How to start a virtual asset company in Dubai 2024 – 25

Dubai has always been a leader in innovation, and this is evident in its efforts to establish itself as a major international hub for virtual assets and blockchain. Dubai has established a regulatory framework that welcomes virtual asset companies, providing a clear path for entrepreneurs wishing to take advantage of this quickly developing market to have a clear road to success as cryptocurrencies and blockchain technology continue to influence the future of finance and commerce.

A study reveals that 55% of Gen Z prefer cryptocurrency over traditional banks, which is driving the adoption of decentralized finance in this era of digitalization. In this era of digitalization, where everything is digital, the concept of digital asset companies is constantly growing, and the craze for cryptocurrencies among millennials and Gen Z is exponentially increasing on a daily basis.

The United Arab Emirates has established a robust framework to promote innovation while maintaining regulatory adherence with the establishment of the Virtual Asset Regulatory Authority (VARA). The city is a great place for virtual asset enterprises because of its business-friendly infrastructure, tax-free atmosphere, and easy access to talent from around the world.

All About VARA (Virtual Asset Regulatory Authority) Dubai

Virtual asset regulatory authority is the regulatory body established in Dubai, with the goals of overseeing and regulating the virtual asset sector in Dubai. The Virtual Assets and Related Activities Regulations 2023 have been released by Dubai’s Virtual Assets Regulatory Authority (VARA). A comprehensive Virtual Assets (VA) Framework based on cross-border financial security and sustainable economic principles is outlined in the Regulations.

Here’s how you can launch your virtual asset company in Dubai step by step.

Step 1: Understand the Legal Framework for Virtual Assets

The first and most critical step is to familiarize yourself with the regulatory framework that governs virtual assets in Dubai. In March 2022, Dubai launched VARA, the Virtual Asset Regulatory Authority, under the Dubai World Trade Centre Authority (DWTCA), which regulates all activities related to virtual assets. This includes:

• Cryptocurrency exchanges
• Token issuance
• Wallet services
• Brokerage services
• Decentralized finance (DeFi) platforms

VARA ensures that businesses operating in the virtual asset space comply with local laws, protect investors, and maintain the integrity of the financial system. You’ll need to abide by these rules to legally operate in Dubai.

Step 2: Choose the Right Legal Structure for Your Business

Dubai offers various business setup options depending on your company’s needs. When starting a virtual asset company, you’ll likely be choosing between the mainland, free zones, or even offshore setups. Each has its pros and cons:

Free Zones:

• Dubai Multi Commodities Centre (DMCC) is one of the most popular free zones for virtual asset companies.
• Free zones provide 100% foreign ownership, tax exemptions, and no customs duties.
• DMCC offers licenses for companies engaging in crypto trading, wallets, and blockchain technology.

Mainland:

• Operating on the mainland gives you direct access to the local market but requires a local partner or agent.
• You may have more flexibility to expand into different sectors.

Offshore:

• Offshore companies are primarily for those interested in international operations without a physical presence in Dubai.
• They are not allowed to conduct business within the UAE.
• For most virtual asset companies, DMCC is a highly favored choice, particularly due to its Crypto Centre, which supports crypto exchanges, DeFi platforms, token issuance, and more.

Step 3: Apply for a Virtual Asset License

To legally operate a virtual asset business, you must apply for a Virtual Asset License through VARA. The application process is fairly straightforward but involves several key steps:

Submit a business plan: This includes outlining your company’s goals, the type of virtual asset services you intend to offer, and your financial forecasts.

Provide key personnel details: You’ll need to submit information about the individuals involved in running the company, including their professional backgrounds and qualifications.

Financial documents: Prepare a financial statement showing the company’s capital, as there may be minimum capital requirements depending on the nature of your business.

AML/KYC Compliance: Virtual asset businesses are required to comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) guidelines. You’ll need to have processes in place to verify your customers’ identities and track transactions.

Fit and Proper Test: You’ll also have to undergo a Fit and Proper test, which evaluates the integrity, competence, and financial soundness of your business owners and key employees.

Once your documents are in order, submit them to VARA for approval. The regulatory body will review your application and issue the necessary approvals, allowing you to legally operate in Dubai.

Step 4: Meet the Compliance Requirements

After receiving approval from VARA, your company will need to ensure ongoing compliance with Dubai’s virtual asset regulations. This involves:

• Implementing AML/KYC procedures: You’ll need to monitor your clients’ transactions, ensure that they are legitimate, and report any suspicious activity.
• Data protection and privacy: Make sure that your platform complies with the UAE’s data protection regulations to protect your clients’ personal and financial information.
• Periodic audits: Your company will be subject to regular audits to ensure that you’re meeting all regulatory requirements, including financial reporting and operational transparency.

