VARA Licence vs. VARA Approvals: What Is the Difference and How Does the Process Work in Dubai?

Marhaba International
Nov 17
7 min read

VARA licences vs. VARA approvals, how they work, and what businesses and investors must know when entering Dubai’s virtual assets ecosystem.I tailored it for your legal consultancy audience — suitable for LinkedIn, websites, or client briefings.

A practical guide for virtual asset service providers (VASPs) and investors in Dubai

Dubai has positioned itself as a global leader in virtual asset legislation, offering one of the world’s most structured, transparent and investor-friendly digital asset regulatory environments.At the centre of this framework stands VARA — the Virtual Assets Regulatory Authority, established under Law No. 4 of 2022.

However, many entrepreneurs, investors, and even advisors confuse what a VARA licence is and what a VARA approval is, and when each is required.

Below is a clear explanation of the difference, the step-by-step process, and which business models fall under regulation.

What Is a VARA Licence?

A VARA Licence is the official authorisation issued by the Virtual Assets Regulatory Authority allowing a company to legally operate as a Virtual Asset Service Provider (VASP) in Dubai (excluding DIFC).

Obtaining a VARA Licence means the company has completed the full regulatory lifecycle, including:

- Business model assessment

- Initial Disclosure Questionnaire (IDQ)

- Minimum Viable Product (MVP) phases

- Regulatory Business Plan (RBP)

- Full compliance with AML/CFT obligations

- Appointment & approval of key personnel (MLRO, Compliance Officer, Senior Management)

- Technology, cybersecurity and governance audits

- Operational readiness review

A VARA licence is required when a company intends to offer regulated virtual asset activities, such as:

Regulated Services under VARA:

Exchange Services (VA-to-VA or VA-to-fiat)
Broker-Dealer Services
Custody & Safekeeping
Management & Investment Services
Advisory Services
Transfer & Settlement
Staking Services (if offered as a service to clients)
VA Lending and Borrowing
VA Payment Services (where applicable)

If a business provides any of these activities “by way of business”, a full VARA licence is mandatory.

What Is a VARA Approval?

A VARA Approval is not a licence, but an authorisation required for:

a) Non-VASPs who still interact with virtual assets, or

b) Entities in free zones (DMCC, RAKEZ, etc.) seeking activity approvals, or

c) Mainstream businesses wishing to use VAs as part of their operations.

Examples where VARA Approval is required (but no VASP licence):

PropTech companies using blockchain tokenisation but not selling tokens themselves
- Real estate developers accepting crypto payments via approved payment providers
- Treasury use of VAs by non-financial companies (subject to limits)
- Marketing, promotions, and advertising approvals
- Issuance of certain utility tokens
- Technology providers building blockchain infrastructure without handling client funds
- Tokenised shares / security token arrangements (coordinated with SCA)
- FZ / mainland companies requiring prior clearance before onboarding a VASP
- Web3 or metaverse platforms that integrate VAs but do not operate as a full VASP

These approvals ensure that activities involving virtual assets do not create systemic risks and remain aligned with Dubai’s regulatory framework — even if the business does not directly handle or trade tokens.

Key Differences: VARA Licence vs. VARA Approval

Category	VARA Licence	VARA Approval
Purpose	Authorises a VASP to conduct regulated VA activities	Allows non-VASPs or limited-scope entities to operate with VAs
Who needs it?	Exchanges, brokers, custodians, asset managers, staking platforms	Real estate developers, technology providers, corporates, token issuers, advertisers
Regulatory scope	Full regulatory lifecycle, technical audits, AML inspection	Activity-specific regulatory clearance
Duration	6–12 months (full cycle)	2–8 weeks depending on activity
Compliance obligations	High (AML, sanctions, IT security, audits, policies)	Moderate (risk disclosure, AML-lite, reporting)
Outcome	Operational VASP licence	Non-VASP activity authorisation

4. VARA Licence Process — Step by Step

Phase 1: Initial Application

Submit Initial Disclosure Questionnaire (IDQ)
Submit Business Plan, Corporate Docs, KYC/KYS, Tech Description
Pay the relevant application fees

Phase 2: Minimum Viable Product (MVP) Stage

MVP Stage 1 — Preparatory Licence:

Submission of draft policies: AML, CTF, KYC, KYS, Cybersecurity
Appointment of MLRO, CO, Senior Management
Tech architecture assessment

MVP Stage 2 — Operational Test Licence:

Limited live testing with a small number of users
Supervised environment
Compliance review

Phase 3: Full Market Product (FMP) Licence

Full operational approval
Ongoing reporting
Financial audits
Annual compliance renewals
Market conduct supervision

VARA Approval Process (Simplified)

Identify activity category

VARA determines whether the business:

requires a licence,
only an approval, or
falls outside regulatory perimeter.

