Background
Dubai's Virtual Assets Regulatory Authority (VARA) is the specialist regulator for crypto assets in Dubai. It oversees both regulated Virtual Asset Service Provider (VASP) licenses and non-regulated licenses for proprietary traders of crypto assets. VARA ensures that firms engaging in virtual asset-related services comply with stringent regulatory standards to promote a secure and transparent digital asset market.
Dubai Crypto Trading License
Freezone Licensing
Several Dubai freezones, including the Dubai Multi Commodities Centre (DMCC), Dubai World Trade Centre (DWTC), and International Free Zone Authority (IFZA), offer proprietary trading licenses for crypto commodities. These licenses allow companies to invest in and trade their own portfolios of crypto assets. However, the scope of this license is specific and includes the following provisions:
- Usage Scope: The license covers active trading strategies on centralized exchanges and decentralized finance (DeFi) platforms, as well as venture capital strategies involving Simple Agreements for Future Tokens (SAFTs) or Token Purchase Agreements.
- Volume Threshold: Proprietary crypto traders with a 30-day trading volume exceeding $250 million must meet additional registration requirements with VARA.
- Restrictions: The license prohibits managing third-party funds, including those of friends and family, providing over-the-counter (OTC) services, or acting as a market maker. These activities require a full VARA VASP license.
VARA No Objection Certificate (NOC) Steps
To establish an entity under the proprietary trading in crypto commodities license in one of the Dubai freezones, obtaining a No Objection Certificate (NOC) from VARA is essential. The steps to secure this NOC are as follows:
- Initial Disclosure Questionnaire (IDQ): Submit a request for a NOC through the VARA IDQ, which details the proposed business model, sources and levels of funding, investment strategy, financial model, and key personnel, including shareholders and directors. Cavenwell assists clients in determining the suitability of their activities for this license and ensuring that the IDQ submission meets VARA's expectations.
- VARA Assessment: VARA reviews the IDQ and may request additional information to thoroughly assess the company's activities. Upon satisfaction, VARA issues an in-principle NOC and requests the NOC fee payment.
- Finalization: After the payment is received, VARA issues the NOC, allowing the company to complete its incorporation with the relevant freezone authority.
How We Can Help
As a Dubai-licensed corporate services provider with expertise in the crypto sector, Cavenwell has successfully assisted numerous clients in obtaining the VARA NOC. Our services include:
- Activity Assessment: Evaluating whether your activities are suitable for the proprietary trading in crypto commodities license.
- IDQ Preparation and Submission: Preparing and submitting the IDQ to VARA and managing the entire NOC application process.
- Company Setup: Finalizing company setup in the chosen freezone and arranging residence visas for principals.
Conclusion
Navigating the regulatory landscape for crypto trading in Dubai requires a comprehensive understanding of VARA's requirements and the licensing process. With Cavenwell's expertise, clients can ensure compliance and successfully establish their proprietary trading operations in Dubai's dynamic crypto market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.