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Dubai’s pro-growth attitude toward digital assets reached a pivotal milestone with the creation of the Virtual Assets Regulatory Authority, commonly abbreviated as VARA. The authority operates under Dubai’s amended Law No. 4 of 2022 and stands apart from federal bodies such as the Securities and Commodities Authority. Among the many permissions VARA supervises, the exchange service license remains the most coveted because it enables a business to operate a trading venue where buyers and sellers of virtual assets meet. This article provides a comprehensive roadmap covering policy foundations, qualifying criteria, capital requirements, application stages, on-going obligations, and strategic considerations, all framed around the VARA exchange services license. Entrepreneurs, traditional brokers pivoting to crypto, and global exchanges eyeing a regulated Gulf foothold will find practical insight grounded in the authority’s rulebooks.
The rise of VARA and its exchange services license
In early 2022 the Emirate of Dubai introduced a dedicated regulatory regime for virtual assets to complement federal frameworks without stifling innovation. Officials chose to create VARA under the umbrella of Dubai’s Department of Economy and Tourism. That decision ensured one city-level authority could manage the licensing, oversight, and enforcement of service providers, while allowing mainland investors and foreign participants clear lines of accountability. This eventually lead to the creation of VARA’s license for exchange services
VARA’s rulebook is separated into a series of Compulsory and Activity Specific Rulebooks. Every virtual-asset service provider, or VASP, must comply with the General Rulebook (GRB) and the Company Rulebook (CRB). Those wishing to run an order book must then satisfy additional Exchange Services Rulebook (ESR) chapters. A VARA exchange services license therefore sits upon this stacked compliance architecture. Check out the details below to learn more about the license and what kind of permissions it grants to holders. We will go over every important note!
What counts as an “exchange service” under this license
Under Article 2 of the ESR an exchange is any platform that:
- Matches or facilitates matching of orders for buying or selling virtual assets, whether on an agency, principal or peer-to-peer basis.
- Executes trades via automated order-book engines or any other mechanism where the operator acts as intermediary.
- Clears or settles transactions, either through internal ledger adjustments or external blockchain transfers.
- Holds or controls client assets during the lifecycle of the trade.
Spot venues, derivative exchanges that list perpetuals on virtual assets, dark pools for OTC block trades, and automated market maker (AMM) protocols that convert user orders into smart-contract interactions can all fall within the term. Operators focusing solely on fiat on-ramps or custody absent an order book must instead apply for broker-dealer or custody licences.
Capital and prudential standards for an exchange
VARA differentiates base capital from risk-based and expense-based capital. For the VARA exchange service license the base figure is AED 20 million, roughly USD 5.4 million. However, authorities reserve the right to require higher buffers once the applicant’s projected order-book turnover and exotic product mix are assessed.
Risk-based capital is calculated using formulas that weight counterparty exposures, market volatility, operational risks arising from smart-contract dependencies and, where applicable, leverage offered on derivatives. The higher of base or risk-based capital must be held in paid-up equity and highly liquid reserves. Expense-based capital becomes relevant when monthly operating outgoings exceed certain thresholds, ensuring the venue could self-finance an orderly wind-down for at least six months.
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Fit-and-proper management and board composition
VARA’s General Rulebook applies a multi-layered fitness test:
Integrity and reputation
Background screening, criminal record checks, and declarations regarding any bankruptcies or regulatory censures worldwide.
Competence
Collective experience across exchange operations, market-making, custody, IT security and risk oversight. VARA looks for senior executives who have run trading venues under recognised jurisdictions such as MAS, FCA or FINMA.
Time commitment
Directors must demonstrate they can dedicate sufficient hours, especially during the first two years of setup.
At minimum an exchange licensee must appoint a Chief Executive Officer, Chief Compliance Officer, Chief Information Security Officer and, if derivatives will be listed, a Chief Risk Officer. All four roles must reside within the UAE. Dual hatting is discouraged, particularly between compliance and technology positions.
Technology standards and cyber-resilience
The ESR cross-references VARA’s Information Technology Controls Rulebook, which borrows heavily from NIST and ISO 27001 but adds blockchain-specific controls. For example, the venue must:
- Operate redundant nodes to verify public-chain transactions rather than outsourcing validation entirely.
- Implement multi-signature or hardware-secured wallet modules for hot wallet balances with single-transaction and daily-withdrawal limits.
