Guide To Vara Licenses | Vara License Categories - 10 Leaves

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VARA Licenses
The Virtual Asset Regulatory Authority has established itself as the go-to regulator for virtual assets regulation in the Emirate of Dubai. It offers comprehensive licensing options, and has a robust licensing process to ensure a high quality of authorised Virtual Asset Service Providers, or VASPs.
What is VARA?
The Virtual Assets Regulatory Authority (VARA), established in early 2022, and represents a pioneering initiative by the Dubai government to regulate the fast-growing sector of virtual assets.
VARA is the first regulatory body of it’s kind, and is dedicated to ensuring the secure and effective functioning of Virtual Asset Service Providers (VASPs) in Dubai. This initiative positions the emirate and the United Arab Emirates as a prominent center for digital finance and innovation.
What are VARA’s objectives?
VARA's primary objectives include promoting Dubai as a regional and international center for virtual assets, enhancing the competitive edge of the emirate in this domain, and fostering a robust digital economy. The authority is tasked with developing regulations ...
... that protect investors while curbing illegal practices associated with virtual assets. This regulatory framework encompasses a wide range of activities, including the operation of virtual asset platforms, currency exchange services, and asset management services.
VARA's main objective is to promote the Emirates as a destination for virtual asset businesses and create an ecosystem for as a regional and international center for virtual assets. The authority is tasked with developing regulations that protect investors while curbing illegal practices associated with virtual assets.

What are the advantages of getting licensed by VARA?
The Virtual Assets Regulatory Authority is the single regulatory body in Dubai that offers licensing options in the virtual assets space. Here are the key benefits:
1. Regulatory Compliance and Legitimacy
a. Legal Authorisation: A VARA license provides legal authorization to operate within Dubai, ensuring that businesses comply with local laws and regulations governing virtual assets.
b. Investor Trust: Being licensed by VARA enhances credibility and trust among investors and clients, as it signifies adherence to established regulatory standards.
2. Access to a Thriving Market
a. Strategic Location: Dubai's position as a global hub for blockchain and cryptocurrency innovation allows licensed firms to access a vibrant market with numerous opportunities for growth.
b. Supportive Ecosystem: VARA fosters a supportive regulatory environment that encourages innovation, providing firms with the necessary framework to develop and expand their services.
3. Comprehensive Framework
a. Diverse Licensing Categories: VARA offers various licensing categories tailored to different types of virtual asset services, including advisory, exchange, custodial, and payment services. This flexibility allows businesses to choose a license that best fits their operational model.
b. Ongoing Support: VARA provides continuous guidance and support throughout the licensing process and beyond, helping firms navigate compliance requirements effectively.
4. Enhanced Operational Standards
a. High Compliance Standards:
License applicants are required to implement a robust compliance and anti-money laundering framework. They also have to put in place elaborate cybersecurity policies to address risks associated with virtual asset businesses.
This commitment not only protects consumers but also helps firms mitigate risks associated with virtual asset operations.
b. Training and Development: Licensed entities must engage in ongoing training for staff to stay updated on regulatory changes, ensuring that they maintain high operational standards at all times.
Firms that are licensed by VARA have to put in place detailed training and development plans for their employees and senior management, thus ensuring commitment to robust operational standards and keeping pace with the fast-developing field of virtual assets.
What kind of entities does VARA license?
VARA licenses a broad range of virtual asset activities, ranging from advirosy services to crypto exchanges. Here is a non-exhaustive list:
1. VA Advisory Services: Firms providing expert advice on virtual asset investments and strategies.
This includes providing recommendations to clients, in respect of transactions relating to any Virtual Assets.
The following factors are to be considered, when providing advisory services:
knowledge and experience of the client in Virtual Asset investments;
the specific objectives and financial goals of the client, their associated risk profiles and the length of time that they plan to stay invested; and
iii) client’s financial circumstances and their ability to bear sudden and significant losses with respect to their investments in Virtual Assets.
2. VA Broker-Dealer Services: Entities facilitating the buying and selling of virtual assets on behalf of clients.
- means any of the following—
i) transmitting orders for buying or selling VAs;
ii) soliciting or accepting orders for Virtual Assets and accepting fiat currency, or other Virtual Assets, for such orders;
iii) arranging transaction matching between market players;
iv) entering into Virtual Asset transactions as a dealer on behalf of the Entity for its own account;
v) market making activities using client assets; or
vi) providing placement, distribution or other related services to Virtual Asset issuers.
3. VA Custody Services: Businesses offering secure storage solutions for virtual assets, ensuring their safekeeping.
4. VA Exchange Services: Platforms that operate as marketplaces for trading various virtual assets.
- includes any of the following—
i) matching orders between buyers and sellers and conducting an exchange, trade or conversion between a) Virtual Assets and fiat currency or b) one or more Virtual Assets; or
iv) maintaining an order book.
5. VA Lending and Borrowing Services: Companies that facilitate the lending and borrowing of virtual assets, enabling users to leverage their holdings.

