Welcome back to Lawgical with Ludmila, where we untangle legal knots so you do not have to. I am Ludmila Yamalova, a U.S.-qualified lawyer based in Dubai. In each episode, we break down complex law into clear, practical insights you can actually use. In today’s episode, we are talking about how the UAE’s crypto-legislative framework really works—what is required, why it is demanding, and what makes it worth it.
The UAE, as many will have heard, is one of the most crypto-friendly jurisdictions in the world. But crypto-friendly does not mean crypto-easy. In recent years, the UAE has taken bold steps—at a federal level, for example, signing an MOU with a crypto.com platform to allow government fees to be paid in regulated digital currencies. In other words, for Dubai or Abu Dhabi courts in particular, there is an initiative to pay fees through crypto. That is a bold move. Once live, this may be the region’s first government-wide crypto payment system.
At the Emirate level, in Dubai, there was a recent announcement about the Dubai Land Department and its own virtual asset regulator. This could one day allow fractional property ownership recorded on blockchain, which means, for example, a villa worth 1 million dirhams could be split into 1,000 tokens, each worth 1,000 dirhams—opening the market to smaller investors, improving liquidity, and streamlining transactions. For now, however, tokenization remains in the pilot phase and is not legally recognized or permitted in practice. But the agreement between the Dubai Land Department (DLD) and VARA signals clear intent. With the right framework, tokenization could redefine property ownership and investment in the UAE.
These initiatives make headlines. As a result, many entrepreneurs—local and international—want to set up a crypto business in the UAE. But here is the catch: many want to do it quickly and cheaply. This is the backdrop for today’s discussion. The UAE is undoubtedly crypto-friendly, but friendly does not mean simple.
Setting up a crypto company here requires approvals at multiple levels, detailed compliance obligations, and substantial financial commitments. That is where reality hits. Recently, a number of clients approached us about setting up a crypto business. Many people in crypto—often younger, not to stereotype—did well financially, fairly quickly. As a result, there can be an expectation of moving fast, being profitable, and avoiding heavy regulatory compliance. The very appeal of crypto to many has been the perception of less regulation.
On the back of the UAE’s headlines about being crypto-friendly and attracting the industry, more people are interested in the UAE as a base or headquarters for their crypto activities. But those same founders often want to do things quickly and with minimal oversight—again, because crypto has historically existed outside traditional regulation. The questions we get are: “We know Dubai is friendly to crypto, so we want to set up a crypto company—quickly, cheaply, and with minimal disclosure and compliance.”
It is not that simple. The purpose of today’s discussion is to explain the multi-tiered structure of setting up a crypto business in the UAE.
First, some context for those new to the UAE. The UAE is a federation of seven Emirates, so there are federal laws and Emirate-specific laws. Company setup starts at the Emirate level. Before setting up a crypto business, you must choose the Emirate, because that choice determines the structure and the authorities you will need to comply with. You begin with a commercial license.
Depending on the Emirate, a commercial license can be on the mainland or in a free zone. Mainland companies are governed by the Department of Economy and Tourism (DET). Free zones are governed by their own authorities. Dubai has the largest number of free zones; Abu Dhabi and Ras Al Khaimah have their own as well. For now, the three Emirates making the most headlines in the crypto space are Dubai, Abu Dhabi, and Ras Al Khaimah (RAK)—and those are the three we will discuss.
There is no such thing as a single “federal UAE company.” Your company will be based in one Emirate—Dubai, Abu Dhabi, or Ras Al Khaimah—and that matters because each has its own crypto regime.
Once you choose the Emirate, you decide mainland vs. free zone. After obtaining the commercial license, any crypto activities must be approved by a crypto regulator. In Dubai, that is VARA (Virtual Assets Regulatory Authority) for the “mainland” Dubai jurisdiction. Within Dubai, there is also the DIFC (Dubai International Financial Centre), which has its own independent legal framework and courts. If you set up in the DIFC, you are regulated by DFSA (Dubai Financial Services Authority), not VARA.
In Abu Dhabi, the crypto regime is centered in ADGM (Abu Dhabi Global Market), which is similar to the DIFC as a financial free zone. ADGM’s regulator is the FSRA (Financial Services Regulatory Authority).
In Ras Al Khaimah, launched in 2023, there is the RAK Digital Asset Oasis (RAK DAO), a dedicated regime for digital assets under its own law (Law No. 2 of 2023).
So, first tier: get the commercial license.
