Written by
Stephan Roberto
CTO & Web3 Technical Director
Published on
Jan 5, 2026
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Want to operate as a Virtual Asset Service Provider (VASP) in Dubai? You need to comply with the Virtual Assets Regulatory Authority (VARA) standards. VARA regulates virtual assets in Dubai (excluding DIFC) and requires VASPs to meet strict security, governance, and compliance requirements. Failure to comply can result in penalties, licence suspension, or permanent reputational damage.
This guide breaks down the actual security requirements, the hidden compliance costs, and the practical steps to achieve and maintain VARA compliance.
Quick Reality Check: What VARA Security Actually Requires
"Just submit a cybersecurity policy"? Try 25+ compliance documents covering 18 distinct security domains
Annual penetration testing? That's the minimum. Pre-deployment testing required for every major system change
CISO appointment? Must be senior, independent, and report directly to the Board
Compliance budget AED 50,000? Real world: AED 200,000-500,000+ annually for proper security infrastructure
Timeline 3 months? Expect 6-9 months to build compliant security frameworks from scratch
The VARA licensing process demands more than checkbox compliance. VARA conducts active inspections and expects evidence-based documentation for every security control.
Quick Navigation
The Security Compliance Reality Gap
Every consultancy will quote you VARA's official requirements. Here's what they leave out about the actual security compliance burden for VASPs operating in Dubai.
What VARA Officially Requires vs What You Actually Need
Requirement | Official VARA Statement | Real-World Implementation |
|---|---|---|
Cybersecurity Policy | Submit formal policy document | 50-100 page comprehensive framework covering 18 security domains |
Penetration Testing | Annual testing required | Annual external + pre-deployment for all changes + quarterly vulnerability scans |
CISO Appointment | Appoint qualified officer | Senior hire (AED 30,000-60,000/month) with direct Board reporting line |
Access Controls | Implement appropriate controls | Full RBAC system, MFA for all privileged access, session management |
Incident Response | Have response procedures | 24/7 monitoring, documented playbooks, 48-hour STR filing capability |
Third-Party Management | Conduct due diligence | Annual SOC 2 audits, right-to-audit clauses, ongoing monitoring scorecards |
Documentation | Maintain records | Version-controlled policies, change logs, CISO sign-offs, Board minutes |
VARA Security Domains You Must Address
The VARA Technology and Information Rulebook requires comprehensive coverage across these areas:
Security Domain | Key Requirements | Documentation Needed |
|---|---|---|
Information Security Principles | Foundational security guidelines | Policy framework document |
Data Governance | Classification (public, internal, confidential, highly confidential) | Data classification matrix |
Access Controls | RBAC, least privilege principle | Access control policy, user matrices |
Systems Operations | Uptime targets, backups, disaster recovery | DR/BCP plans, RTO/RPO documentation |
Network Security | Firewalls, intrusion detection, protocol monitoring | Network architecture diagrams |
Smart Contract Security | Code validation, third-party audits | Audit reports, validation procedures |
Physical Security | Data centre access, CCTV, environmental controls | Physical security policy |
Authentication | MFA, session management, password policies | Authentication standards document |
Data Privacy | PDPL compliance, cross-border transfers | Privacy impact assessments |
Vendor Management | Due diligence, contractual safeguards | Vendor risk assessments |
Incident Response | Detection, escalation, root cause analysis | Incident response playbook |
Protocol Monitoring | Network upgrades, forks, consensus changes | Protocol change management plan |
For VASPs also considering ADGM licensing or DIFC authorization, note that security requirements differ across jurisdictions.
Creating a VARA-Compliant Cybersecurity Policy
The VARA Technology and Information Rulebook mandates that all VASPs develop a formal Cybersecurity Policy. This policy outlines procedures to safeguard electronic systems and sensitive client data. You must submit it during the licensing process and make it available upon VARA request.
