When a crypto payment project prepares to cooperate with banks, card networks or large institutional clients, the counterparty usually does not merely ask "do you have a license"; it breaks the question down further:which activities the license specifically covers, which entity is responsible for receiving and transferring client assets, whether the team is genuinely on the ground, how client funds are segregated, and how users are protected in the event of a system failure or the company exiting the market.
To an early-stage project, these questions may seem overly complex. What the team really wants to do may simply be stablecoin collection, merchant settlement or cross-border asset transfer, and it may appear that there is no need to build a governance system approaching that of a traditional financial institution. But for banks and institutional counterparties, once the business begins handling real clients, real assets and large-value transactions, the assessment standard will not stop at whether the product functions well; it will further examine whether the project can be supervised over the long term, whether it can bear continuing responsibility, and whether a clear handling mechanism exists once problems arise.
Dubai VARAis for this reason that many mature projects include it in their global licensing planning.
It is not a lightweight registration suitable for low-cost experimentation, nor merely a "Dubai crypto license" for external publicity, but a complete licensing framework covering entity establishment, management fitness, capital strength, anti-money laundering, client assets, technical security, market conduct and exit mechanisms.
It should be noted that"institutional-grade license" is not an official license name established by VARA, but rather this article's summary of its regulatory intensity and commercial use.
What VARA regulates is not an "offshore crypto company", but an institution genuinely operating in Dubai
Under Dubai's Virtual Assets Regulation Law No. 4 of 2022, VARA's regulatory scope covers Dubai mainland, special development zones and free zones, but excludes the Dubai International Financial Centre (DIFC). Any enterprise planning to conduct regulated virtual asset activities within Dubai or from Dubai should obtain a VARA license before commencing operations.
This means that a project cannot merely establish a Dubai company and then conduct all its business through an overseas team and remote systems. The VARA licensing process itself requires the enterprise to complete local entity establishment, office leasing, staffing and operational preparation, and to submit materials such as ultimate beneficial owners, senior management, organizational structure, business plan, financial projections and sources of funds.
New applicants typically go through two stages. In the first stage, they submit an initial disclosure questionnaire, business plan and shareholder and management information, and complete company registration and operational preparation after obtaining Approval to Incorporate; in the second stage, they submit complete licensing documents and respond to VARA's written feedback, meetings, interviews and requests for supplementary materials. Obtaining preliminary approval does not mean that business may commence; only after obtaining the formal VASP Licence may the enterprise provide services to clients in accordance with the license conditions.
This is also the most intuitive difference between VARA and some lightweight registration pathways: it not only reviews what a project 'plans to do,' but also examines whether the enterprise already has the organization and resources to actually operate this business.
What VARA approves is not a business plan, but an operating institution capable of being continuously supervised.
For a crypto payment project applying to VARA, the first step is to clearly break down what it is actually doing
The virtual asset activities currently regulated by VARA include advisory, broker-dealer, custody, exchange, lending, asset management and investment, transfer and settlement, and Category 1 virtual asset issuance. An enterprise may apply for one or more activities based on its business and obtain the corresponding authorization under a single overall VASP Licence; however, custody services involve stricter business segregation and governance independence requirements.
For crypto payment projects, the most common misconception is that as long as the product uses stablecoins, it should apply for 'transfer and settlement services.' In fact, which type of activity license is specifically required depends on which functions the platform undertakes throughout the entire transaction process.
If a project transfers stablecoins from the payer to the payee in accordance with customer instructions, it may need to focus on assessing VA Transfer and Settlement Services; if the platform participates in the exchange between stablecoins and fiat currency or between different virtual assets, it may also involve Broker-Dealer Services or Exchange Services; if customer assets enter a wallet controlled by the platform, and the project can safeguard private keys or decide on asset transfers, it also needs to assess Custody Services.
Some products that appear to be merely 'stablecoin payments' may in fact simultaneously include customer account opening, top-ups, exchange, wallet management, merchant settlement and liquidity arrangements.For such projects, the real difficulty is not choosing the cheapest option among the eight categories of activities, but accurately mapping product functions, contractual responsibilities and fund flows to different regulatory activities.
Why is VARA's threshold closer to 'institutionalized operation'?
The VARA licensing requirements consist of four sets of mandatory rules applicable to all VASPs, namely corporate governance, compliance and risk management, technology and information, and market conduct rules; enterprises must also continue to comply with the corresponding activity rules based on the specific activities they are authorized to carry out.
