Comparison of UAE Virtual Asset Regulations: Key Differences Between ADGM and VARA

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UAE Crypto Assets Regulation: Similarities and Differences Between Abu Dhabi and Dubai

The UAE, with its advantageous geographical location, clear support for crypto asset policies, and favorable tax policies, has become one of the important centers for global crypto assets and blockchain innovation. In the regulatory field of virtual assets in the UAE, the Abu Dhabi Global Market (ADGM) and the Dubai Virtual Assets Regulatory Authority (VARA) each have their own characteristics. This article will explore in depth the key content and differences in compliance regulation between Abu Dhabi and Dubai.

Regulatory Overview of Abu Dhabi and Dubai

Abu Dhabi

As an international financial center, ADGM aims to support regional economic strategies and serve as a global financial and business hub. Its independent regulatory body, the Financial Services Regulatory Authority (FSRA), is responsible for overseeing and enforcing ADGM's Crypto Assets regulatory provisions.

The FSRA regulates virtual assets as a specific asset class within the financial industry. Therefore, the scope of the crypto assets licenses it issues is relatively limited, lacking a specialized customized regulatory framework. The application process typically takes six to seven months, with strict compliance requirements for applicants, following the licensing standards of traditional financial institutions. This results in a high barrier to entry for exchanges with a technological background, while traditional financial institutions have a greater advantage in transitioning to engage in crypto business.

Dubai

The virtual asset licensing in Dubai is divided into two major systems:

  1. Dubai International Financial Centre (DIFC): As a financial free trade zone, its regulatory model is similar to that of ADGM. Its independent regulatory authority, the Dubai Financial Services Authority (DFSA), classifies virtual assets as tokenized assets within financial instruments for regulation. The application period is approximately seven to eight months, primarily aimed at large institutions with financial qualifications. DIFC also offers a special channel for "Innovation Licenses," allowing purely technology development companies (not involved in client fund custody or financial transactions) to be approved in about three months.

  2. Virtual Assets Regulatory Authority (VARA): A regulatory body set up by the Dubai government that does not directly issue business licenses but rather overlays virtual asset operating licenses on existing company licenses. Its regulatory scope covers mainland businesses and free zone companies in Dubai (excluding DIFC), authorizing specific virtual asset businesses through a licensing mechanism.

In addition, the Securities and Commodities Authority (SCA) is responsible for regulating ICOs and token issuance activities. Companies planning to conduct ICOs in the UAE may need to obtain approval from the SCA.

Main Differences Between VARA and ADGM

Institutional Nature and Positioning

  • VARA: The government authority established by the Dubai government to specifically regulate virtual assets, responsible for overseeing the virtual asset industry in Dubai (excluding DIFC).
  • ADGM: Financial Free Trade Zone, with an independent regulatory system, and its Financial Services Regulatory Authority (FSRA) is responsible for regulating enterprises providing virtual asset-related services within ADGM.

jurisdiction

  • VARA: Dubai Emirate (excluding DIFC)
  • ADGM: Abu Dhabi Global Market and Al Maryah Island

Regulation Scope of Virtual Asset Activities

  • VARA: Includes brokerage services, virtual asset consulting services, exchange/multilateral trading, virtual asset custody, virtual asset management, investment trading as an agent, and NFT-related activities.
  • ADGM: Including brokerage services, virtual asset consulting services, exchanges/multilateral trading, virtual asset custody, virtual asset management, investment trading as an agent, etc., but excluding NFT-related activities.

Application Conditions and Requirements

  1. Company Registration:

    • VARA: Requires the applicant company to be registered in the mainland of Dubai or any free zone in Dubai (excluding DIFC).
    • ADGM: Requires applicant companies to register in the Abu Dhabi Global Market.
  2. Office Space:

    • All require a physical office, shared desks are not accepted.
    • VARA: Generally, at least one desk is needed for every two visas.
    • ADGM: Generally, at least one desk is required for every three visas.
  3. Regulatory Capital:

    • VARA: Regulatory capital requirements range from $11,000 to $27,000, with a maximum of $408,000, or 15%/25% of fixed annual expenses, depending on the type of virtual asset activities.
    • ADGM: The operating expense (OPEX) cycle is 6 to 12 months based on the type of activity.

Application Process and Time

  • VARA:

    • Process: Prepare a compliant business plan, have an initial meeting with VARA, submit materials, review materials, operational adjustments, review again and issue license.
    • Time: generally 4-8 months
    • Required documents: Overview of virtual asset services, KYC documents of company directors and shareholders, financial forecasts, etc.
  • ADGM:

    • Process: Conduct due diligence and discussions with the FSRA team, submit a formal application, obtain in-principle approval, obtain final approval, and conduct "operational launch" testing.
    • Time: Generally around 6 months
    • Required documents: Business plan for virtual asset services, KYC documents for company directors, shareholders, and other key personnel, financial forecasts, etc.

required fee

  • VARA:

    • Application fee: between $11,000 and $27,000
    • Ongoing supervision fees: between $22,000 and $55,000, depending on the activity
  • ADGM:

    • Application Fee: between $20,000 and $125,000
    • Ongoing supervision fees: between $15,000 and $60,000, depending on the activity

By understanding the similarities and differences in virtual asset regulation between Abu Dhabi and Dubai, crypto practitioners can better choose a regulatory environment that suits their business, ensuring legal and compliant operations, and contributing to the healthy development of the entire crypto industry.

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ponzi_poetvip
· 07-16 00:20
It feels like Dubai wants to take jobs away.
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GasFeeTearsvip
· 07-13 10:40
Why not choose Singapore?
View OriginalReply0
MissedAirdropBrovip
· 07-13 02:12
Choice paralysis, feeling uncomfortable
View OriginalReply0
MEVHuntervip
· 07-13 02:10
ngmi dual regulations = more attack vectors tbh
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StablecoinGuardianvip
· 07-13 02:08
After playing with stablecoins for so long, ADGM is still the most reliable choice.
View OriginalReply0
BlockchainBouncervip
· 07-13 01:56
These two are really hard to deal with...
View OriginalReply0
LiquidityHuntervip
· 07-13 01:52
At this moment, the regulatory arbitrage space of DXB is gradually becoming evident, waiting for the right opportunity.
View OriginalReply0
DeFi_Dad_Jokesvip
· 07-13 01:47
The water in Dubai is really deep.
View OriginalReply0
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