6. VA Management and Investment Services: Firms managing investment portfolios that include virtual assets, catering to both retail and institutional clients.
This includes —
i) Asset management services with regard to Virtual Assets; and
ii) taking responsibility for the staking of Virtual Assets for the purposes of earning fees or other amounts paid to validators and/or node operators of a proof-of-stake Distributed Ledger Technology.
7. VA Transfer and Settlement Services: Businesses responsible for the transfer and settlement processes of virtual asset transactions, ensuring efficient and secure operations.
8. NFT Marketplace Services: Entities operating platforms for buying, selling, or trading non-fungible tokens (NFTs), which may require specific licenses depending on their activities.

What are the capital requirements for firms that are licenced by VARA?
The nature of virtual asset activities determines the capital requirements mandated by the regulator.
(i.).Advisory Services – US$ 27,300 (AED 100,000)
(ii.)Broker-Dealer Services – If using a Custodian licenced by VARA:
US$ 109,000 (AED 400,000) or
15% of fixed annual overheads
OR
(iii.)If using a non-VARA licensed custodian:
US$ 163,500 (AED 600,000) or
25% of fixed annual overheads.
(iv.)Custody Services - Higher of US$ 163,500 (AED 600,000) or 25% of fixed annual overheads
(v.)Exchange Services –
In the case of VARA-licensed VASP for custody- Higher of US$ 218,000 (AED 800,000) or 15% of fixed annual overheads
In other cases - US$ 409,000 (AED 1,500,000) or 25% of fixed annual overheads
(vi.)Lending and Borrowing Services - Higher of US$ 136,300 (AED 500,000) or 25% of fixed annual overheads
(vii.)Virtual Asset Management and Investment Services
In the case of VARA-licensed VASP for custody - Higher of US$ 76,300 (AED 280,000) or 15% of fixed annual overheads
In other cases - US$ 136,300 (AED 500,000) or 25% of fixed annual overheads
(viii.)VA Transfer and Settlement Services –
US$ 136,300 (AED 500,000) or 25% of fixed annual overheads – whichever is higher
VARA also requires licensed firms to maintain an expense-based capital, that is calculated as at least 1.2 times their monthly operational expenses. This expense-based capital has to be maintained as liquid assets, such as cash in the bank.
The VASP is expected to meet the capital requirements for each activity applied for separately, in case it is authorised to conduct multiple regulated activities.
Paid-Up Capital shall, at all times, be held and maintained in a trust account in a UAE-based bank, or as a surety bond (or any other manner as specified by VARA) with CARA as the beneficiary of the instrument.
I want to operate a virtual asset business. Do I need a VARA license?
Yes. You will need to obtain a license from VARA, before you conduct any virtual asset business within the emirate of Dubai.
There are two stages in the licensing process. Step 1 is submission of an initial application, followed by a detailed review and in-principal approval.
VASPs are also required to be physically present in Dubai, in the form of leasing or purchasing an office.
The authority has also outlined specific requirements regarding capital adequacy, operational transparency, and compliance with anti-money laundering protocols.
I own a Virtual Assets proprietary trading license, and use my own funds with no clients. Am I required to be registered with VARA?
Yes. Proprietary trading companies that trade in virtual assets have to obtain a No-Objection Certificate from VARA. This is to confirm that the trading activity can be undertaken without a VARA license or any form of regulation from VARA.
VA Proprietary traders with a 30-day rolling trading volume of US$ 250 million will have to register with VARA.

