INTRODUCTION
VARA—established under Dubai Law No. 4 of 2022—is the competent regulatory body for Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) throughout Dubai, including free zones, but excluding DIFC.
Its objectives include:
- Promoting Dubai as a global VA hub;
- Increasing investor awareness and sector innovation;
- Protecting investors and preventing illegal practices;
- Regulating, supervising, and overseeing VAs and VASPs;
- Developing robust rules to support the digital economy.
The Regulations form the core regulatory framework, subject to updates at VARA’s discretion.
Original source: VARA_EN_18_VER992_2
FUNDAMENTAL PRINCIPLES & GOALS
The regime is built on five regulatory pillars:
- Market Integrity & Stability – Fair, transparent markets; FATF-aligned; prudentially safe.
- Consumer Protection – Prevent harm from misinformation/abuse; informed consent required.
- Technology Neutrality – Regulate activity, not technology; avoid unnecessary bans.
- Regulatory Resilience – Principles-based to avoid obsolescence and loopholes.
- Efficiency & Proportionality – Balanced supervisory burden aligned with market risk.
Primary policy goals:
- Position Dubai/UAE as a safe, progressive, globally interoperable VA jurisdiction;
- Align with international law and FATF principles;
- Promote cross-border regulatory passportability.
PART I – THE REGULATOR
A. Establishment of VARA
- VARA has exclusive jurisdiction over VA activities in Dubai.
- Holds full discretion to interpret, waive, or modify the Regulations.
- Can amend regulations at any time.
B. Rules, Directives & Guidance
VARA can issue:
- Rules (binding) included in Rulebooks;
- Directives (binding, entity-specific or sector-specific requirements);
- Guidance (non-binding explanatory materials).
VARA may:
- Place capital/liquidity requirements, exposure limits, or additional reporting on entities;
- Issue waivers;
- Make different provisions for different VA activities or asset types.
PART II – ISSUING VIRTUAL ASSETS
A. Issuance Rules
Issuers must comply with the VA Issuance Rulebook.
B. Classification Powers
VARA may classify a VA as:
- Prohibited;
- Regulated by the UAE Central Bank (CBUAE);
- Or issue interpretive statements about regulatory treatment.
Virtual Assets may be considered objects or rights under UAE Civil Transactions Law.
C. Prohibited Virtual Assets
- Anonymity-Enhanced Cryptocurrencies (AECs) are fully prohibited (issuance and all related VA activities).
PART III – REGULATED VA ACTIVITIES
A. General Prohibition & Exemptions
No entity may conduct a VA Activity unless:
- Licensed by VARA;
- An employee acting on behalf of a licensed VASP; or
- An Exempt Entity.
VARA determines whether an activity is carried out “by way of business” using factors such as scale, remuneration, and commercial representation.
False claims of being a VASP/Exempt Entity are prohibited.
Central Bank Jurisdiction
- UAE-CBDC related activities fall solely under CBUAE.
- VASPs must comply with relevant CBUAE regulations (e.g., payment tokens).
PART IV – LICENSING
A. Licensing Requirements
- Any entity conducting a VA Activity must obtain a VARA licence.
- Must meet licence conditions and comply with all Regulations, Rulebooks, and Directives.
- If operating outside Dubai, VASPs must meet the higher of the two jurisdictions’ standards.
Professional Exemption
Lawyers, accountants, and business consultants are exempt only if activities are incidental to professional work and they maintain proper authorisation and insurance. VARA retains discretion.
Exempt Entities
Must:
- Notify VARA;
- Obtain a formal no-objection;
- Comply with all imposed conditions.
Mandatory Registration – Large Proprietary Traders
Entities investing ≥ USD 250M over 30 days must register with VARA.
Registration ≠ licence.
Voluntary Registration
Technology service providers or proprietary investors may voluntarily register.
Voluntary registration ≠ licence.
Critical Service Providers
VARA may designate service providers as systemically important based on:
- Systemic impact,
- Dependence by VASPs,
- Availability of alternatives.
Such entities become subject to direct VARA supervision.
B. Licensing & Authorisation Powers
VARA may:
- Approve or reject licence applications;
- Impose limitations or time-bound permissions;
- Add/remove VA activities;
- Consider actions by other regulators when approving.