Core Policy Components
Your cybersecurity policy must address these mandatory elements:
Component | What VARA Expects | Implementation Notes |
|---|---|---|
Information Security Principles | Foundational guidelines for all security activities | Align with ISO 27001 or NIST frameworks |
Data Classification | Categories: public, internal, confidential, highly confidential | KYC documents and wallet addresses = highly confidential |
Access Control Framework | Role-based access, least privilege enforcement | Document all privileged access justifications |
Capacity Planning | Critical systems below 70% utilisation | Documented load testing results |
Availability Targets | 99.9% uptime for trading and custody systems | SLA documentation, monitoring dashboards |
Incident Response | Root cause analysis, corrective actions, VARA notification | 48-hour STR filing through goAML |
Vendor Management | Due diligence, ongoing monitoring, audit rights | Annual SOC 2 requirements for critical vendors |
UAE Personal Data Protection Law (PDPL) Integration
For UAE crypto operations, your cybersecurity policy must integrate PDPL compliance:
PDPL Requirement | Implementation | Documentation |
|---|---|---|
Data Classification | Mark KYC docs, wallet addresses as "highly confidential" | Data inventory with classifications |
Cross-Border Transfers | Document transfer assessments for data leaving UAE | Transfer impact assessments |
Encryption Standards | TLS 1.2+ for data in transit, AES-256 for data at rest | Technical specifications document |
Vendor Agreements | Data Processing Agreements with all processors | Signed DPAs on file |
Breach Notification | Procedures for notifying authorities and affected parties | Breach response procedures |
Policy Review and Update Requirements
VARA requires annual policy reviews at minimum. Your CISO must update the Cybersecurity Policy when:
Launching new virtual asset products or services
Making significant IT architecture changes (new custody solutions, cloud region changes)
Identifying emerging vulnerabilities or experiencing major incidents
VARA updates its rulebook or UAE data protection regulations change
Maintain a review calendar, version-controlled documents, change logs, and CISO sign-offs. VARA inspectors will request this documentation.
Technology Governance Framework Requirements
At the core of VARA compliance lies a well-structured technology governance framework. This framework must focus on four primary goals: safeguarding systems and client data, ensuring operational resilience, managing risks systematically, and adhering to VARA and UAE PDPL regulations.
Governance Structure Requirements
Role | Responsibilities | Reporting Line |
|---|---|---|
Board/Executive Committee | Oversee technology and cyber risks, approve policies | N/A |
CISO | Draft and review Cybersecurity Policy, manage security operations | Direct to Board |
Compliance/Risk Function | Integrate technology risks into enterprise risk register | To Board via Risk Committee |
Internal Audit | Test controls as third line of defence | To Audit Committee |
Technology & Cyber Risk Committee | Monthly/quarterly review of incidents, metrics, remediation | To Board |
Risk Assessment Process
Implement a documented and repeatable technology risk assessment covering:
Step | Activity | Output |
|---|---|---|
Asset Identification | Catalogue systems, APIs, wallets, smart contracts, data stores | Asset inventory |
Threat Recognition | Identify ransomware, key theft, protocol exploits, insider threats | Threat register |
Vulnerability Analysis | Assess weaknesses in identified assets | Vulnerability assessment |
Inherent Risk Scoring | Score using 1-5 scale for impact and likelihood | Risk matrix |
Control Evaluation | Assess effectiveness of existing controls | Control assessment |
Residual Risk Calculation | Calculate remaining risk after controls | Residual risk scores |
Treatment Planning | Develop mitigation plans with timelines | Risk treatment plan |
Conduct these assessments annually and whenever major changes occur, such as new product launches or architectural updates. Feed results into Board-level discussions and Internal Audit plans.
Third-Party Risk Management
For vendors supporting critical technology functions, implement:
Requirement | Standard | Frequency |
|---|---|---|
Due Diligence | Security certifications, audit reports, data location, incident history | Pre-engagement |
Vendor Classification | Critical, important, or non-critical based on risk | Annual review |
Contractual Clauses | Information security obligations, PDPL compliance, audit rights | Contract signing |
Ongoing Monitoring | Scorecards, SOC reports, penetration test summaries | Quarterly |
This framework aligns with requirements for crypto exchanges in the UAE and other regulated virtual asset activities.
Required Security Controls for VASPs
Implementing the security controls mandated by VARA is essential for maintaining a strong cybersecurity framework. These controls must be documented, regularly tested, and reviewed by your CISO.
