Basic Requirements for Obtaining a VARA Permit

Each country creates state bodies to regulate the crypto industry. Although the requirements have become more authoritarian, despite this, it is still an attractive jurisdiction for many investors seeking to get permits here.

The Virtual Asset Regulatory Authority is the central supervisory authority for the financial activities of firms. Since February 2024, this Regulator has published new conditions for crypto organizations.

Background The Dubai Virtual Asset Authority (VARA), a subsidiary of the Dubai World Trade Center Authority (DWTCA), was established in February 2022 under the Virtual Assets Act (VA) of the United Arab Emirates as an authorized entity responsible for the management, supervision and oversight of all Asset Service Providers (VASPs) and virtual asset operations in Emirate of Dubai (excluding Dubai International Financial Center or DIFC).

Regulatory framework for virtual asset management and all related activities within the emirate. These new regulations include mandatory rules for all VASPs, as well as specific rules for each AV operation established under VARA mode.

Most notably, VARA sets high standards for the virtual asset scene in the UAE. Most of the new requirements are on par with financial market regulations established in other jurisdictions, bringing a comprehensive regulatory framework for virtual assets to the region for the first time.

These new developments are relevant to all existing and potential VARA candidates, as well as to any PSAV offering or plans to provide services in the Emirate.

Features of Jurisdiction

The new legislation confirms that the VARA Regulator can operate throughout Dubai. We list the conditions that apply to other regulatory bodies:

• The UAECB and VARA should control payment tokens backed by real currencies and stablecoins (virtual currency with a fixed value).
• The Central Bank will also control the electronic currency.
• An organization that has obtained a VARA license does not need to make a separate licensing request from the SCA.
• Any entity that has obtained commercial licensing for a crypto business in the Free Zone is eligible to complete a request for a separate VARA license to engage in a business related to virtual funds.

Thus, Emirates conducts a comprehensive regulation of the financial activities of organizations related to virtual currency.

What Types of Crypto Activities Are Subject to Control?

Consider the list of services provided by crypto firms that are subject to control by regulatory authorities. It should be noted that they will not include those organizations that conduct their financial activities in Financial Center. Services are as follows:

• consulting;
• dealer and brokerage;
• depository;
• credit and loan;
• exchange: fiat/cryptocurrency, cryptocurrency/fiat, cryptocurrency/cryptocurrency;
• payment and financial: transactions, money transfers;
• management and investment.

To control all the listed crypto services, we developed a Framework. The platform is fully adapted to the technology and the requirements for operating systems designed to conduct crypto activities. The action of this program has gained momentum since its publication. In this regard, any organization planning to engage in crypto business should be familiar with these conditions.

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More about VA (Virtual Assets)

Let’s understand the principles of this platform. The requirements apply to registering a firm and obtaining a VASP (crypto-related financial services provider) permit. The requirements describe all activities with virtual currency that are subject to control. These requirements have a detailed description of the conditions associated with implementing the AML system and what relates to violations of the crypto market.

All crypto firms that follow licensing rules must meet 4 conditions to support licensing for their subsequent crypto activities.

But there are 7 more rules that must be observed to be allowed to conduct financial activities. These rules consider the risks that may arise in the process of crypto business. All requirements should be considered when an organization has a BAPA license. In addition, conditions have been developed that are aimed at regulating the issuance of crypto.

Consider the Requirements for Crypto Firms

There are rules for all financial companies related to virtual currency. These rules must be taken into account for the methods of management activities of organizations, for capital investments, and for the company’s organizational structure.

To pass licensing, you must appoint 2 responsible persons with experience in the crypto business. They must be residents of the UAE or have a UAE passport. The same conditions apply to the directorate of the organization and leading managers.

We list the financial activities subject to regulation by the VARA Regulation (these activities will also be checked during licensing):

• control of the company’s management;
• availability of trained personnel;
• accounting and auditing;
• conducting risk analysis;
• implementation of AML and KYC policy.

All these points will be subject to rigorous scrutiny. If deficiencies are found, the company will have to eliminate them.

The Process of Obtaining a Permit

There currently needs to be a final plan for obtaining a license. While there is a way to go through the initial stage: the necessary package of documents is provided. The MVP project and the permit have been obtained so far only for MVP.

From all, it follows that the licensing rules have become more brutal, and now, you can only get a license for the minimum viable product.