Can I cater to Retail Clients with a VARA license, or is the license restricted to Qualified Clients only?
Yes, a VARA (Virtual Assets Regulatory Authority) licensee can cater to retail customers. Virtual Asset Service Providers (VASPs) are permitted to offer services to retail clients once they have obtained the appropriate VARA license. However, VARA retains discretion in approving certain VASPs to provide services exclusively to Qualified Investors and institutional clients based on specific criteria and risk assessments.
How does VARA classify investors?
According to VARA's regulations, there are three main classifications of investors:
1. Retail Investors: These include individuals or companies that do not meet the criteria of being classified as qualified or institutional investors. Retail investors have lower investment amounts to commit and lesser experience in investing in the virtual asset space.
2. Qualified Investors: This classification includes individuals or legal entities that meet certain financial thresholds (e.g., maintaining a cash holding of AED 500,000) and demonstrate relevant knowledge about virtual assets.
3. Institutional Investors: These are entities regulated by competent financial authorities, such as banks or investment firms, which possess significant expertise in virtual assets.
A single license can cover both retail and institutional services, however, the VASP must comply with VARA's regulations regarding investor classifications and ensure that it adheres to any restrictions imposed on its activities.
What is a Category 1 VARA Issuance?
A Category 1 VA issuance from VARA refers to the issuance of specific types of virtual assets that require authorization and licensing by VARA. This category primarily includes the issuance of Fiat-Referenced Virtual Assets (FRVAs), which are virtual assets designed to maintain a stable value in relation to one or more fiat currencies, although they do not hold legal tender status in any jurisdiction. Stablecoins that have the Arab Emirate Dirham, or AED, as a reference currency will have to be licensed by the UAE Central Bank and not VARA.
What is a Category 2 VARA Issuance?
The Category 2 issues include all issuances which do not constitute a Category 1 VA issuance, and—
by or involving DNFBPs and Professions; or
which satisfy any of the following—
(i.) a single transaction exceeding AED 40,000, or the equivalent amount in another fiat currency or Virtual Assets;
(ii.) offered to one hundred and fifty Entities or more, where such Entities are acting on their own account; or
(iii.) over a period of twelve [12] months, starting with the beginning of the issuance, the total consideration, direct or indirect benefit, accrued to the Issuer exceeds AED 2 million, or equivalent.