Submit Activity Notification or Approval Request

Documents typically include:

Business summary
Token purpose / flow of funds
Compliance controls
Advertising materials (if marketing approval)
Risk assessment

Technical & Legal Review

VARA may coordinate with:

SCA (for security/financial tokens)
DLD (for tokenised real estate)
Free zones (DMCC, RAKEZ, DSO, IFZA)

Approval Letter Issued

With conditions and limitations.

Which One Does Your Business Need?

Choose VARA Licence if you:

trade, manage, transfer, hold, or exchange virtual assets
provide VA services to the public
run a Web3 platform with financial features
offer tokenised investment solutions

Choose VARA Approval if you:

accept crypto as payment
issue utility tokens
use blockchain for operations without handling client assets
promote or market a virtual asset project
integrate tokenisation without financial services

If unsure, companies must obtain a Regulatory Perimeter Assessment — which is now standard in Dubai.

Dubai’s virtual asset ecosystem is fast-growing but tightly supervised, and VARA plays a central role in ensuring:

investor confidence
market stability
anti-money laundering compliance
sustainable growth of digital asset innovation

Understanding the difference between a VARA Licence and VARA Approvals is crucial for avoiding regulatory breaches and structuring your business correctly from day one.

WHO NEEDS A VARA LICENCE & WHO NEEDS A VARA APPROVAL?

Understanding VARA requirements in Dubai for 2025

Dubai’s Virtual Assets Regulatory Authority (VARA) regulates all virtual asset activities carried out in the Emirate of Dubai (excluding DIFC).Businesses often confuse approval with licensing, but the two are very different.

Below is the exact breakdown.

Who Needs a VARA Licence?

A VARA Licence is required for any business that provides Virtual Asset Services to clients.If you are dealing with client funds, clients’ virtual assets, or facilitating transactions, you must have a VASP (Virtual Asset Service Provider) licence.

VARA Licence is required for:

A. Exchanges & Trading Platforms

Crypto exchanges
NFT marketplaces enabling trading between users
VA-to-fiat or VA-to-VA trading platforms
DEX operators (if they maintain control or benefit)

B. Broker-Dealers

OTC desks
Market makers
Entities executing orders on behalf of clients

C. Custodians & Wallet Providers

Custody and safekeeping of client assets
Virtual asset wallet service with custody features

D. Payment & Transfer Service Providers

Companies transferring crypto on behalf of clients
Crypto remittance or settlement platforms

E. Portfolio & Fund Managers

Investment management in virtual assets
Staking-as-a-service (if offered to clients)
Yield products offered to clients

F. Advisory Services

Companies giving professional advice on virtual asset investments
Structured product advisory(not just general education — this is advisory to clients on investment decisions)

G. Lending & Borrowing Platforms

Crypto lending
DeFi lending platforms controlled by a central entity

If your business handles client assets, executes transactions, keeps custody, or creates financial returns, you need a full VARA licence.

Who Needs a VARA Approval?

VARA Approval is for businesses that use or integrate virtual assets, but do not provide regulated virtual asset services.

These companies do not handle client assets or execute VA transactions, but their activities still touch the virtual asset environment.

VARA Approval is required for:

A. Companies Accepting Crypto Payments

Businesses that accept crypto must obtain approval if they use:

approved payment gateways, or
direct crypto acceptance mechanisms.

Examples:

Real estate developers
E-commerce platforms
Hotels, retailers
Car dealerships

B. Real Estate Developers or Brokers Using Tokenisation

Businesses using:

tokenised property sale models
fractionalisation platforms
VA-based ownership representation

They are not VASPs, but the model needs VARA approval.

C. Companies Issuing Tokens (Non-Financial / Utility)

Examples:

Utility tokens
Membership/loyalty tokens
Access or governance tokens
NFT collections tied to a business model

(Not trading platforms — the business is just issuing tokens.)

D. Marketing, Advertising & Promotion Approvals

Any entity advertising:

a token sale
a crypto product
a virtual asset platform

must obtain VARA Marketing & Promotion Approval before publishing.

E. Corporates Using Virtual Assets for Treasury

For example:

companies putting a portion of treasury holdings in crypto
investment & diversification strategies(subject to restrictions and risk controls)

F. Web3 Platforms Not Handling Client Funds