VARA & SCA Joint Frameworks

VARA & SCA: How the New Joint Framework Impacts Virtual Asset Service Providers

The UAE’s regulatory landscape for virtual assets entered a new era in late 2024, as the Securities and Commodities Authority (SCA) and Dubai’s Virtual Assets Regulatory Authority (VARA) signed a landmark cooperation agreement. This joint framework is a pivotal development for Virtual Asset Service Providers (VASPs) and signals the UAE’s commitment to establishing itself as a global hub for digital assets.

What Changed? Unified Licensing and Regulatory Clarity

Previously, VASPs operating in Dubai faced the complexity of needing licenses from both VARA and the SCA. The new agreement introduces a streamlined, unified approach:

• VASPs in Dubai: Firms operating in or from Dubai, or wishing to serve Dubai, now only need to secure a license from VARA. Once licensed, they are automatically registered with the SCA, allowing them to provide virtual asset services throughout the UAE without duplicative licensing requirements.
  
• VASPs in Other Emirates: Firms wishing to operate outside Dubai must obtain a direct license from the SCA.
  
• Financial Free Zones: The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) remain outside the scope of both VARA and SCA for virtual assets, as they have their own independent regulatory frameworks.
  

This unified system brings much-needed clarity and efficiency for VASPs, reducing administrative burdens and accelerating market entry.

Key Features of the Joint Framework

• Comprehensive Rules and Procedures: The SCA and VARA will jointly establish rules for licensing, supervision, and ongoing compliance for VASPs, in line with Cabinet Decisions No. 111 and 112 of 2022.
  
• Mutual Supervision: The agreement provides mechanisms for the mutual supervision of VASPs, including the imposition of penalties, information sharing, and coordinated enforcement actions.
  
• Automatic Passporting: Licensing with VARA in Dubai now enables automatic registration with the SCA, effectively “passporting” services across the UAE and greatly simplifying expansion for regulated firms.
  
• Focus on Compliance: The framework reinforces strict anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, aligning with international standards and boosting investor confidence.
  

Why This Matters for VASPs

• Easier Market Access: The streamlined process lowers barriers to entry, making the UAE more attractive to global virtual asset businesses and encouraging innovation.
  
• Regulatory Certainty: Clearer responsibilities and a unified approach reduce compliance confusion and support long-term business planning.
  
• Investor Protection: Enhanced supervision and robust compliance measures help protect investors and ensure the integrity of the UAE’s virtual asset ecosystem.
  
• Alignment with National Vision: The agreement supports Dubai’s 2033 Economic Agenda and the UAE’s ambition to lead in the future of finance and responsible innovation.