Does VARA require appointment of UAE residents?
Yes, the regulator mandates the appointment of two Responsible Individuals to be appointed as full-time employees and be resident in the UAE. These Responsible Individuals also have to meet the "Fit and Proper" criteria set by the regulator.
Does VARA require a physical presence in Dubai, such as leasing an office space?
Yes. VARA mandates that the Firm lease an office in Dubai, and a lease agreement will have to be be provided as part of the licensing process.
There is no minimum size/space requirement from VARA. However, you would have to provision for around 80 square feet per visa required, unless the space is in a business centre.
What is the process to set up a VARA License in Dubai?
The process involves the following steps:
1. Choose the zone of incorporation of the legal entity – this can be the DWTC or any other free zone in Dubai, or the Dubai Economic Department (mainland) license.
2. Finalise the physical office – this will be based on the number of visas required and actual space required to carry out your business operations
3. complete the reserving of the name and signing the corporate documents such as the Memorandum of Association
4. Submit an Initial Disclosure Questionnaire (IDQ) to VARA
5. VARA reviews the submission, revert with questions, if any, and then sends across an invoice for 50% of the application fees.
6. VARA issues an Initial Approval once the fees are paid.
7. Submit the Initial Approval to the contracted free zone to obtain the non-operational license
8. Complete Part 2 of the VARA application within 12 months – this includes detailed document submissions, policies and procedures, appointment of responsible individuals, Compliance and AML officers, and company secretaries
9. VARA then issues an invoice for the balance 50% of it’s application fees.
10. Once paid, VARA issues the permissions to formally carry out the activities applied for. This is now a fully functional and regulated license.
What are the costs associated with applying for and maintaining a VARA license?
Costs include two types of fees – one is payable to the regulator i.e. VARA, and the second is payable for the legal structure and office space options.
VARA – The Regulator
VARA has two sets of charges. There is a one-time application fee and an annual fee payable for supervision of the licensed entity.
(i.)Application Fee – payable one-time only, and per activity
(ii.) Advisory Services – US$ 10,900 (AED 40,000)
(iii.) Broker-Dealer Services – US$ 27,300 (AED 100,000)
(iv.) Custody Services – US$ 27,300 (AED 100,000)
(v.) Exchange Services – US$ 27,300 (AED 100,000)
(vi.) Lending and Borrowing Services – US$ 27,300 (AED 100,000)
(vii.)VA Management and Investment Services – US$ 27,300 (AED 100,000)
(viii.)VA Transfer and Settlement Services – US$ 10,900 (AED 40,000)
(ix.)Extension Fee - payable one-time only, and per activity
50% of lower license application Fee.
For instance, if a Firm applies for Custody Services and VA Transfer and Settlement Services, the application fees will be US$ 27,300+ US$ 5,450.
(x.)Annual Supervision Fee - payable every year, and per activity
(xi.) Advisory Services – US$ 21,800 (AED 80,000)
(xii.)Broker-Dealer Services – US$ 54,600 (AED 200,000).
(xiii.)Custody Services – US$ 54,600 (AED 200,000)
(xiv.)Exchange Services – US$ 54,600 (AED 200,000)
(xv.)Lending and Borrowing Services – US$ 54,600 (AED 200,000)
(xvi.)VA Management and Investment Services – US$ 54,600 (AED 200,000)
(xvii.)VA Transfer and Settlement Services – US$ 21,800 (AED 80,000)
Free Zone – The Registrar of Companies
Most entities that have obtained VARA licenses have established themselves in the Dubai World Central (DWTC) Free Zone. Here are the approximate costs:
DWTC VARA Packages
a. from US$ 12,125 (AED 44,500) per annum (VA Proprietary Trading, Distributed Ledger Technology).
b. from US$ 17,400 (AED 63,800) per annum (VA Advisory Services, VA Broker & Dealer Services, VA Lending Borrowing Services, VA Issuance).
c. from US$ 21,350 (AED 78,300) per annum (VA Custody Services, VA Exchange Services, VA Management and Investment Services).
Global Impact and Future Prospects:
Since its inception, VARA has attracted significant interest from global players in the virtual asset space, including major exchanges and innovative startups. By fostering a collaborative environment between local and international stakeholders, VARA aims to facilitate cross-border operations while ensuring compliance with global standards. The authority's proactive approach has led to the successful licensing of multiple VASPs, establishing Dubai as an attractive destination for digital asset businesses seeking regulatory clarity.In summary, VARA stands at the forefront of Dubai's ambition to be a global leader in the digital economy. Its comprehensive regulatory framework not only safeguards investors but also encourages innovation and investment in virtual assets, thereby contributing to the sustainable growth of Dubai's economy. As VARA continues to evolve alongside technological advancements in the digital asset sector, it remains committed to adapting its regulations to meet emerging challenges and opportunities in this dynamic landscape.
How Can 10 Leaves help you?
10 Leaves is a Corporate Service Provider at VARA.
We provide turnkey services for VARA Licenses. From inital consultations, to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the VARA Rulebooks and submit an application that is comprehensive, complete and compliant.
Our services include assistance in:
1. Reviewing the business model and advice on the applicable regulatory framework;
2. Preparation of the Regulatory Business Plan and comprehensive financial projections;
3. Preparation of all policies, processes and manuals required;
4. Provision of Outsourced Compliance Officer, Company Secretary and Outsourced Finance Officer services;
5. Finalising the legal structure, including holding company setup and customisation of Memorandums; and
6. Finalisation of leased space and obtaining Financial Services Permissions.

For More Details About VARA Licenses, Contact us here