Second tier: obtain approvals from the crypto regulator for that Emirate (VARA, DFSA, FSRA, or RAK DAO).
Third tier: depending on activities, you may also require federal approvals from the Securities and Commodities Authority (SCA/ESCA) and/or the UAE Central Bank.
Because of this multi-layered system, setting up a crypto business in the UAE is complex, costly, and time-consuming.
To contextualize, in Dubai under VARA—the most talked-about crypto authority—there are currently 36 companies licensed by VARA. We are now close to the end of 2025, and VARA was introduced in 2023. Over roughly two and a half years, there have been 36 licenses issued. That is not a huge number, and it reflects how stringent the qualification process is. Of course, many operate in crypto without being properly licensed—but we are talking about doing it by the book.
Now, the first tier—commercial licensing—with a closer look at Dubai. Dubai often leads in commercial development and offers many licensing options. If you set up on the mainland, you apply through DET (formerly DED). DET now has specific virtual asset activity codes, including:
- Virtual Asset Advisory Services
- Virtual Asset Custody Services
- Virtual Asset Exchange Services
- Virtual Asset Investment Management Services
- Virtual Asset Broker-Dealer Services
Each is a separate activity, and you can sometimes combine activities under one license (fees are cumulative). These DET categories map closely to VARA’s categories, which makes downstream approvals smoother.
Other Dubai free zones that position themselves as crypto-friendly include DWTC (Dubai World Trade Centre Free Zone), IFZA (International Free Zone Authority), and DMCC (Dubai Multi Commodities Centre).
- DWTC has an MOU with VARA and hosts Binance’s regional HQ.
- IFZA offers licensing menus similar to DET (advisory, custody, exchange, borrowing and lending, management/investment, broker-dealer, transfer/settlement, and proprietary trading).
- DMCC has a crypto community and many DMCC entities appear on VARA’s public register; its public activity list may be less granular, so you may need extra diligence to align activities.
Inside Dubai’s DIFC, crypto token activities fall under DFSA and center on financial services—so DIFC may be better suited if you are doing regulated financial-services-type crypto; otherwise, Dubai has ample non-DIFC options.
In Abu Dhabi, ADGM is the primary zone. ADGM is very efficient for commercial licensing, but crypto approvals still require FSRA authorization. The compliance standards are broadly similar to VARA and DFSA.
In Ras Al Khaimah, RAK DAO is the newest regime. It has its own regulator and requirements. Application fees and share-capital expectations are broadly in line with other regulators.
Now, the second tier—the crypto regulator approval. After the commercial application, the economic authority routes your file to the crypto regulator. This is where compliance intensifies. For example, VARA’s Initial Disclosure Questionnaire requires:
- A Regulatory Business Plan detailing activities, business model, revenue streams, tech infrastructure, risk management, governance, and financial projections.
- Ownership details: all shareholders, UBOs, funding sources, and background.
- Organizational chart: board, senior management, compliance, reporting lines.
- CVs of senior management, demonstrating relevant crypto and/or financial-services experience—truthful and verifiable.
- Financial projections and proof of capital: you must show liquidity and the ability to support the licensed activity.
Regulators use these disclosures to test whether your activity fits the defined categories and whether your team can run it responsibly. Shareholders and senior management are assessed for fit-and-proper standards (qualifications, experience, reputation, integrity, and solvency). You must also appoint a Money Laundering Reporting Officer (MLRO) with at least two years of AML experience in a verifiable organization. This is not a formality; it is a real fitness test for the business and the people behind it.
Compared to many other UAE company types, this level of detail is a shock to some founders. For typical commercial licenses, people often lean on AI to draft business plans or CVs. For crypto, that will not fly. You need real experience, credentials, and verifiable substance.
Financially, proof of initial capital ranges roughly from AED 100,000 (advisory) up to AED 1.5 million+ (exchange), depending on activity. You must provide 1–3-year financial projections and evidence of sustainable revenue sources, plus IT readiness and staffing.
There are also ongoing obligations: regular reporting, maintaining capital adequacy, updating policies as rules evolve, and notifying regulators of material changes in management, ownership, or operations.
The process is designed to filter out opportunists. Without a robust plan, experienced leadership, and solid capital, the application will stall or fail. This rigor helps explain why only 36 entities have cleared VARA’s process to date, while many more have tried.
A common reaction when founders learn about the requirements is to get “creative” and try to structure their model so it does not trigger crypto regulation. For example, calling themselves a “simple middleman” between a crypto-paying customer and a merchant. But if you read the definitions, those models typically fall squarely within regulated activities:
- Advisory Services: personal recommendations on transactions involving virtual assets.