Authentication and Access Controls
Control | Requirement | Implementation Standard |
|---|---|---|
Multi-Factor Authentication | Required for all high-risk activities | Hardware tokens, biometrics, or authenticator apps |
MFA Triggers | Withdrawals exceeding AED 10,000/24hrs, wallet address changes | Configurable thresholds in system |
Failed Login Limits | Account lockout after failures | 3-5 attempts maximum |
Session Timeouts | Idle session termination | 15-30 minutes |
Password Rotation | Regular password changes | Every 90 days |
Authentication Logging | All attempts logged securely | No sensitive data in logs |
Physical Security Requirements
For VASPs with physical infrastructure or HSM facilities:
Control | Standard | Documentation |
|---|---|---|
Access Control | Biometric entry systems | Access logs |
Surveillance | 24/7 CCTV coverage | Retention policy |
Environmental | Fire suppression, climate control (18-27°C) | Maintenance records |
Power Redundancy | Backup generators | 48-hour minimum runtime |
Network Segregation | HSMs on isolated networks | Network diagrams |
Intrusion Detection | IDS for HSM facilities | Alert procedures |
Hardware and Software Standards
Category | Requirement | Standard |
|---|---|---|
Network Security | Disable unnecessary ports/services | Hardening checklist |
Firewalls | Properly configured perimeter defence | Rule documentation |
Server Redundancy | Failover capability for critical systems | HA architecture |
HSM Encryption | FIPS 140-2 compliant key protection | Certification evidence |
Data Encryption (Rest) | Industry-standard encryption | AES-256 |
Data Encryption (Transit) | Secure communication protocols | TLS 1.3 |
Code Security | Vulnerability detection in CI/CD | SonarQube or equivalent |
Smart Contract Audits | Third-party audits for custody, DeFi, token contracts | Audit reports |
These controls apply whether you're operating a crypto trading platform, custody service, or token issuance platform.
Incident Response Requirements
Phase | Activity | Timeline |
|---|---|---|
Detection | Anomaly identification through SIEM | Real-time |
Isolation | Contain affected infrastructure | Immediate |
Analysis | SIEM-based investigation | Within 4 hours |
VARA Notification | Report significant incidents | As required by rulebook |
STR Filing | Suspicious Transaction Reports via goAML | Within 48 hours |
Post-Incident Review | Root cause analysis, corrective actions | Within 7 days |
Penetration Testing and Security Audits
VARA mandates annual penetration testing and pre-deployment testing for any new systems or major infrastructure changes. These requirements ensure your security controls actually work, not just exist on paper.
Testing Frequency Requirements
Test Type | Frequency | Trigger Events |
|---|---|---|
External Penetration Testing | Annual minimum | New product launch, major incident |
Internal Penetration Testing | Annual minimum | Infrastructure changes |
Pre-Deployment Testing | Before each deployment | New custody dashboard, liquidity provider integration, cloud changes |
Vulnerability Assessments | Quarterly | Ongoing requirement |
Security Configuration Reviews | Semi-annual | System updates |
Red Team Exercises | As needed | Higher-risk operations |
Testing Scope Requirements
Your penetration testing must cover:
System Category | Examples | Testing Focus |
|---|---|---|
External Systems | Exchange interfaces, broker portals, APIs, wallets | Internet-facing attack vectors |
Internal Systems | Admin interfaces, back-office applications | Insider threat scenarios |
Critical Infrastructure | Firewalls, VPNs, identity providers | Configuration weaknesses |
Smart Contracts | Custody contracts, DeFi integrations | Code vulnerabilities |
Use certified providers adhering to OWASP-ASVS and NIST SP 800-115 standards. Focus areas should include authentication, authorization, input validation, and key management.
