Consider this: you're starting a new project in Web3 Dubai, and everything is going smoothly until you discover that you need to register as a virtual asset service provider (VASPs). Instead of focusing on your business, you're suddenly tangled up in legal obligations you never expected.

How will you find the time and energy to meet these requirements when launching a new venture? This guide will walk you through the ins and outs of VASPs so you can get back to focusing on your goals. As you read on, you'll learn how to quickly comply with VASP regulations in Dubai to get your business back on track. You'll also discover how Ape Law's Web3 legal experts can help you navigate this process and get expert legal solutions on Web3.

Table of Contents

• VASPs Provider in UAE

• Requirement for VASPs in UAE

• How to Get VASPs in UAE for Your Web3 Business

• Benefits of Getting VASP for a Web3 Business

VASPs Provider in UAE

VASPs in Dubai: Who Regulates Them?

In Dubai, Virtual Asset Service Providers are regulated by the Virtual Assets Regulatory Authority, or VARA. This organization oversees the activities of VASPs across Dubai's free zones and the mainland, excluding the Dubai International Financial Centre (DIFC). VARA was established under Law No. (4) of 2022 and aims to provide a world-leading regulatory framework that ensures investor protection high levels of risk assurance, and facilitates virtual asset innovation in Dubai. 

VASPs in Dubai: Licensing Process and Public Register

VARA maintains a publicly accessible register of Virtual Asset Service Providers that are either fully licensed or hold an In-Principle Approval (IPA). An IPA is a conditional step in the licensing process, allowing applicants to complete the final requirements to secure a full VASP license. Applicants with an IPA are prohibited from initiating operations, conducting virtual asset activities, or servicing clients until they have obtained their VASP license from VARA. The public register provides key details about each VASP, including the specific permits granted and the services they are authorized to offer. This transparency ensures consumer protection and informs stakeholders about each provider's legitimacy and scope of operations. 

VASPs in Dubai: Licensed Activities

VASPs seeking to operate in Dubai must apply for and receive a license from VARA before undertaking any virtual asset activities. The licensed activities include: 

Exchange Services

Facilitating the exchange of virtual assets.

Broker-Dealer Services

Engaging in trading activities on behalf of clients.

Management and Investment Services

Managing virtual asset portfolios and providing investment advice.

Custody Services

Safekeeping of virtual assets, including custodial staking.

Advisory Services

Guiding virtual asset investments.

Lending and Borrowing Services

Facilitating lending and borrowing of virtual assets. VASPs licensed to undertake multiple activities must fully meet the requirements for each activity and maintain compliance at all times. 

VASPs in Dubai: Examples of Licensed VASPs

As of the latest update, the following are examples of VASPs that VARA has granted licenses:​ 

Mantra Finance FZE

Licensed for Exchange Services, Broker-Dealer Services, and Management and Investment Services.

Tokinvest DMCC

Licensed for Broker-Dealer Services.

OFZA Fintech Virtual Asset Exchange LLC

Licensed for Broker-Dealer Services, Exchange Services, Management and Investment Services, and Advisory Services.

Zand Bank P.J.S.C.

Licensed for Custody Services.

BitOasis Technologies FZE

Licensed for Broker-Dealer Services.

Deribit FZE

Licensed for Exchange Services, including Virtual Asset Derivatives Trading.​

OKX Middle East Fintech FZE

Licensed for Lending and Borrowing Services, Management and Investment Services, and Exchange Services, including Virtual Asset Derivatives Trading.​ Please refer to VARA's public register for a comprehensive and up-to-date list of licensed VASPs, including their specific licensed activities and statuses. ​ 

VASPs in Dubai: Regulatory Notices and Compliance

VARA also issues regulatory notices and maintains a framework to ensure that all licensed VASPs comply with the established guidelines. This includes adherence to anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, as well as aligning with international standards to maintain the integrity of Dubai's virtual asset market.

