable on the applicant’s choice of virtual asset activities. 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.
Obtaining a VASP license with SALVUS
The SALVUS Crypto Assets Licensing team consists of industry-leading professionals who specialize in the registration and licensing of various fintech projects. We apply our project management expertise to assist you in selecting virtual asset activities that align with your business model and objectives.
We take the lead in introducing you to the regulatory authorities and collaborate closely with your team to gather and complete all necessary documentation for a comprehensive application submission. Our goal is to support you in meeting VARA’s requirements while optimising the allocation of your financial resources.
Please 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.