Step 5: Open a Corporate Bank Account

Opening a corporate bank account can be a challenge for virtual asset companies due to the high-risk nature of the business. However, Dubai has become more open to working with virtual asset companies in recent years.

When approaching banks, it’s essential to have clear documentation, including:

• A business plan
• Proof of regulatory approval from VARA
• Financial statements
• AML/KYC compliance measures in place

Banks like Mashreq Bank, RAK Bank, and Emirates NBD are known to work with blockchain-related businesses, though the due diligence process can be more thorough.

Step 6: Hire the Right Talent

Hiring skilled employees is essential for a virtual asset company. Dubai is home to a wide pool of talent in the blockchain and tech space. However, if you plan to hire international employees, you’ll need to obtain employment visas for them.

The process is straightforward, especially if you’re in a free zone like DMCC, where the visa process is streamlined.

Step 7: Set Up IT Infrastructure and Security

As a virtual asset company, your technology infrastructure is the backbone of your business. You’ll need to ensure that your platform is secure, scalable, and compliant with international cybersecurity standards.

• Cybersecurity: Given the nature of virtual assets, you must implement robust cybersecurity measures to protect your platform and customers’ data.
• Smart contracts and blockchain development: Depending on the services you offer, you may need to build smart contracts, wallets, or blockchain solutions. Consider hiring a strong tech team or partnering with a specialized firm.

Step 8: Promote Your Business

Once you have your virtual asset company set up, it’s time to market your services. In Dubai’s fast-growing market, a strong digital marketing strategy will help you reach potential clients and investors. Focus on building an online presence, engaging with local blockchain communities, and attending industry events.

Some effective marketing channels include:

• Social media (LinkedIn, X, Reddit)
• Content marketing (blogs, case studies, white papers)
• Industry partnerships with blockchain startups or fintech companies
• Networking events and blockchain conferences in Dubai

Step 9: Stay Updated on Regulatory Changes

The virtual asset industry is constantly evolving, and regulations may change over time. It’s important to stay updated on any new rules or guidelines from VARA and other authorities in Dubai. Consider joining local blockchain associations or hiring a legal consultant specializing in crypto regulations to ensure compliance at all times.

VARA-Regulated Virtual Asset Activities in Dubai

If you’re planning to operate a virtual asset business in Dubai or are already involved in this space, it’s essential to understand that the Virtual Asset Regulatory Authority (VARA) oversees all activities related to virtual assets. To comply with Dubai’s regulations, businesses must apply for the appropriate license that matches their activities. Here’s a rundown of the key activities regulated by VARA, explained in an easy-to-understand way:

1. Advisory Services

Advising clients on their virtual assets is an important service, and it’s one that requires a license under VARA. Whether you’re making personalized recommendations at a client’s request or offering advice on your own initiative, any action involving advice on virtual asset transactions needs to be regulated. Think of it as providing tailored investment advice in the traditional finance world—only here, it’s about virtual currencies and assets.

2. Broker-Dealer Services

Are you planning to match buyers and sellers for virtual assets? Or maybe you’ll be facilitating trades between two parties, accepting orders, and even handling the transactions? These activities fall under broker-dealer services. In simple terms, if you’re acting as a middleman in virtual asset transactions or handling orders for clients, you’ll need a license to operate legally in Dubai.

Here’s what’s included under broker-dealer services:

• Arranging and processing orders for buying and selling virtual assets.
• Accepting payment (fiat currency or virtual assets) for those orders.
• Matching buyers and sellers for virtual asset trades.
• Acting as a dealer, using your own company’s assets to enter transactions.
• Helping clients issue virtual assets by offering placement or distribution services.

3. Custody Services

Just like a bank keeps your money safe, virtual asset companies often offer custody services to protect clients’ digital assets. If your business will be responsible for safeguarding virtual assets on behalf of clients and acting on their instructions, you’ll need a license to provide these services. Custody services ensure that your clients’ digital investments are protected and securely managed.

4. Exchange Services

One of the most common virtual asset activities is running an exchange, where people trade between virtual assets or convert them to fiat currency (like dollars, dirhams, etc.). If you plan to operate a platform where buyers and sellers can exchange digital currencies or convert virtual assets into traditional money, you’ll need a license for this.

Exchange services include:

• Trading between virtual assets and fiat currency.
• Converting one virtual asset into another.
• Matching buyers and sellers on your platform and maintaining an order book to track these transactions.

