Crypto Regulation in Dubai: Understanding the VARA Framework

Dubai is widely recognised as one of the most crypto-forward jurisdictions globally. Government-led initiatives, regulatory innovation, and the presence of major international exchanges have positioned the emirate as a serious hub for virtual assets. But there is an important distinction that often gets lost in headlines. Dubai is crypto-friendly, not crypto-permissive. This article explains how crypto regulation works in Dubai, what laws and regulators are involved, and why setting up a crypto business requires far more than a commercial license. If you are considering launching a crypto-related venture in Dubai, this guide walks you through the regulatory reality you will need to navigate.

Summary of Crypto Regulation in Dubai

Crypto activities in Dubai are regulated through a structured, multi-layered legal framework that combines emirate-level licensing with specialised regulatory oversight.

The cornerstone of this framework is the Virtual Assets Regulatory Authority (VARA), established in 2022 to regulate virtual asset service providers operating in Dubai outside the DIFC. VARA works alongside existing commercial licensing authorities and, in certain cases, federal regulators such as the Securities and Commodities Authority (SCA) and the Central Bank of the UAE.

Importance and Impact of Dubai’s Crypto Regulatory Framework

Dubai’s crypto regulations are designed to balance opportunity with control. On one hand, the government has actively signaled its long-term commitment to blockchain adoption. A memorandum of understanding with Crypto.com is intended to allow government fees to be paid using regulated digital currencies. A separate pilot project between the Dubai Land Department and VARA is exploring the tokenisation of real estate assets, including the possibility of fractional ownership recorded on the blockchain.

This dual approach has real consequences for businesses. It attracts serious operators while filtering out those seeking fast entry or light regulation. The impact is visible in the numbers. Only 36 companies have received VARA licences over the past two years, despite significant global interest in the Dubai market.

Key Regulatory Requirements for Crypto Businesses in Dubai

Setting up a crypto business in Dubai involves more than one authority and more than one approval. Understanding how these layers interact is essential.

Commercial Licensing Comes First

Every crypto business must start with a commercial license, either in mainland Dubai or in a free zone. Mainland licenses issued by the Department of Economy and Tourism (DET) include specific crypto-related activity codes, such as:

• Virtual asset advisory services
• Custody services
• Exchange operations
• Investment management
• Broker and dealer activities

Several free zones also support crypto businesses. IFZA offers one of the most detailed activity classifications. DMCC hosts multiple VARA-licensed entities in practice, even though its public listings are not fully updated. Dubai World Trade Centre (DWTC) is notable as the location of Binance’s regional headquarters.

The Dubai International Financial Centre (DIFC) operates under a separate legal system and is regulated by the Dubai Financial Services Authority (DFSA), not VARA. A commercial license allows the company to exist. It does not authorise crypto activity.

VARA Approval Is the Decisive Stage

The critical approval comes from VARA, which regulates virtual asset service providers through defined licensing categories, including advisory, brokerage, custody, exchanges, lending and borrowing, and investment management.

The process begins with the Initial Disclosure Questionnaire (IDQ). This is not a simple form. It requires detailed disclosures covering:

• The regulatory business plan, including revenue model and technology infrastructure
• Ownership structure and ultimate beneficial owners
• Governance framework and organisational structure
• CVs of senior management and key personnel
• Financial projections and proof of capital

VARA uses this stage to assess whether the business is viable, compliant, and run by individuals who meet fit and proper standards. Senior management, shareholders, and compliance officers are all reviewed for experience, integrity, and financial standing.

Capital, Compliance, and Ongoing Obligations

VARA licensing involves meaningful financial commitments. Initial capital requirements range from AED 100,000 for advisory activities to over AED 1.5 million for exchanges, depending on the license category. Application and annual regulatory fees apply on top of capital thresholds.

Licensing is not a one-time exercise. VARA-regulated businesses must comply with ongoing obligations, including:

• Regular regulatory reporting
• Maintenance of capital adequacy
• AML and CFT compliance frameworks
• Notification of material changes in ownership or management

Federal Regulators May Still Apply

In certain cases, Dubai-licensed crypto businesses must also engage with federal regulators.

The Securities and Commodities Authority (SCA) may regulate activities involving token issuance, exchanges, or custody that resemble securities or capital markets services. The Central Bank of the UAE becomes relevant where crypto overlaps with payments, stablecoins, digital wallets, or remittance services.

Recent DIFC Update: DFSA’s Enhanced Crypto Token Framework

In early 2026, the DFSA brought into force major updates to its Crypto Token Regulatory Framework. These changes materially affect how DIFC-based digital asset firms assess tokens, structure operations, and manage regulatory risk.

The most significant change is a shift in responsibility from the regulator to the firm. Under the updated framework:

• Firms must independently assess and document whether a crypto token meets DFSA suitability criteria
• The DFSA no longer publishes or maintains a list of recognised crypto tokens
• Token due diligence is now a firm-level compliance obligation, not a regulatory safeguard

This change increases flexibility, but it also increases accountability. If a token assessment is flawed, the regulatory exposure sits with the licensed entity.

The revised framework also introduces further refinements:

• Enhanced investor protection measures
• Clearer conduct and operational requirements
• Proportionate reporting obligations aligned with current market conditions

For businesses engaged in trading, custody, fund management, or advisory services, the updates provide clearer boundaries around permitted activities while maintaining strong oversight.

Penalties for Non-Compliance

Operating without proper authorisation or exceeding the scope of a license can expose businesses to serious consequences, including:

• Suspension or revocation of licenses
• Administrative fines imposed by regulators
• Orders to cease regulated activities
• Referral to federal authorities in cases involving financial crime or consumer harm

How LYLAW Can Help

Dubai’s crypto framework rewards preparation and penalises shortcuts. Businesses that succeed are those that understand the regulatory landscape before committing capital, technology, or branding.

LYLAW advises clients on the full lifecycle of crypto business setup in Dubai, including commercial licensing strategy, VARA regulatory approvals, governance structuring, compliance frameworks, and engagement with federal regulators where required. If you are considering launching or expanding a crypto business in Dubai, early guidance from our team of experienced crypto lawyers can save you months of delay and significant cost.