Author: Beosin
With its convenient geographical location, clear government crypto policies, and tax-friendly environment (0% personal income tax, 9% corporate income tax, and 146 double taxation avoidance agreements), the UAE has become one of the global centers for cryptocurrency and blockchain innovation. Notably, in the virtual asset regulatory landscape of the UAE, ADGM (Abu Dhabi Global Market) and VARA (Dubai Virtual Asset Regulatory Authority) have distinct characteristics and positioning. When analyzing the UAE's regulated virtual asset licensing system, it is crucial to distinguish between the two jurisdictions of Abu Dhabi and Dubai.
This article will explore the key contents and differences in compliance and regulation between Abu Dhabi and Dubai. By understanding the regulatory requirements and distinctions of these two locations, crypto practitioners can better conduct their businesses, ensure legal and compliant operations, and promote the healthy development of the entire crypto industry.
Abu Dhabi VS Dubai
In Abu Dhabi, ADGM (Abu Dhabi Global Market) serves as an international financial center, established to support the region's economic strategy and play the role of a global financial and business center. Its independent regulatory body is FSRA (Financial Services Regulatory Authority), responsible for overseeing and implementing ADGM's specific crypto asset regulatory provisions.
FSRA regulates virtual assets as a specific asset class within the financial industry. Therefore, the crypto asset licenses it issues have a relatively limited scope and lack the specialized, customized regulatory framework of Dubai's VARA. The application process typically takes six to seven months and has strict compliance requirements for applicants—using traditional financial institution licensing standards. This creates a high entry barrier for technology-based exchanges, while traditional financial institutions transitioning to crypto business are more adaptable.
In Dubai, virtual asset licenses are divided into two systems:
1. DIFC (Dubai International Financial Centre): As a financial free trade zone, its regulatory model is similar to ADGM, with DFSA (Dubai Financial Services Authority) as its independent regulatory body. DFSA categorizes virtual assets as tokenized assets within financial instruments, with an application cycle of about seven to eight months, primarily targeting large institutions with financial qualifications. However, it provides a "innovation license" special channel: purely technology development companies (not involving customer fund custody or financial transactions) can be approved in about three months.
2. VARA (Virtual Asset Regulatory Authority): A regulatory body specifically established by the Dubai government, which does not directly issue business licenses but adds virtual asset operating permits on top of existing company licenses. Its regulatory scope covers Dubai mainland enterprises and free zone companies (excluding DIFC), authorizing specific virtual asset businesses through a licensing mechanism.
3. SCA (Securities and Commodities Authority) is responsible for regulating ICO and token issuance activities. Companies planning to conduct an ICO in the UAE may need to obtain SCA approval.
Main Differences between VARA and ADGM
Institutional Nature and Positioning
VARA: A government functional department specifically established by Dubai to regulate the virtual asset industry in Dubai (excluding DIFC), including virtual currency exchanges, virtual asset venture capital funds, Non-Fungible Token platforms, etc.
ADGM: A financial free trade zone with an independent regulatory system, where its Financial Services Regulatory Authority (FSRA) is responsible for regulating companies providing virtual asset-related services within ADGM.
Jurisdiction
VARA: Jurisdiction covers the Emirate of Dubai (excluding DIFC).
ADGM: Jurisdiction covers Abu Dhabi Global Market and Al Maryah Island.
Virtual Asset Activity Regulatory Scope
VARA: Regulated virtual asset activities include brokerage services, virtual asset consulting services, exchanges/multilateral trading, virtual asset custody, virtual asset management, investment trading as a principal, and Non-Fungible Token related activities.
ADGM: Regulated virtual asset activities include brokerage services, virtual asset consulting services, exchanges/multilateral trading, virtual asset custody, virtual asset management, investment trading as a principal, etc., but Non-Fungible Token related activities are not within the regulatory scope.
Application Conditions and Requirements
Company Registration: VARA requires applicant companies to be registered in the Dubai mainland or any free trade zone in Dubai (excluding DIFC); ADGM requires applicant companies to be registered in Abu Dhabi Global Market.
Office Space: Both require physical offices, not shared desks. VARA generally requires at least one desk per two visas; ADGM generally requires at least one desk per three visas.
Regulatory Capital: VARA's regulatory capital requirements range from $11,000 to $27,000, up to $408,000, or 15%/25% of fixed annual expenses, depending on the virtual asset activity type; ADGM bases it on operating expenses (OPEX) for a 6 to 12-month cycle.
Application Process and Time
VARA: Application process includes preparing a compliant business plan, initial meeting with VARA, submitting materials as required, material review, operational adjustments based on conditions, re-review, and license issuance. Obtaining a business license typically takes 4-8 months. Document list: virtual asset service overview, KYC documents for company directors and shareholders, financial projections, and other regulatory documents required by VARA.
ADGM: Application process includes due diligence and discussion with FSRA team, formal application submission, obtaining initial approval, final approval, and "operational launch" testing. Application time is generally around 6 months. Document list: virtual asset service business plan, KYC documents for company directors, shareholders, and other key personnel, financial projections, and other regulatory documents required by ADGM.
Required Fees
VARA: Application fees range from $11,000 to $27,000, with ongoing supervision fees between $22,000 and $55,000 depending on activities.
ADGM: Application fees range from $20,000 to $125,000, with ongoing supervision fees between $15,000 and $60,000 depending on activities.
