The Process of Setting up a Company for a Cryptocurrency Business in Dubai
Setting up a company in Dubai is a key step toward becoming a licensed cryptocurrency business regulated by VARA. It is correct to see the incorporation stage as being strategic to the licensing process, as it is an integral part of the pre-application process.
A crypto business is free to register in a free zone in Dubai or to the Dubai Department of Economy and Tourism (DET). The choice shall not affect the company’s operations and should also be motivated by the choice of location and actual place of business.
To successfully obtain the VASP license in Dubai, it is compulsory that Dubai is the actual place of business. This means, at a minimum, that the company should rent an office space in a dedicated area of its registration place, and hire at least 2 residents or holders of a UAE passport as responsible Individuals.
Taxation for Cryptocurrency Companies in Dubai
The corporate income tax rate in Dubai is 9%. It is important to note that this tax rate does not apply to free zones in Dubai, where VASP companies are free to register. Therefore, it is possible to form a crypto business benefitting from a 0% tax rate in Dubai.
Cryptocurrency companies are, even for the ones registered in free zones and not liable to taxes, expected to fill tax returns. The compliance rulebooks state that licensed VASP companies must comply with tax reporting obligations at all times, under all the applicable laws. This includes national but also international best practices, like the United States Foreign Account Tax Compliance Act (FATCA).
This underlines the importance of having good accounting practices when operating a cryptocurrency company in Dubai. Rengang’s FinTech lawyers and specialists can provide valuable advice to crypto companies getting started in Dubai.
Obligations for Crypto Companies in Dubai
VARA has made it simple for VASP companies to comply with the regulation by providing them with a set of rulebooks detailing all the requirements. These rulebooks are freely available on the VARA website and their content is to the point, leaving no place for free interpretation. The key to obtaining a Dubai crypto license is having a legal team that has experience preparing compliance programs and knows how to communicate with the regulator.
The company rulebook pertains to the legal entity, the board members and ultimate beneficiary owners (UBOs), corporate governance, etc. It defines how the company should be structured, including in terms of personnel (mandatory company secretary, two responsible individuals) and in terms of training and background of the individuals (senior management is expected to be fit and proper by VARA, for example).
The compliance and risk management rulebook defines the AML/KYC policy and procedures to implement, as well as the internal compliance and risk management measures to enforce.
The technology and information rulebook relates to every software aspect of the business. This includes the application developed to perform their virtual asset activities, their cybersecurity measures, the laws and policies pertaining to data, and the requirement for testing and auditing of the systems.
The market conduct rulebook can be seen as the applicable financial regulation. It defines how the VASP company shall behave in regard to market participants. This includes marketing and promotion, agreements signed between the company and the clients, but also with the shareholders, the investors, the market makers and financial institutions, etc.
Those four rulebooks constitute the reglementary basis for all virtual asset services providers in Dubai. In addition to them, a specific rulebook applies to every virtual asset activity that the company will register for.
There are 8 VA activities in Dubai. When applying for the license, a crypto business shall notify the VARA on which of them it intends to practice. This is critical, as not only the obligations in terms of ongoing requirements but also in terms of incorporation, will change accordingly.
The 8 VA activities in Dubai are the following:
咨询服务； 经纪自营商服务； 托管服务； 交换服务； 借贷服务；
VA Issuance Category-1; VA管理和投资服务； VA转移和结算服务。
Issuing anonymity-enhanced cryptocurrencies, and anything having to do with these kinds of virtual assets, is strongly prohibited in the Emirate.
Sanctions for Violating Dubai Crypto-Business Obligations
It is implied by the official statements of the VARA, that behind the licensing of crypto businesses in Dubai, there is an intention to form trusted corporate bonds between the regulatory bodies and the licensees. Consequently, violating the VASP license obligations is severely repressed.
VARA can impose fines, civil penalties, and other enforcement actions directly against the responsible individuals of a VASP.
A single violation of rules as they are described in the rulebook can lead to a fine, whose amount shall be the higher of:
50,000,000 AED (about 13,500,000 USD);
15% of the company’s annual gross revenue;
300% of the profits gained or loss avoided by the breach of the rules.
Unpaid fines generate a penalty of 1% per month.
The VARA also has the right and duty to sanction any action that they would consider improper, even though it may not be described as a rule that has been breached. VARA is the judge and arbiter of crypto companies in Dubai, as it is required by law to make and enforce the rules.
STEP-BY-STEP GUIDE TO THE DUBAI VARA CRYPTO PERMIT
How to obtain a VASP license in Dubai
How to get crypto license in Dubai? Obtaining a crypto license in Dubai’s VARA framework is a two-step process.
阶段1根据要求
INCORPORATION IN DUBAI TO PREPARE FOR THE VARA’S INITIAL APPROVAL
When setting up a crypto company in Dubai, licensing has to be kept in mind from the very beginning. This means that the incorporation of the company has to be done with the licensing requirements in mind.
Registration of a limited liability company in the Dubai Department of Economy and Tourism (DET) or in a free zone;
Provide information about the participants: certified government ID, resume, proof of non-criminal record, etc
Appointment of 2 responsible individuals who are either UAE citizens or residents, and validated by the VARA for this position;
Appointment of a company secretary;
Rental of an office space in Dubai, according to the place of registration of the company;
Drafting of policies, procedures, and documents pertaining to the 4 compulsory rulebooks (Company, Compliance and Risk Management, Technology and Information, and Market Conduct);
Opening of a corporate account to deposit the required initial share capital (100,000 AED);
Payment of 50% of the licensing fee;
Presentation of the project to the VARA & application to the VA activities related.
阶段2根据要求
APPLICATION TO THE VIRTUAL ASSET SERVICES PROVIDER LICENSE IN DUBAI
After initial approval from the VARA, the crypto business can prepare itself for application to the VASP license in Dubai. This step is mainly about building communication with VARA and performing fine-tuning of the company processes before validation.
Preparation of additional documents as requested by VARA after initial approval;
Meetings and interviews with VARA to assert the final details of the operation;
Payment of the remainder of the licensing fee;
Reception of the license and beginning of the crypto business.
