In Part 2 of our FinTech Series, we break down crypto licensing in Dubai, highlighting how VARA and DIFC operate within the city's unique regulatory landscape.
Dubai is unique in having two fully independent regulatory frameworks for crypto-assets — the Virtual Assets Regulatory Authority ("VARA") and the Dubai Financial Services Authority ("DFSA") within the Dubai International Financial Centre ("DIFC"). Both are world-class, but they cater to different market segments.
For crypto-asset service providers (CASPs, ASPs), tokenisation platforms, or institutional FinTech firms evaluating the UAE, understanding the differences is essential.
Two frameworks, one city
| Jurisdiction | Regulator | Scope |
|---|---|---|
| Dubai (excluding DIFC) | VARA | Mainland Dubai + all Dubai free zones except DIFC |
| DIFC | DFSA | DIFC free zone only |
While both frameworks operate in Dubai, they are governed independently, and choosing the right one affects your licensing model, compliance structure, and market strategy.
Who they're designed for
- VARA is a purpose-built, crypto-native regulator. It offers licensing to businesses directly engaged in virtual asset activity, from exchanges and custodians to tokenisation platforms and staking operators.
- DFSA integrates crypto regulation into the broader financial services regime. It is geared towards firms offering investment, custody, and tokenised financial products in a regulated environment, particularly for institutional or professional clients.
Innovation in practice
- VARA has overseen live tokenisation pilots, including fractional real estate sales and upcoming gold-based assets. It is open to DeFi experimentation, subject to responsible governance structures and regulations.
- The DFSA launched a dedicated tokenisation sandbox in 2025, focusing on regulated financial instruments, including tokenised funds, bonds, and shares. The programme received over 90 expressions of interest, signalling strong institutional engagement.
Key considerations
| Aspect | VARA | DIFC (DFSA) |
|---|---|---|
| Regulatory focus | Dedicated focus on the virtual asset sector and crypto-native business models; aims to foster innovation and make Dubai a global crypto hub. | Integrates digital assets into a conventional financial framework, emphasising tokenised finance and institutional-grade crypto services for sophisticated investors. |
| Licensing process | Phased approach with two-stage licensing (initial approval then full VASP licence). VARA offers an MVP (Minimum Viable Product) sandbox route allowing firms to launch in stages under close supervision. | Requires a full DFSA authorisation under the existing financial services rulebook. Firms must undergo a thorough application process (including a business plan, capital proof, etc.) and obtain a DFSA licence with a Crypto Token endorsement, if required. |
| Client base | Globally oriented, serving both retail and institutional clients. VARA-licensed virtual asset service providers are permitted to cater to retail customers (no qualified-investor restriction). | Primarily professional/institutional clients. The DFSA regime is geared towards sophisticated investors; retail clients are generally not targeted, and any retail offerings would face strict suitability checks and extra obligations (e.g. appropriateness tests, no incentive schemes). |
| Token types | Broad scope of permissible tokens. VARA's framework covers most virtual assets, including cryptocurrencies, utility tokens, NFTs, and even tokenised real-world assets (RWAs) – enabled by the law's flexible definitions. | Restricted whitelist of tokens. Only DFSA-"Recognised" Crypto Tokens can be used (a short list of major tokens like Bitcoin, Ethereum, Litecoin, Toncoin, XRP). Unrecognised tokens (e.g. privacy coins or algorithmic stablecoins) are not allowed in DIFC. |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