Audit Report Requirements for VARA
Structure your reports to meet VARA inspection standards:
Section | Content | Purpose |
|---|---|---|
Executive Summary | Scope, dates, overall risk posture, key findings | Board-level overview |
Methodology | Standards referenced (OWASP, NIST, ISO 27001) | Demonstrate rigour |
Scope Documentation | All systems and environments tested | Completeness evidence |
Limitations | Any constraints on testing coverage | Transparency |
Vulnerability Details | CVSS v3.1 ratings, exploitability, AED exposure estimates | Risk quantification |
VARA Control Mapping | Each finding mapped to VARA requirements | Compliance alignment |
Remediation Plan | Owner, target date, treatment decision, retest evidence | Accountability |
Remediation Timelines
Severity | Resolution Target | Approach |
|---|---|---|
Critical | 72 hours | Immediate remediation |
High | 30 days | Priority fix |
Medium | 90 days | Planned remediation |
Low | Next review cycle | Risk acceptance with justification |
Maintain a central register tracking every finding through resolution. Your CISO should provide regular dashboards to senior management showing unresolved issues, overdue items, and trends.
CISO Appointment and Security Monitoring
The Chief Information Security Officer plays a pivotal role in shaping and managing your organisation's cybersecurity strategy. Under VARA guidelines, the CISO ensures all systems meet required standards for security, scalability, and regulatory compliance.
CISO Responsibilities Under VARA
Responsibility Area | Specific Duties |
|---|---|
Policy Management | Draft, review, and update Cybersecurity Policy annually |
Security Oversight | System and network protection, consensus protocol integrity |
Smart Contract Security | Oversee audit requirements for custody and DeFi integrations |
Physical Security | Ensure data centre and HSM facility compliance |
Vendor Management | Due diligence and ongoing monitoring |
Authentication Controls | MFA implementation for high-value transactions |
Incident Escalation | Establish procedures for ransomware and critical incidents |
Board Reporting | Direct reporting on security posture and incidents |
Coordination | Work with Internal Audit and MLRO on three-lines-of-defence model |
The CISO must report directly to senior management or the Board to maintain objectivity. This role must be documented in your licensing submissions.
CISO Qualification and Independence
Requirement | VARA Expectation |
|---|---|
Seniority | Executive-level position |
Independence | No conflicting operational responsibilities |
Reporting Line | Direct to Board or senior management |
Qualifications | Relevant security certifications and experience |
Documentation | Role documented in licensing application |
Outsourcing | Permitted if provider demonstrates qualifications to VARA |
Continuous Security Monitoring Requirements
Unlike periodic assessments, continuous monitoring uses automated tools for real-time vulnerability detection:
Monitoring Component | Function | Output |
|---|---|---|
SIEM Platform | Monitor access controls, network security, anomalies | Real-time alerts |
Intrusion Detection | Identify unauthorized access attempts | Incident triggers |
Behavioural Analysis | Detect unusual transaction patterns | Risk flags |
Transaction Limits | Alert on activity exceeding thresholds | Compliance notifications |
On-chain Monitoring | Track blockchain transactions | STR workflow support |
Off-chain Integration | Correlate on-chain with traditional systems | Comprehensive view |
For VASPs in Dubai, integrated on-chain/off-chain monitoring platforms support Suspicious Transaction Report workflows, ensuring compliance with goAML filing requirements within 48 hours.
Security Compliance Costs Breakdown
Understanding the true cost of VARA security compliance requires looking beyond official guidance. Here's what you'll actually spend based on market experience.