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Requirement for VASPs in UAE

Setting Up Shop in Dubai: Registering Your Web3 Business

To launch your Web3 business in Dubai, you must first register your entity with the emirate’s Virtual Assets Regulatory Authority (VARA). This governing body oversees all virtual asset activity in the emirate, and its licensing process is designed to protect investors and ensure a compliant environment that promotes innovation. VARA issues different licenses based on the activities a virtual asset service provider (VASP) intends to conduct.  ​You must establish your Web3 business in Dubai to obtain a VARA license. This involves legally registering your entity in a Dubai Free Zone or on the Mainland, depending on your specific business goals and regulatory preferences. 

Physical Presence: You Can’t Run a VASP From Afar

Next, VARA requires your business to establish a physical presence in Dubai. This involves setting up a local office, obtaining visas for key personnel, and engaging with local service providers. These measures help ensure compliance with VARA’s expectations regarding local substance and operational integration. 

Fit and Proper Test: VARA Wants to Know Who You Are

Another key requirement for obtaining a VARA license is the ‘fit and proper test’ your business must undergo. This assessment evaluates the key individuals in your organization, such as directors and senior management, to ensure they have the necessary skills, experience, and integrity to operate a VASP in compliance with regulatory standards. 

Capital Requirements: Show VARA the Money

VARA also stipulates specific capital requirements that vary based on the nature of the virtual asset services your business intends to provide. These requirements ensure companies maintain financial stability and meet their obligations to clients and counterparties. 

Operational Standards: Prepare to Play by the Rules

To obtain a VARA license, your business must adhere to high operational standards, which include:​ 

Compliance with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations

Implement robust policies and procedures to prevent money laundering and terrorist financing activities. ​

Cybersecurity Measures

Establish comprehensive cybersecurity protocols to protect digital assets and sensitive information from cyber threats. ​

Risk Management

Develop effective risk management frameworks to identify, assess, and mitigate potential risks associated with virtual asset activities. ​Adherence to these operational standards is crucial for maintaining the integrity and security of your business operations. 

Application Process: How to Secure a VARA License

The process of obtaining a VARA license involves several key steps:​

Initial Consultation

Engage with VARA to understand the requirements and determine the appropriate license type for your business activities. ​

Documentation Submission

Prepare and submit detailed documentation, including business plans, financial statements, compliance policies, and information about key personnel. ​

Review and Assessment

VARA will thoroughly review your application, which may involve interviews and due diligence checks to assess compliance with regulatory standards. ​

Approval and Issuance

Upon satisfactory assessment, VARA will issue the license, authorizing your business to commence operations within the scope of the licensed activities. ​The licensing process ensures that only firms meeting stringent regulatory standards can operate, thereby maintaining the integrity of Dubai’s virtual asset ecosystem. ​ 

Ongoing Compliance: VARA is Going to Want to Hear from You

After obtaining the license, your business must comply with ongoing obligations, including regular reporting to VARA, maintaining AML/CFT measures, and ensuring continuous adherence to operational standards. Staying informed about updates or changes to VARA regulations is essential to ensure continued compliance and to avoid potential penalties or legal issues.  

How to Get VASPs in UAE for Your Web3 Business

1. Use Ape Law for Legal Solutions

When it comes to establishing a crypto business in the UAE, the process can be overwhelming. Fortunately, Ape Law can help alleviate the burden. As Web3-native legal experts, we provide smooth crypto licensing, business structuring, and compliance solutions. This way, you can focus on what’s essential: growth. Whether you’re launching a new coin, token, and/or NFT, expanding operations, or optimizing for tax efficiency, our team ensures a smooth and legally sound setup. Ready to establish your business in the UAE? Book a free consultation today to easily navigate the legalities of creating a Web3 business in the UAE! 

2. The Basics of Getting a VASP License

To operate a Web3 business legally in Dubai, you must obtain a Virtual Asset Service Provider (VASP) license from the Virtual Assets Regulatory Authority (VARA). The licensing process has two main stages. 

