VARA created a staged licensing approach. The MVP gets you operating faster with restrictions. Full authorization takes longer but removes the limits.

Dubai's Virtual Assets Regulatory Authority (VARA) has emerged as the Middle East's primary crypto regulatory framework. Launched in 2022 and refined through 2024, the regime offers a two-stage approach that lets firms begin operations while working toward full authorization. The structure is unusual and worth understanding if Dubai is in your plans.

The two-tier system

The VARA website outlines two authorization pathways:

Minimum Viable Product (MVP): Provisional authorization allowing limited operations while the firm completes full licensing requirements. Think of it as supervised market entry.

Full Virtual Asset Service Provider (VASP) License: Complete authorization for unrestricted operations within the licensed activity scope.

The MVP isn't a permanent status. It's a pathway to full licensing, with a defined timeline to complete remaining requirements. Firms that don't progress lose MVP status.

What MVP authorization allows

MVP licensees can operate, but with guardrails:

Limited customer onboarding (typically qualified/institutional investors only, not retail)
Restricted trading volumes or transaction values
Enhanced VARA oversight and reporting
Specific operational limitations defined per applicant

The restrictions vary by firm. VARA tailors MVP terms based on the applicant's readiness level and risk profile. Some MVP holders operate nearly unrestricted; others face significant limitations.

MVP status typically lasts 6-12 months, during which the firm must complete full licensing requirements. Extensions are possible but not guaranteed.

Full VASP license requirements

Full authorization requires meeting VARA's complete framework:

Capital adequacy: Varies by activity type. Exchange operations require higher capital than advisory services. Expect AED 1-5 million minimum depending on scope (roughly $270,000-1.35 million).

Governance: Detailed organizational requirements including local presence, qualified personnel, and defined compliance functions. Board composition and key personnel face fit-and-proper assessment.

Technology standards: Security frameworks, custody arrangements (for firms holding customer assets), system resilience, and operational continuity requirements.

AML/CFT compliance: Full framework meeting UAE Central Bank standards and FATF recommendations. Transaction monitoring, customer due diligence, and suspicious activity reporting.

Consumer protection: Disclosure requirements, complaint handling, and asset segregation obligations.

Timeline and process

The staged approach was designed to accelerate market entry:

MVP path: 2-4 months from application to provisional authorization for well-prepared applicants. Then 6-12 months to complete full licensing while operating.

Direct full license: 6-12 months from application for firms applying directly for complete authorization without MVP stage.

VARA has been responsive compared to many regulators. They've staffed up, published guidance, and engaged with applicants actively. The Dubai government clearly wants the regime to work.

The cost reality

Dubai licensing is not cheap:

VARA fees: Application fees, annual supervision fees, vary by activity type. Budget AED 100,000+ in regulatory fees.
Capital requirements: AED 1-5 million depending on activities
Local substance: Dubai office, local employees, operational infrastructure. Budget AED 500,000+ annually for meaningful presence.
Professional fees: Legal, compliance consulting, application support. AED 200,000+ is common.

Year one setup cost: AED 2-5 million+ ($550,000-1.35 million) is realistic for most applicants. Dubai isn't competing on cost. It's competing on access to Gulf markets, credibility, and operational environment.

Who VARA licensing works for

Dubai VARA makes sense for:

Firms targeting Middle East and Gulf customers
Companies wanting a credible non-EU license with substance
Operations that benefit from UAE's zero personal income tax environment
Businesses where Dubai's geographic position (between Asia and Europe) matters

It's less suitable for firms only targeting EU or US markets (where VARA provides no regulatory access) or those seeking the cheapest path to any license.

The MVP pathway particularly suits firms with strong operational readiness who want to begin generating revenue while completing full authorization. It's not a shortcut around requirements; it's phased implementation of the same requirements.