Guide To Vara Broker-dealer Licenses - 10 Leaves

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VARA Broker-Dealer 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.
In this article, we take a look at the Broker-Dealer license offered by VARA, which is by far the most popular license as of now.
What is a broker-dealer license?
A Virtual Asset Broker-Dealer license in Dubai allows entities to engage in various activities related to virtual assets.
With a Virtual Asset Broker-Dealer license, an entity can perform the following activities:
1. Order Arrangement: Arranging orders for the purchase and sale of virtual assets between two entities.
2. Order Solicitation: Soliciting or accepting orders for virtual assets and accepting fiat currency or other virtual assets for such orders.
3. Transaction Facilitation: Facilitating the matching of transactions in virtual assets between buyers and sellers.
4. Dealer Transactions: ...
... Entering into virtual asset transactions as a dealer on behalf of the entity for its own account.
5. Market Making: Making a market in virtual assets using client assets.
6. Issuance Services: Providing placement, distribution, or other issuance-related services to clients issuing virtual assets.

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:
(i.)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.

(ii.)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.
(iii.)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.
(iv.)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.
(v.)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 licenses does VARA issue for broker-dealers?
VARA licenses a broad range of virtual asset activities, ranging from advirosy services to crypto exchanges. The relevant activity for broker-dealer operations is:
VA Broker-Dealer Services: Entities facilitating the buying and selling of virtual assets on behalf of clients.
- means any of the following—
1. transmitting orders for buying or selling VAs;
2. soliciting or accepting orders for Virtual Assets and accepting fiat currency, or other Virtual Assets, for such orders;
3. arranging transaction matching between market players;
4. entering into Virtual Asset transactions as a dealer on behalf of the Entity for its own account;
5. market making activities using client assets; or
6. providing placement, distribution or other related services to Virtual Asset issuers.
What are the capital requirements for VARA broker-delaer licensed companies?
The nature of virtual asset activities determines the capital requirements mandated by the regulator. Below is a summary of the paid-up capital requirements for Virtual Asset Service Providers who wish to provide broker-dealer services:
Broker-Dealer Services – If using a Custodian licenced by VARA:
a. US$ 109,000 (AED 400,000) or
b. 5% of fixed annual overheads
OR

If using a non-VARA licensed custodian:
a. US$ 163,500 (AED 600,000) or
b. 25% of fixed annual overheads.
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 VARA 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 intial 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 properitary trading license, and use my own funds with no clients. Am I required to be registered with VARA?
Yes. Propreitary 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 Propreitary 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.
Does VARA require appointment of UAE residents?
Yes, the regulator mandates the appintment 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 Questionaaire (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.)Broker-Dealer Services – US$ 27,300 (AED 100,000).
(iii.)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.
(iv.)Annual Supervision Fee - payable every year, and per activity.
(v.)Broker-Dealer Services – US$ 54,600 (AED 200,000).
Free Zone – The Registar 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
from US$ 17,400 (AED 63,800) per annum (VA Advisory Services, VA Broker & Dealer Services, VA Lending Borrowing Services, VA Issuance)
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 Information On VARA Broker-Dealer Licenses, Contact us here