5. Lending and Borrowing Services

In the virtual asset space, lending and borrowing are popular services. If your business facilitates lending (where a lender provides virtual assets to a borrower, with the agreement that they’ll return them later), you’ll need to comply with VARA’s regulations. This type of service includes agreements where virtual assets are loaned out with the expectation that the borrower will return them at an agreed-upon time.

6. Virtual Asset Management and Investment Services

Managing virtual assets for a client is another regulated activity. Whether you’re acting as a fiduciary, agent, or taking responsibility for overseeing and administering virtual assets on behalf of someone else, a license is required. This category covers services where you’re handling someone else’s digital investments and making decisions about how those assets are managed.

7. Virtual Asset Transfer and Settlement Services

This involves the transfer or settlement of virtual assets between different entities, wallets, or addresses. If your business will be facilitating the movement of virtual assets from one place to another (or settling the transactions between different wallets), you’ll need a license for this. Think of it like wiring money in the traditional banking world—only here, it’s done with virtual currencies.

2. Regulatory Fees and Capital Requirements for VASP License in Dubai

When applying for a Virtual Asset Service Provider (VASP) license in Dubai under the Virtual Asset Regulatory Authority (VARA), it’s important to know the associated fees and financial obligations. These costs come into play when you submit your application and throughout the lifetime of your business, ensuring your company remains compliant with local regulations. Here’s a breakdown:

License Application Fees

The first cost you’ll encounter when applying for a VASP license is the license application fee. This fee is paid at the time of submitting your license application. It’s a one-time payment necessary to begin the process of obtaining regulatory approval from VARA to operate your virtual asset business.

If your business plans to engage in more than one virtual asset activity (like providing both advisory and exchange services), you will be required to pay a license extension fee. This fee applies for each additional activity beyond the initial one included in your application.

Annual Supervision Fees

Once your business is licensed, you’ll also need to account for annual supervision fees. VARA charges this fee to monitor and supervise each of your licensed virtual asset activities. This ensures that your business continues to comply with the regulatory framework throughout its operations in Dubai. The fee applies to each individual activity for which you hold a license.

In essence, the financial requirements include:

• Initial license application fee (paid at the time of submission).
• License extension fee (if applying for multiple virtual asset activities).
• Annual supervision fee (to be paid yearly for each licensed activity).

Meeting these financial obligations is a key part of maintaining your status as a compliant and licensed VASP in Dubai. Be sure to budget appropriately when planning your virtual asset business to cover these regulatory costs.

License Extension Fees and Capital Requirements

When operating a Virtual Asset Service Provider (VASP) in Dubai, it’s crucial to understand the extension fees and capital requirements tied to your business operations.

License Extension Fee

For businesses planning to engage in more than one virtual asset activity, VARA has a streamlined structure for extension fees. In all cases, the license extension fee is set at 50% of the lower license application fee. This ensures that businesses expanding their activities can do so at a reasonable cost, enabling more flexibility in your operations.

For example:

• If your primary license is for Broker-Dealer Services (AED 100,000), and you wish to extend it to include Advisory Services (AED 40,000), your license extension fee would be 50% of AED 40,000, i.e., AED 20,000.

Paid-Up Capital Requirements

Maintaining sufficient paid-up capital is mandatory for VASP-licensed entities. The required capital depends on the types of virtual asset activities the business is engaged in and the method of providing custody services.

If your business holds a license for multiple activities, you must consistently maintain the designated paid-up capital for each authorized activity. This ensures that your business has adequate financial backing to support its operations and comply with the regulatory standards.

How BizDaddy Can Streamline Your VARA Application

At BizDaddy, our dedicated Virtual Asset Licensing team is here to make your journey into the crypto space in Dubai seamless and efficient. With a team of highly experienced professionals specializing in fintech project registration and licensing, we ensure that your application process is smooth from start to finish.

Here’s how we can help:

Customized Guidance: We work closely with you to understand your business model and objectives, helping you select the most suitable virtual asset activities that align with your long-term vision.

Regulatory Introductions: Leveraging our extensive network, we facilitate direct introductions to VARA and other relevant regulatory authorities, ensuring that your business is well-positioned to navigate the licensing process.

Comprehensive Support: From document preparation to final submission, we collaborate with your team every step of the way. Our experts handle all the intricate details to ensure that every requirement is met and that your application is thorough and well-prepared.

Efficient Resource Management: We understand the importance of managing financial resources wisely. Our goal is to help you meet VARA’s requirements while optimizing costs and ensuring you stay on track.

Whether you’re just starting or expanding your virtual asset operations, BizDaddy is here to help you succeed in Dubai’s thriving crypto market.

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