- Schedule semi-annual penetration tests by DFSA-approved cyber firms, submitting the executive summary to VARA within thirty days.
- Maintain an incident-response playbook that identifies thresholds for user-notification, platform suspension and authority reporting.
"Exchanges must follow strict AML/CFT rules including travel-rule compliance, blockchain monitoring, and enhanced due diligence for high-risk tokens or counterparties."
Custody segregation and insurance
Exchanges typically commingle user deposits within omnibus wallets, but VARA insists on segregated ledger entries representing individual balances, daily reconciliation against on-chain totals and a formal client asset policy. Furthermore, the authority expects licensees to procure commercial crime and professional indemnity insurance that covers hot-wallet hacks, cold-wallet key compromise, employee collusion and errors in trade matching. Deductibles must be funded by reserves separate from regulatory capital. VARA approves the insurance provider list and reviews coverage annually.
Market conduct, listings and surveillance
Dubai’s lawmakers seek to protect retail traders while encouraging institutional liquidity. The ESR therefore forces exchange licensees to adopt a transparent listing procedure including a written token classification methodology, risk scoring, technical audits and legal opinions. High-risk privacy coins or tokens with excessive centralised control may be rejected or require strict disclosure.
Post-listing, the venue must run real-time market-surveillance software capable of detecting spoofing, wash trading, layering and cross-platform pump schemes. Alerts must be investigated, documented, and material breaches reported to VARA within five business days.
Retail protections for leverage or derivatives
If an applicant plans to list perpetual futures or leveraged tokens, VARA imposes additional conditions. As part of these conditions, maximum leverage for retail is capped at 5:1 until the client completes a knowledge test and loss simulation. On top of that, liquidation engines must be stress-tested daily with parameter logs retained. Lastly, a transparent insurance fund capitalised by exchange fees must backstop auto-deleverage events.
Professional clients can access higher leverage subject to a signed risk-acknowledgement statement and proof of net liquid assets above AED 1 million.
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AML, CFT and travel-rule obligations
The United Arab Emirates belongs to the Financial Action Task Force (FATF), and VARA extends Central Bank AML guidelines to virtual-asset entities. Exchanges must implement:
- Risk-based client onboarding with liveness checks and, where feasible, blockchain address screening against sanctions.
- Ongoing transaction monitoring using heuristics and chain-analysis to flag mixers, darknet marketplaces or unusually high velocity between wallets.
- Travel-rule compliance sending originator and beneficiary data for transfers above USD 1,000 to counterpart virtual-asset service providers.
Non-UAE counterparties that fail to implement the travel rule must be averted until reciprocal data-sharing solutions are enacted.
Step-by-step application process for the VARA exchange service license
Preliminary consultation
Prospective applicants schedule a non-binding call with VARA’s Authorisations Division, presenting a ten-page concept note and disclosing ultimate beneficial owners. The authority evaluates whether the project’s scope fits within exchange activities and offers informal feedback on likely capital expectations.
Letter of intent
Following green light the firm submits a formal Letter of Intent accompanied by business-model canvas, projected volumes, token-listing policy drafts and group structure. VARA responds within three weeks, outlining documentation checklists and invoice for application fees.
Full licence pack submission
Applicants upload:
- Detailed regulatory business plan (RBP) including five-year P&L, order-book architecture, wallet segregation flowcharts, AML framework and risk register.
- Shareholder and director due-diligence files.
- Draft rulebook for the exchange, covering listing, trading, clearing, margin and dispute resolution.
- Draft client agreements and KYC questionnaires.
Review and Q&A
VARA assigns a case officer. Expect iterative Q&A rounds over two to three months. Technology walkthroughs and stress-test results may be requested along with a live demonstration of the order-matching engine in a sandbox.
Management interviews
Core personnel, such as the CEO, CCO, CISO and CRO, attend in-person interviews in Dubai. Questions span previous compliance culture, internal escalation triggers and crisis drills.
In-Principle Approval (IPA)
If satisfied VARA issues an IPA outlining capital, insurance, office leasing and professional-indemnity prerequisites. The applicant now incorporates a Dubai mainland or free-zone company where permitted. After that, they have to open a local bank account and deposit the initial regulatory capital. Once that’s dealt with, they have to procure cyber and crime insurance from an approved underwriter. Finally, the applicant has to sign a lease for a physical office inside Dubai.