VARA may vary, suspend, or revoke licences for:
- Violations,
- Insolvency,
- Failure to pay judgments,
- “Good Cause.”
Fees apply per Schedule 2.
PART V – VA ACTIVITY RULEBOOKS
VASP obligations come from:
General Rulebooks:
- Company Rulebook
- Compliance & Risk Management Rulebook
- Technology & Information Rulebook
- Market Conduct Rulebook
Activity-Specific Rulebooks:
(e.g., Advisory, Custody, Exchange, Lending, Issuance, Investment Services, Transfer & Settlement)
VASPs must comply with all applicable Rulebooks.
PART VI – AML/CFT
A. Supervisory Authority
VARA is a Federal AML/CFT Supervisory Authority under Decree-Law 20/2018.
Reports suspicions to federal authorities.
B. VASP AML/CFT Obligations
Must comply with:
- All Federal AML laws;
- All VARA regulations and FATF-aligned rules;
- All AML-related Rulebook requirements.
PART VII – MARKETING, ADVERTISING, PROMOTION
All entities must comply with VARA’s Marketing Regulations 2024, covering:
- Disclosures,
- Risk warnings,
- Limitations on influencers,
- Restrictions on promotion of unlicensed services.
PART VIII – MARKET OFFENCES
Market Offences include:
- Insider Dealing
- Unlawful Disclosure
- Market Manipulation
Certain behaviours may be labelled Accepted Practices, exempt from being offences.
Inside Information
Defined as non-public, precise information that would reasonably affect a VA’s price or investor decisions.
Insider Dealing
Includes:
- Trading on inside information;
- Amending/cancelling orders;
- Advising or inducing others.
Unlawful Disclosure
Sharing inside information outside normal professional duties.
Prohibition
Entities are strictly prohibited from Insider Dealing or Unlawful Disclosure.
Legitimate Behaviour
Exemptions apply to:
- Market makers;
- Execution-only agents;
- Pre-existing obligations.
Market Sounding
Permitted with strict requirements for:
- Written records, disclosures, consent, confidentiality, and 8-year recordkeeping.
Market Manipulation
Covers a wide range of behaviours including:
- Fake orders, spoofing, wash trading, price signalling;
- Rumour dissemination;
- Algorithmic manipulation;
- Benchmark distortion.
Accepted Practices exist (e.g., collateral transactions, legitimate algorithmic trading).
Detection & Reporting
VASPs must detect, prevent, and report suspicious activity to both VARA and the UAE FIU.
PART IX – SUPERVISION, EXAMINATION & ENFORCEMENT
VARA may conduct investigations and examinations at any time.
Entities must provide full access to records, systems, and data.
Supervision Scope
VARA can assess:
- Financial condition,
- Safety and soundness,
- Policies and controls,
- Compliance with laws,
- Affiliate operations.
Enforcement Tools
Include:
- Reprimands;
- Cease & desist orders;
- Licence suspension/revocation;
- Public statements;
- Fines (see Schedule 3);
- Additional monitoring;
- Injunctions.
Penalties can also apply to Responsible Individuals.
A grievance process may be established.
PART X – CONFIDENTIALITY
Entities must keep all communications with VARA confidential unless:
- The information becomes public via VARA; or
- VARA issues written approval.
Employees and service providers must be bound by similar confidentiality duties.
SCHEDULES
Schedule 1 – VA Activity Definitions
Provides formal definitions for all regulated VA activities (Advisory, Broker-Dealer, Custody, Exchange, Lending, Issuance, Investment Services, Transfer & Settlement).
Schedule 2 – Supervision & Authorisation Fees
(Page 39 contains a detailed table)
Examples:
- Advisory: AED 40,000 application / AED 80,000 annual
- Exchange: AED 100,000 application / AED 200,000 annual
- Custody: AED 100,000 application / AED 200,000 annual
- Extension fees: 50% of the lower application fee
VARA may impose additional fees based on risk factors.
Schedule 3 – Fines
States VARA’s full discretion to impose fines based on:
- Nature/seriousness of violations,
- Market impact,
- Cooperation during investigations,
- Past compliance history.
(Connected to Cabinet Resolution No. 99 of 2024.)