This framework means that a project cannot merely prepare an AML policy and a few application forms, but must demonstrate that governance, capital, personnel, systems and customer protection mechanisms can operate together.
Taking capital requirements as an example, different activities correspond to different minimum paid-up capital or fixed annual expenditure percentages. The minimum paid-up capital for advisory services is AED 100,000; virtual asset transfer and settlement services, lending services, etc. generally require maintaining a higher amount of not less than AED 500,000 or 25% of fixed annual expenditure; if exchange services do not use an independent licensed custody arrangement, the capital requirement may reach AED 1.5 million or 25% of fixed annual expenditure, whichever is higher. The relevant capital must also be continuously maintained in the manner specified by VARA, rather than being withdrawn after the application is approved.
On the personnel side, enterprises need to put in place management and key personnel recognized by VARA. The current rules require the compliance officer to have relevant experience, meet the fitness requirements, and be resident in the UAE as a full-time employee of the enterprise. The actual application materials also include the resumes of key personnel, job responsibilities, source of funds, group financial statements, insurance, succession arrangements and exit plans, among others.
If the project handles client fiat currency or virtual assets, it must also meet requirements concerning client money management, third-party banking arrangements, asset segregation, periodic reconciliation, audit and disclosure; at the technical level, it is necessary to establish cybersecurity, access control, data protection, business continuity and incident response mechanisms.
Therefore, the difficulty with VARA is not that there is a lot of material, but that every document must correspond to actual operations.If the business plan, organizational structure, wallet system, bank accounts, staffing and client agreements cannot corroborate one another, even an enterprise with strong fundraising capacity may find it difficult to complete licensing smoothly.
What VARA truly brings to a project is a verifiable institutional identity
Dubai's advantage is not merely a positive attitude toward the virtual assets industry, but the establishment of a publicly searchable licensing system. VARA's public register lists formally licensed institutions and applicants still at the in-principle approval stage, and discloses the specific activities the enterprise is approved to carry out. An enterprise holding only In-Principle Approval may not carry out virtual asset activities or serve clients.
This transparency is very important for institutional cooperation. Banks, investors and corporate clients do not need to rely solely on a certificate displayed by the project; they can directly verify the license status, approval date, permitted activities and additional conditions. The public register currently includes both institutions approved only to carry out brokerage or advisory services and mature platforms authorized for multiple activities such as exchange, lending and investment management, which shows that VARA grants permissions separately according to an institution's actual capabilities and business scope.
For projects preparing to serve large merchants, family offices, funds or traditional financial institutions, this verifiability is itself an important commercial asset. Counterparties can know which licensed entity provides which service, and it is easier to conduct due diligence around client funds, asset custody, trade execution and risk responsibility.
However, this does not mean that holding a VARA Licence guarantees a bank account or cooperation from all institutions. Banks will still independently assess the project's clients, transaction scale, target markets, source of funds and sanctions risk.What VARA can provide is a more complete and credible regulatory foundation, not a substitute for financial institutions' own risk approval.
Which crypto payment projects are suitable for considering VARA?
The first category is platforms that have completed product validation and are preparing to move from a regional project into the institutional market. Such enterprises usually already have a certain transaction scale, client base and fundraising capacity, and what they need to address at the next stage is not how to launch quickly, but how to gain long-term acceptance of their business from banks, large-scale channels and institutional clients.
The second category consists of stablecoin payment, corporate settlement and digital asset service platforms that wish to establish a regional operating center in the Middle East and North Africa market. Because VARA applies to Dubai mainland and free zones other than the DIFC, projects can design specific local implementation plans by combining their commercial license, office location, team composition and target customers.
The third category consists of projects whose products already involve exchange, transfer, custody, asset management or lending at the same time, and which need to re-map their business boundaries through an activity-based licensing system. VARA allows firms to apply for authorization for multiple activities, but different activities must satisfy the corresponding capital, governance and activity-specific rules, and it is therefore suited to teams capable of maintaining a complex product structure over the long term.
Conversely, if a project is still at the proof-of-concept stage, has not yet formed a stable customer base and real transactions, and has no budget to deploy a local UAE team, capital and ongoing compliance systems, then VARA may not be the optimal path at present. In that case, a more reasonable approach may be to first validate the market through business boundary design and licensed partnerships, and then decide whether to enter formal licensing.
VARA is not a "Dubai label" prepared for all projects, but a regulatory entry point offered to projects that are already prepared to assume institutional operating responsibilities.
What else will projects face after obtaining a license?