Final licence grant
Evidence of IPA conditions fulfilled triggers the Financial Services Permission, the official VARA exchange service license. Live trading may commence only after a final readiness inspection that audits wallets, disaster-recovery sites and client-support channels.
"The application process includes a detailed regulatory business plan, management interviews, site inspections, and final readiness checks before full license issuance."
Ongoing compliance and reporting obligations
Holding the licence is the start rather than the finish. Exchanges must:
- File quarterly returns covering trade volumes, fee revenues, insurance-fund balances and incident reports.
- Submit annually audited financial statements prepared under IFRS and audited by a VARA-recognised firm.
- Notify VARA within thirty minutes of any unplanned system downtime exceeding fifteen minutes.
- File a cyber-resilience self-assessment each December, signed by the board.
- Maintain a client-assets attest report verified by an external accountant every six months.
Failure to file on time attracts administrative penalties beginning at AED 50,000 and escalating with each recurrence.
Comparative perspective, VARA versus global regimes
Singapore MAS
Singapore’s Payment Services Act covers digital-payment token exchanges but does not yet provide a bespoke derivatives framework. Capital requirements range from SGD 250,000 to SGD 1.5 million, lower than Dubai’s but derivatives listing remains ambiguous.
EU MiCAR
From 2025 the Markets in Crypto-Assets Regulation introduces EU-wide exchange authorisation with passporting. Capital is set at EUR 150,000 for trading platforms, again below Dubai, but marketing stablecoins triggers added obligations.
United States
Multiple pathways exist through state money-transmitter licences, a FinCEN registration and, for derivatives, CFTC designated contract-market approval. The federal patchwork leads many exchanges to exclude US residents.
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Ongoing obligations include quarterly reporting, real-time incident notifications, annual financial audits, cyber resilience assessments, and market surveillance compliance.
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Compared to other jurisdictions, VARA provides a single, comprehensive licensing model with clearer derivatives guidance and stronger regulatory alignment with FATF.
- Aston VIP can guide you through the whole process, from acquiring a VARA license to everything that comes after.
Key strategic tips before applying
Build an institution-grade custody architecture first
VARA will scrutinise cold-storage key ceremonies and multi-sig policies long before marketing budgets.
Budget realistically
Including capital, insurance, locally based staff and regulatory fees, initial outlay can exceed USD 8 million.
Prioritise a board-level risk culture
Meeting minutes evidencing active oversight of IT audits bolster credibility.
Align your token-listing methodology
Lining up your methods with global analytical frameworks such as FATF token risk metrics to pre-empt VARA follow-up.
Keep a roadmap for derivatives
Even if launching spot only, keeping a roadmap for derivatives can be helpful. VARA welcomes phased expansion provided risk management evolves accordingly.
Case study snapshot, from OTC desk to licensed exchange
A Middle East OTC brokerage handling large bitcoin block trades saw increased client demand for transparent price discovery. The founders partnered with Aston VIP to pursue a VARA exchange service license. We drafted the listing policy, converted in-house custody scripts into a compliant wallet-segregation manual, and coordinated a dry-run penetration test. After four Q&A rounds, VARA issued an IPA. Aston VIP then liaised with local banks to open a safeguarded client-money account, secured a crime-insurance policy via Lloyd’s syndicate and delivered board-training workshops on market-surveillance obligations. The exchange launched within twelve months and processed USD 400 million in volume during its first full quarter.
Aston VIP: Your full-spectrum partner for the VARA exchange service license
Securing a VARA exchange service license is an extensive journey that intertwines legal drafting, capital planning, cyber-security architecture and stakeholder interviews. Aston VIP serves as a single interface throughout that journey. We conduct feasibility studies to evaluate whether your token-mix, leverage targets and custody plans align with VARA thresholds. Our regulatory drafting team writes the business plan, AML programme, technology-risk assessments and token-listing methodology that VARA’s reviewers expect to see.
Simultaneously our corporate lawyers incorporate the Dubai entity, while our insurance desk negotiates cyber and wallet-crime coverage from approved underwriters at competitive premiums. After getting the licence, we remain alongside you, acting as outsourced compliance officer or cyber-audit coordinators, filing quarterly reports, managing rulebook updates and even designing expansion strategies into Abu Dhabi Global Market or DIFC. Just get into contact with our support team to sign up for our services, and we’ll help guide you the whole way!
