Dubai’s crypto regulator defends ‘robust’ approval process

• Vara CEO Matthew White interview
• Only 5% of applicants approved
• Licensing takes up to two years

Dubai is viewed as a crypto-friendly destination, but the head of the regulator overseeing the sector has told AGBI its processes are rigorous and only a small fraction of applicants are approved.

“It’s probably fair to say at the beginning there was a perception from the market that it would be straightforward to get a licence within Dubai,” said Matthew White, CEO of the Virtual Assets Regulatory Authority (Vara).

This perception has “changed significantly” since Vara was established in March 2022, according to White. “The market has realised that the regulation [and licensing process] we’ve had in place is comprehensive and robust.”

White said fewer than 5 percent of applicants have been granted a full virtual asset service provider – or VASP – licence. A VASP is a company that facilitates the exchange, management or transfer of digital assets, particularly cryptocurrencies.

The rest are either still undergoing the process, do not need full licensing or are being rejected, he said.

Vara

Vara, the world’s first independent regulator for virtual assets, regulates virtual assets across Dubai’s free zones and mainland, excluding the Dubai International Financial Centre.

This regulatory clarity has attracted major cryptocurrency firms, including OKX, eToro, Nomura’s Laser Digital, and the exchange Binance.

Last week Vara announced an update to its marketing regulations. The update places a strong emphasis on the accuracy of marketing communications, the avoidance of misleading information and the protection of consumer interests. 

White said licensing can take from three months to two years, depending on the complexity and size of the business. 

“The more complex, the more systemic, the bigger entities… require a lot more due diligence,” he said.

Vara has “pushed back on many organisations” during the licensing process, often providing feedback that a business’ initial setup does not meet its regulatory requirements, he said, particularly in areas of compliance and governance.

White said larger companies had been patient and responsive, understanding the detailed requirements needed to move applications forward.

He added that Vara has licensed just over 20 entities, with many more in progress. 

“We’ve seen a big evolution and the influx is now from sophisticated players that take regulation seriously,” he said, pointing to a recent inquiry from the CEO of a well-known crypto custody company (a business that provides crypto storage services for investors with extensive holdings).

“You don’t [attract] organisations like that without regulations that provide clarity, transparency and security that these entities want.”

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White said Vara’s collaborative approach had set Dubai apart from other jurisdictions that take a more restrictive stance on cryptocurrency.

“We are very engaging. We don’t shut the door before we’ve had sensible conversations to understand the risks of particular business models and types of entities.”

Internationally, White said Vara is in early talks with other jurisdictions to harmonise regulations and manage cross-border risks.

“We’re also starting to get requests to support enforcement activities,” he said. 

“The level of dialogue is improving.”