September 20, 2023

What Does It Mean To Apply For A Regulatory Licence?

by Soham Panchamiya and Pankhuri Malhotra

in Articles

A common question that comes my way a great deal from crypto companies setting up operations in the UAE is: what is the difference between a company set up in the UAE and obtaining a regulatory licence (or colloquially, a ‘VARA licence’ or ‘ADGM licence’).

When you open a company in a free zone in the UAE (or even in the mainland a an LLC), you get an incorporation certificate/trade licence where your company’s specific activity code is chosen and included.

However, a company setup alone does not mean that you have everything you need to commence operations. VARA, the ADGM (or rather, the FSRA, which is the regulator in the ADGM) would still need to examine your business and grant you specific permissions in order to allow you to operate if what your business is trying to do (in relation to virtual assets) involves some kind of financial service for professional, institutional and/or retail customers.

This could include: running an exchange, an OTC desk, a broker-dealer service, virtual asset management, advisory services, taking or providing custody, on-ramping and off-ramping virtual assets, etc.

If you do happen to fall into one of these categories of service or business operation, you will have to submit a regulatory business plan and create internal compliance systems to satisfy the applicable regulator that you should be allowed to operate your business from the UAE.

There appears to be this picture of the UAE as a no-holds-barred, free-for-all grey jurisdiction where anyone in the digital asset space can do anything they please and no rules or regulations would apply to them. This is far from the truth. The UAE has a robust and relatively clear (though developing) regulatory framework, which means as a VASP, you will know where you stand if you choose to operate from here, but it won’t be a simple or fast process.

Plan ahead, strategise, and surround yourself with capable, reliable advisors when shopping around for a jurisdiction. The UAE is a home for all VASPs, whether start-ups or late-stage, but it is a home with rules and regulations – be prepared for that both in terms of your internal company roadmap and budgets.

© 2024 TLP Advisors