Year 1 Security Compliance Costs (Market Estimates)
Cost Component | Advertised/Minimum | Realistic Range (AED) | Notes |
|---|---|---|---|
CISO Salary | "Appoint qualified officer" | 360,000 - 720,000 | AED 30,000-60,000/month for competent hire |
Penetration Testing | "Annual testing" | 50,000 - 150,000 | External firm, comprehensive scope |
Vulnerability Assessments | Quarterly required | 40,000 - 80,000 | 4x per year |
SIEM Platform | "Appropriate monitoring" | 100,000 - 300,000 | Setup + annual subscription |
AML/Transaction Monitoring | Required for STR filing | 60,000 - 240,000 | Monthly subscription |
Smart Contract Audits | Required for custody/DeFi | 50,000 - 200,000 | Per audit, may need multiple |
Compliance Documentation | Submit policies | 75,000 - 150,000 | Legal/consulting support |
Staff Training | Annual requirement | 25,000 - 50,000 | All staff + specialized for high-risk roles |
Cybersecurity Insurance | Best practice | 50,000 - 150,000 | Annual premium |
Third-Party Audits | Annual financial + security | 100,000 - 250,000 | UAE-approved auditors |
Total Year 1 | 910,000 - 2,290,000 | USD 248,000 - 624,000 |
Ongoing Annual Costs (Year 2+)
Component | Annual Cost (AED) | Notes |
|---|---|---|
CISO Salary | 360,000 - 720,000 | Ongoing |
Security Testing | 90,000 - 230,000 | Penetration + vulnerability |
Monitoring Systems | 80,000 - 200,000 | SIEM + transaction monitoring |
Audit Costs | 100,000 - 200,000 | Annual requirement |
Training & Updates | 30,000 - 60,000 | Staff training, policy updates |
Total Ongoing | 660,000 - 1,410,000 | USD 180,000 - 384,000 |
These costs are separate from VARA licensing fees and general operational expenses. For comparison, see our analysis of ADGM license costs and DIFC license costs.
Cost Comparison: VARA vs ADGM vs DIFC Security Requirements
Factor | VARA | ADGM | DIFC |
|---|---|---|---|
CISO Requirement | Mandatory, senior level | Required for certain activities | Required for certain activities |
Penetration Testing | Annual + pre-deployment | Annual minimum | Annual minimum |
Security Framework | VARA-specific rulebook | FSRA guidance | DFSA requirements |
Audit Standards | UAE-approved auditors | ADGM-recognized auditors | DFSA-approved auditors |
Estimated Security Budget | AED 900K - 2.3M (Year 1) | AED 1M - 2.5M (Year 1) | AED 1.2M - 3M (Year 1) |
Best For | Retail-focused VASPs | Institutional platforms | TradFi + crypto hybrid |
Implementation Timeline
Building VARA-compliant security infrastructure takes time. Here's a realistic timeline based on typical implementations.
6-Month Security Implementation Roadmap
Month | Milestone | Key Activities | Deliverables |
|---|---|---|---|
Month 1 | Foundation | Gap assessment, CISO recruitment initiated, framework selection | Gap analysis report, job posting |
Month 2 | Policy Development | Draft Cybersecurity Policy, governance framework, risk assessment methodology | Policy drafts, governance structure |
Month 3 | Control Implementation | Deploy access controls, MFA, SIEM setup, vendor assessments | Control documentation, system configs |
Month 4 | Testing Preparation | Select penetration testing firm, prepare test environments, remediation procedures | Testing contracts, environment docs |
Month 5 | Testing & Remediation | Execute penetration tests, vulnerability assessments, address findings | Test reports, remediation evidence |
Month 6 | Finalization | CISO policy approval, Board sign-off, VARA submission preparation | Approved policies, submission package |
Critical Success Factors
Factor | Impact | Mitigation |
|---|---|---|
CISO Hiring Delays | Can add 2-3 months | Start recruitment Month 1, consider interim outsourced CISO |
Penetration Test Findings | Critical findings extend timeline | Budget time for remediation cycles |
Documentation Quality | Incomplete docs cause VARA queries | Engage legal/compliance experts early |
Third-Party Vendor Delays | SOC 2 reports, contract negotiations | Start vendor due diligence early |
Board Availability | Approval bottlenecks | Schedule governance meetings in advance |
Frequently Asked Questions
Can we use an outsourced CISO to meet VARA requirements?
Yes, VARA permits outsourced CISO arrangements provided you demonstrate to VARA that the appointed experts have the necessary qualifications and expertise. The outsourced CISO must still report directly to senior management or the Board and maintain the required independence. Document this arrangement clearly in your licensing application.
How often must we update our Cybersecurity Policy?
VARA requires annual reviews at minimum. However, you must also update the policy when launching new products, making significant IT changes, identifying emerging vulnerabilities, or when VARA updates its rulebook. Maintain version-controlled documents with change logs and CISO sign-offs.
What penetration testing standards does VARA accept?