- Broker-Dealer Services: arranging/soliciting orders, accepting fiat/crypto for trades, facilitating matches, making a market, or distributing/issuing virtual assets.
- Custody Services: safekeeping client virtual assets and acting on verified instructions.
- Exchange Services: exchanging virtual assets for fiat or other virtual assets, matching orders, or maintaining an order book.
- Lending and Borrowing: transferring or lending virtual assets with an obligation to return the same asset later (including use as collateral).
- Management and Investment: acting as agent/fiduciary/manager for others’ virtual assets—administration, disposition, investment.
- Transfer and Settlement: transmitting or settling virtual assets between entities or wallets.
If your idea matches any of these, you need a crypto license—not just a regular commercial license.
Now, costs (illustrative figures as laid out in the rule books). Fees are per activity and cumulative if you combine them:
- Advisory: Application AED 40,000; Annual AED 80,000; Initial capital AED 100,000.
- Broker-Dealer: Application AED 100,000; Annual AED 200,000; Initial capital AED 400,000–600,000+.
- Custody: Application AED 100,000; Annual AED 200,000; Initial capital AED 600,000 or 25% of overheads (whichever applies).
- Exchange: Application AED 100,000; Annual AED 200,000; Initial capital AED 800,000–1,500,000+.
- Lending and Borrowing: Application AED 100,000; Annual AED 200,000; Initial capital AED 500,000 or 25% of overheads.
- Management and Investment: Application AED 100,000; Annual AED 200,000; Initial capital AED 280,000–500,000.
- Transfer and Settlement: Application AED 40,000; Annual AED 80,000; Initial capital AED 500,000 or 25% of overheads.
For example, if you combine Advisory and Broker-Dealer, your initial capital might be AED 500,000–700,000, your combined application fees AED 140,000, and your combined annual fees close to AED 280,000 per year. The numbers speak for themselves: licensing is a serious financial commitment.
Now, the third tier—federal approvals. Depending on your business, you may also need SCA (ESCA) and/or UAE Central Bank approvals:
- SCA/ESCA typically covers issuance, custody, exchanges, and wallets, as these impact securities/commodities and capital markets.
- The UAE Central Bank steps in for stablecoins, payment tokens, stored-value facilities, and money services/remittances.
Examples:
- Issuing a new token or a tokenized bond likely requires SCA approval—even if you already hold a VARA license.
- Operating a wallet that lets users store balances and spend them on goods and services triggers stored-value facility licensing under the Central Bank.
- A crypto-based remittance model falls under money services regulation and involves the Central Bank.
So your model determines whether you stop at the Emirate level or must climb to federal approvals as well.
Why the high burden? Because crypto businesses handle financial transactions and carry risks of fraud, market abuse, and money laundering. That is why documentation is extensive, compliance is detailed, senior management must be qualified, and capital adequacy is enforced. The system is designed to filter out casual players and leave serious operators, which protects the public and the UAE’s reputation.
Where do things stand now? Under VARA, 36 companies are licensed, with a few more on provisional approvals—publicly listed on VARA’s register. Big names include Binance (regional HQ in DWTC), Crypto.com, and custodians like Hex Trust, alongside smaller exchanges and advisory platforms. If you are a consumer, that public register is your vetting mechanism—work with providers that have cleared the hurdles.
You may have seen headlines about provisional vs. full licenses. In many cases, it has taken months, if not years, for major players to clear all requirements—from capital adequacy to IT alignment with VARA standards to fit-and-proper criteria. Even the biggest firms do not get a fast track; everyone faces the same hurdles.
Takeaway: The UAE is building crypto into government payments and real-estate pilots, but that does not mean licensing is easy. It is multi-tiered, multi-regulated, time-intensive, costly, and requires real experience with robust compliance. This is not a market for shortcuts. It is for serious, well-capitalized businesses that can meet international standards. The UAE welcomes crypto—under standards and accountability.
That is all for this episode of Lawgical with Ludmila. If you found this episode useful and you like what we do, you can always find more on our website—lylawyers.com. We are also on Apple Podcasts and Spotify. For the full experience, you can watch our video podcast on YouTube. Until next time, stay informed. We are also on Apple Podcasts and Spotify, and for the full experience, you can watch our video podcast on YouTube. Until next time, stay informed, stay safe, and keep things Lawgical.
