Launching a New Cryptocurrency in the UAE: VARA and Other Nuances

Thanks to the systemic regulation of the crypto industry, the UAE is one of the few countries in the world well-suited for most crypto projects, even the most ambitious ones, including launching their own cryptocurrency. However, according to statistics, 80% of such entrepreneurial endeavors get stuck at the stages of legal planning/structuring, licensing, or banking compliance.

In the vast majority of cases, completing these stages without losses is only possible with competent support from professionals in these related fields. Antwort Law, an international legal consulting firm headquartered in Dubai, has completed a number of Web3 projects and is ready to briefly discuss launching a new cryptocurrency in one of the most promising, yet challenging, jurisdictions.

First, let's define why any Web3 project should be launched in the UAE. Firstly, it's very important and convenient that the country has its own body, VARA (Dubai Virtual Assets Regulatory Authority), to regulate cryptocurrency—incidentally, the first of its kind in the world. Secondly, VARA licenses can be obtained for various types of activities, including advisory services, brokerage, exchange, and asset custody. Thirdly, licenses obtained in the UAE are highly trusted by banks and other financial institutions. Finally, the UAE government is actively developing this area, supporting the industry with new projects and government initiatives.

Along with the broad opportunities offered by this jurisdiction, applicants also receive a wide range of requirements that must be met at every step along the way. Below we describe the most common mistakes along the way:

1) Conducting any type of cryptocurrency operations without a license is illegal in the UAE and carries a multitude of penalties, from company closure to criminal liability for entrepreneurs unaware of this key risk.

2) For a crypto project, simply registering a company is not enough; choosing the right license is essential from the very beginning. This is not a quick process; in our experience, it typically takes from seven months to a year and includes: preparing the project's business model, organizing AML and compliance procedures, organizing the office and staff, proving capital and financial performance, and even confirming the directors' experience.

Currently, the following licenses can be obtained for these types of activities:

VARA Advisory (consulting):

• consulting on virtual assets, tokens, and risks;

VARA Exchange Services:

• VA↔VA
• VA↔fiat
• OTC transactions
• matchmaking, order book

ADGM Custody / Brokerage:

• custody services
• brokerage services
• settlement / transfer services

ADGM MTF:

• full-fledged trading platform (matching engine)

Without a license, you will also be unable to carry out the following activities:

• Issuing a token if it has the characteristics of a financial instrument.
• Selling a token to investors without a legal opinion.
• Any transactions with user assets.
• Accepting payments, investments, yield mechanisms, DAO payments.
• P2P transactions, DeFi modules, staking/farming.

In the UAE, these activities are subject to significant fines, project closure, and criminal liability.

3) Furthermore, if you have correctly selected and prepared the documents for obtaining a license, you should avoid being classified by VARA as a high-risk project. This always leads to increased scrutiny, inquiries, delays, and possibly even outright rejection. This label may be applied if your project involves the following:

• user anonymity;
• decentralized financial instruments and protocols;
• tokens with security attributes;
• use of client funds;
• investment promises;
• trading on external platforms.

4) Finally, after completing these steps, you'll face the second unofficial regulator in the UAE – a bank. You may be denied a corporate account for the following possible reasons:

• your structure is deemed opaque
• lack of a physical office
• lack of an AML officer
• weak documentation
• unclear revenue model
• no verified capital

So, what's the right way to launch a crypto project in the UAE? Let's go through the steps:

Stage 1. Structuring (0-2 months)

• Tokenomics analysis and legal opinion
• Choosing a jurisdiction (VARA vs. ADGM vs. CBUAE)
• Determining the model (exchange / advisory / custody / broker-dealer)

Stage 2. Company registration (1-2 months)

• Preparing a set of documents
• Office rental
• Preparing initial policies

Stage 3. Licensing (6-12 months)

• AML policies
• Compliance structure
• Business plan
• Responses to VARA and ADGM inquiries

Stage 4. Visa and bank

• Residency visa
• Opening a corporate bank account
• Preparing a compliance package
• Supporting responses to the bank

UAE regulators require a level of project development that is impossible to achieve independently. Antwort Law covers the entire project development cycle in the UAE, namely: 

• Legal opinions on tokenomics,
• risk analysis (to prevent the project from becoming high-risk),
• AML/KYC/KYT preparation,
• full structuring,
• communication with regulators,
• document preparation for banks,
• tax model,
• structure for investors.

We design the structure so that VARA approves it on the first try, regulators don't classify the project as high-risk, and the company successfully passes bank compliance processes of varying complexity. We determine the project model, how it will appear to the regulator, whether it meets banking requirements, and what legal strategy it uses. No serious crypto project in Dubai operates without a legal team. Contact us, and we'll conduct an initial consultation and show you the best path for your project.

Diana Gulevskaya

Head of Office in UAE
Antwort Law