VARA accepts penetration testing conducted according to recognized standards such as OWASP-ASVS and NIST SP 800-115. Use certified providers with demonstrable experience in financial services or virtual asset security. Testing must cover both external and internal systems.
Do we need separate security frameworks for different VARA license categories?
No, the security requirements apply across license categories, though the scope and complexity will vary based on your activities. A VA Exchange license will require more extensive controls than an Advisory license due to the higher risk profile.
What happens if we fail a penetration test?
Failing a penetration test is not automatic disqualification. What matters is your response. Document all findings, implement remediation within the required timelines (72 hours for critical, 30 days for high severity), and conduct retesting to verify fixes. VARA expects evidence of effective remediation, not perfection.
How do we handle security incidents under VARA?
Implement your incident response playbook immediately. For significant incidents, notify VARA as required by the rulebook. For suspicious transactions, file STRs through goAML within 48 hours. Conduct root cause analysis and implement corrective actions. Document everything for VARA inspection.
Can we share security infrastructure with a parent company or group entities?
Yes, but you must document the arrangement and demonstrate that controls meet VARA standards. Shared services must still satisfy independence requirements, particularly for the CISO role and internal audit functions. Include details in your licensing application.
What documentation does VARA request during inspections?
VARA may request your Cybersecurity Policy, governance policies, risk assessments, penetration test reports, vulnerability assessment results, incident logs, training records, vendor assessments, Board minutes discussing security matters, and evidence of remediation for identified issues. Maintain all documentation in English (en-AE) format.
Are there specific requirements for smart contract security?
Yes. If your operations involve smart contracts for custody, DeFi integrations, or token issuance, third-party audits are mandatory. Implement a secure software development lifecycle (SDLC) with code reviews and validation procedures. Document your approach in the Cybersecurity Policy.
How does VARA security compliance interact with PDPL requirements?
Your Cybersecurity Policy must integrate PDPL compliance. This includes classifying KYC documents and wallet addresses as "highly confidential," implementing safeguards for cross-border data transfers, and maintaining Data Processing Agreements with vendors. VARA inspections may include PDPL compliance verification.
Next Steps: Build Your Security Framework with Confidence
Meeting VARA security standards requires significant investment in people, processes, and technology. The requirements are substantial, but achievable with proper planning and expert guidance. Strong compliance builds trust with clients, institutional partners, and regulators, helping you secure a competitive edge in Dubai's growing virtual asset market.
Why Choose Ape Law for VARA Security Compliance
We've successfully guided 50+ projects through UAE crypto licensing, including comprehensive security framework development. Our expertise spans:
VARA Readiness Reviews: Gap assessments of existing cybersecurity policies and governance frameworks
Policy Development: Customised policy suites designed to meet VARA's specific requirements
Technical Alignment: In-house CTO ensures blockchain architecture and security measures align with VARA standards
Post-Licensing Support: Ongoing compliance reviews to maintain operational readiness
Our VARA Compliance Success Stories
While client confidentiality prevents us from naming specific platforms, we've helped:
Multiple VASPs achieve first-time VARA licensing approval with compliant security frameworks
Established exchanges remediate security findings and maintain ongoing VARA compliance
International platforms adapt existing security programs to meet UAE-specific requirements
Ready to Build Your VARA Security Framework?
Don't navigate VARA's complex security requirements alone. Our team combines deep regulatory knowledge with practical implementation experience to ensure your VASP launches successfully and maintains compliance.
Schedule Your Consultation Today
Get a customized security compliance roadmap, including:
Gap assessment against VARA security requirements
Detailed cost breakdown and implementation timeline
CISO sourcing and governance structure recommendations
Policy development and documentation strategy
Book Your VARA Security Consultation today.
Additional Resources
Disclaimer: This guide reflects VARA regulations as of January 2025. The UAE's virtual asset regulations evolve rapidly. Always consult with qualified legal counsel before making licensing or operational decisions. The information provided here is for educational purposes and does not constitute legal advice.
Ape Law is a Web3-native legal firm specializing in cryptocurrency and blockchain regulations in the UAE. We provide comprehensive legal support for VARA licensing, security compliance frameworks, and ongoing regulatory requirements.