3. Stage 1: Approval to Incorporate (ATI)

Initial Disclosure Questionnaire (IDQ)

To kick off your VASP license application, submit an IDQ to either the Department of Economy and Tourism (DET) for mainland operations or the relevant Free Zone authority. This questionnaire gathers fundamental information about your business, including its structure and planned activities.

Supporting Documentation

Prepare to provide additional documents such as a comprehensive business plan, details of beneficial owners, and information about senior management.

Fee Payment

To commence the review process, pay the initial application fee, typically 50% of the total license application cost.

Approval to Incorporate (ATI)

Upon satisfactory review, VARA issues an ATI, allowing you to establish your legal entity, secure office space, and initiate operational setup. At this stage, conducting any virtual asset activities is not permitted.

4. Stage 2: VASP License Application

Documentation Submission

After receiving the ATI, prepare and submit detailed documentation as VARA guides. This may involve compliance manuals, risk assessment strategies, and operational policies.

Regulatory Review

VARA will assess your submission, including meetings, interviews, and requests for additional information to ensure compliance with regulatory standards.

Final Fee Payment

Pay the remaining application fee and the first year's supervision fees upon approval.

License Issuance

You will receive your VASP license, which may include specific operational conditions tailored to your business model.

5. Additional Considerations

Regulatory Framework

Familiarize yourself with VARA's comprehensive virtual asset framework, which outlines the regulatory requirements and guidelines for VASPs.

Public Register

VARA maintains a public register of licensed VASPs, enhancing transparency and consumer protection.

Compliance

Adherence to anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations is mandatory. Implementing robust compliance and cybersecurity measures is crucial for successful licensing.

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Benefits of Getting VASP for a Web3 Business

1. Regulatory Categorization Based on Activity Scope 

The Virtual Asset Regulatory Authority (VARA) establishes a licensing framework for virtual asset service providers (VASPs), focusing on six key activities. The categories cover various services related to digital assets, from advisory and management to trading and custody. Each requires compliance with several regulatory measures, including AML/KYC frameworks, cybersecurity protocols, and risk management controls. 

2. Stringent Compliance & AML/KYC Requirements 

Dubai enforces strict Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols under FATF recommendations and UAE Cabinet Decision No. 10 of 2019. Licensed VASPs must comply with several measures, including real-time transaction monitoring and reporting to detect suspicious activities, classifying customers based on their risk profile, and enhanced due diligence for high-risk clients. Additionally, onboarding processes must include robust identity verification involving biometric authentication, AI-driven KYC checks, and blockchain analytics. Failure to comply with these regulations can result in fines, business restrictions, or license revocation. 

3. Market Access & Institutional Legitimacy 

Securing a VARA license allows firms to access Dubai’s institutional investor pool. Financial institutions, VCs, and private equity firms prefer engaging with regulated entities. Moreover, licensed exchanges can facilitate initial (IEOs) and security token offerings (STOs). Operating with a VARA license also enhances a firm’s prospects of obtaining corporate bank accounts with UAE-based banks. 

4. Cybersecurity & Custody Compliance 

VARA mandates robust cybersecurity and digital asset custody solutions for licensed firms. These include using air-gapped cold wallets with multi-signature authorizations for secure storage, quarterly security audits and real-time threat detection for ongoing monitoring, and smart contract audits from VARA-approved cybersecurity firms before launching any token. 

5. Tax Efficiency & Business Structuring 

A VARA license enables access to UAE’s tax benefits, including 0% corporate tax on virtual asset transactions under Free Zone regulations, no VAT on most digital asset trades (except taxable transactions under UAE VAT law), and no personal income tax – ideal for high-net-worth individuals (HNWIs) and crypto entrepreneurs. Setting up a crypto business in the UAE can be complex, but Ape Law makes it smooth. As Web3-native legal experts, we handle crypto licensing, business structuring, and compliance so you can focus on growth. Whether you’re launching a new coin, token, and/or NFT, expanding operations, or optimizing for tax efficiency, our team ensures a smooth and legally sound setup. Ready to establish your business in the UAE? Book a free consultation today to easily navigate the legalities of creating a Web3 business in the UAE!

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