What is the VARA Framework, and what are its main components?

05 April 2023

Ajmal Khan

The VARA Framework is a set of regulations that govern the activities related to virtual assets and virtual asset service providers (VASPs) operating in Dubai. VARA is the entity in charge of regulating, supervising and overseeing Virtual Assets and related activities in all zones across the Emirate of Dubai (including Special Development Zones and Free Zones but excluding the DIFC).

The Regulations cover 7 licensed virtual asset activities

Advisory services, Broker-Dealer services, Custody services, Exchange services, Lending and Borrowing services, Payments and Remittances services, Management and Investment services

VASPs are required to comply with these regulations:

• Compulsory Rulebooks which all VASPs must comply with;

• Activity Specific Rulebooks which VASPs must comply with to the extent related to the activity which it is licensed to carry on; and

• The Virtual Asset Issuance Rulebook

Exempt Entities

Exempt Entities will not be subject to the licensing requirements under VARA and includes those entities which have notified VARA and obtained confirmation of its Exempt Entity status in the form of a NOC confirmation prior to undertaking any Virtual Asset activities in Dubai.

Professional Exemption

Duly registered practicing lawyers, accountants and other professionally licensed business consultants carrying on Virtual Asset Activities related to their respective professions.

Fines and Penalties

For Violation of Compliance and Risk Management Rulebook, Market Conduct Rulebook, or Directives related to Market Offences:

Return of the profits gained or losses avoided; a fine up to AED 20,000,000 for an individual; fine up to AED 50,000,000 or 15% annual revenue of any VASP; a fine of 300% of the profits gained or losses avoided.

For Violation of the rules in all other Rulebooks:

A fine up to AED 8,000,000 for an individual or a fine up to AED 20,000,000 or 5% annual revenue for a VASP; or 200% of the profits gained or losses avoided.