A VARA Licence is not a one-off approval outcome. Licensed firms must continuously satisfy capital, personnel, compliance, technology, client asset and reporting requirements, and must apply to the regulator for approval or for updates to the scope of their license as their business changes. If a firm also conducts business in other countries, it must also comply with local regulatory requirements; a VARA Licence does not automatically authorize a project to enter other markets.
Regulatory enforcement has also become a real risk. VARA has previously imposed penalties on and issued public warnings about institutions suspected of operating without a license and violating marketing rules, which also shows that Dubai's virtual asset regulation has moved from institution-building into the stage of ongoing inspection and enforcement.
For projects, what truly needs to be assessed is not only whether they can pass the application, but also whether the firm can maintain capital, team and systems over the long term after approval, whether it can continuously handle suspicious transactions, regulatory reporting and customer complaints, and whether, when a product exits or the company encounters financial difficulties, it can protect customers in accordance with a pre-established exit plan.VARA's market conduct rules also expressly require firms to establish orderly exit and wind-down mechanisms.
What can Mankun deliver for projects?
For projects preparing to apply for a Dubai VARA license, what usually needs to be resolved first is not which free zone the company should be registered in, but whether the product functions, target customers and fund flows can be accurately mapped to VARA's activity classifications.
First, Mankun can, based on the project's existing products, wallet control arrangements, exchange arrangements, client assets and fiat settlement processes, produce a Dubai VARA Business Model Compliance Diagnostic Opinion, a Virtual Asset Activities and Licensing Scope Matrix, and an Analysis of Regulatory Gaps in Existing Business. This stage is used to determine whether the project is suitable for applying for VARA, and which activities it needs to apply for, such as Transfer and Settlement, Broker-Dealer, Exchange, Custody or others.
Second, Mankun can design, around the project budget, equity structure and target markets, the division of functions among the Dubai entity, group affiliates, technology company and licensed partner institutions, and produce the Dubai Entity and Group Structure Plan, the On-Chain and Off-Chain Fund Flow Map, the Client Asset Control Analysis and the Group Functions and Regulatory Responsibility Matrix. If the project needs to use banks, custodians, liquidity providers or fiat payment channels at the same time, the responsibilities and licence coverage of the relevant institutions will also be incorporated into the structural design.
Once the application stage begins, Mankun can assist in preparing the regulatory business plan, corporate governance framework, AML/KYC/KYT policies, client asset protection plan, cybersecurity and technology risk materials, financial projections, capital arrangements, outsourcing management system and orderly exit plan, and coordinate the local company incorporation, free zone or DET application process and regulatory communications.
For projects that are close to institutional launch, Mankun can also build on the licence materials to produce the Bank and Institutional Client Due Diligence Package, the Licence and Business Coverage Statement, the Compliance Review Opinion on Key Partners and a continuing compliance calendar, so that the documents generated in the regulatory application can continue to be used for bank account opening, financing and cooperation with large clients.
Conclusion: The value of an institutional-grade licence is that it moves a project from "can be done" to "worthy of trust"
The appeal of Dubai's VARA does not stem only from Dubai's support for the digital asset industry, nor merely from the fact that an increasing number of well-known platforms have obtained licences in its public register. More importantly, it breaks virtual asset business down into clearly defined licensed activities and, through rules on capital, personnel, client assets, technical security and market conduct, requires firms to demonstrate that they have the capacity to operate on a sustained basis.
For early-stage projects, such a regulatory system may appear costly and complex; but for platforms preparing to connect to the banking system, serve institutional clients and take on large-value assets, what is truly scarce is often not one more offshore entity, but a licensed institution that can be publicly verified by regulators, understood by banks and able to bear responsibility to clients.
Therefore, when assessing Dubai's VARA, a project should not ask only about the application timeline and fees, but should further confirm: which licensed activities the product actually involves, whether it has a local management team and long-term capital, how client assets are protected, whether the banking and channel structure can be implemented, and whether the group is ready to accept continuing supervision.
The institutional-grade value of VARA is not proof that a project once passed an approval, but proof that it has begun to operate in the manner of a genuine financial institution.
In the next article, we will continue with: Global Crypto Payment Compliance Map · Advanced Series ② Why do crypto projects all love to go to Singapore to "queue for licences"? Stay tuned.
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*This article is an original article of Mankun Law Firm and represents only the personal views of the author. It does not constitute legal consultation or legal advice on any specific matter. For reprinting and legal consultation, please add our customer service:mankunlawyer。
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