Crypto license in the UAE (Dubai)

Obtaining a crypto license in Dubai offers many benefits that make it an attractive destination for cryptocurrency-related businesses.

Some of the key benefits of a crypto license in UAE are:

Favorable regulatory environment
Dubai has established clear and favorable regulations for the cryptocurrency sector, providing a stable and predictable legal framework for businesses.

Tax benefits
Dubai offers significant tax advantages, including zero income tax and dividend tax, which can result in significant savings for businesses. In addition, the OEA has 123 double tax treaties with other jurisdictions.

100% repatriation of profits and capital
This means that businessmen doing business in the UAE can take their earnings and investments back to their home country without any restrictions. Entrepreneurs can rest assured that their funds are safe and available for return at any time

Robust financial infrastructure
Dubai boasts a well-developed financial infrastructure, including advanced banking services, which are crucial for the efficient operation of cryptocurrency businesses.

Strategic Location
Dubai’s strategic location at the crossroads of Europe, Asia, and Africa makes it an ideal hub for international business operations and provides easy access to major markets.

An ecosystem conducive to innovation
Dubai is known for its commitment to innovation and technology. The government actively supports blockchain and cryptocurrency initiatives, creating a vibrant ecosystem for startups and established businesses alike.

Regulatory compliance
Obtaining a license in Dubai ensures that your business will operate in compliance with international standards and local regulations, enhancing your reputation and credibility in the market.

Government support
The UAE government has launched various initiatives such as the Dubai Blockchain Strategy to position Dubai as a global leader in blockchain technology and digital transformation.

Favorable business environment
The process of setting up and running a business in Dubai is streamlined and efficient, with various free zones offering additional benefits such as 100% foreign ownership and no import or export duties.

Stable currency and business English
The UAE’s currency, the dirham, is pegged to the US dollar, which provides a stable and predictable exchange rate. This makes it easy to plan budgets and operations and reduces currency risks. In addition, English is widely spoken in the UAE and is the second official language of business.

Access to Capital
Dubai is home to numerous venture capitalists and investors who are interested in investing in promising cryptocurrency and blockchain projects, providing ample fundraising opportunities.

Networking Opportunities
Dubai hosts numerous international conferences, exhibitions, and networking events dedicated to cryptocurrencies and blockchain technology, providing excellent opportunities to network with industry leaders and potential partners.

By obtaining a cryptocurrency license in Dubai, businesses can use these advantages to establish a strong presence in the rapidly evolving cryptocurrency industry, ensuring long-term success and growth.

The requirements for obtaining a crypto license in the UAE depend on the choice of free economic zone and the specific type of crypto activity.

General requirements include:

Equity capital required
Companies must have sufficient financial resources to cover operating expenses for six to twelve months. The amount of minimum shareholder capital is between USD 100,000 and USD 100,000.

Local Employee
Anti-money laundering officers and directors are mandatory.

Physical office
A local office is mandatory.

Security requirements
Companies must ensure a high level of security and protection of virtual assets and customer data. This includes the use of modern encryption technologies, multi-factor authentication, and measures to prevent unauthorized access.

Documents for obtaining a crypto license
Copies of passports of all founders.

AML/CFT Compliance
AML/CFT compliance procedures include:

• mandatory client registration and identification procedures;
• verification of clients’ identity, collection of relevant documents, and criminal record checks.

Reporting

The jurisdiction must maintain accurate and timely reporting, which includes:

• financial statements;
• operational data;
• other information required by the regulator.
• Audits and inspections

Regular audits and compliance reviews by VARA or other regulators to ensure that companies comply with all requirements and regulations. In case of violations, fines, restrictions on operations, or license revocation.

Cooperation with regulators
Active cooperation with regulators includes providing necessary information and reporting upon request, and cooperating in the event of investigations of suspicious transactions or misconduct.

Internal policies and procedures
It is mandatory to develop and implement clear internal policies and procedures, as well as rules for transaction processing, risk management, compliance control, and staff training.

Recall that these are general requirements. Specific requirements may differ depending on the free zone and license type you choose. For example, a crypto license in the DIFC requires:

Experience in the cryptocurrency industry
More than 5 years of legal presence in the cryptocurrency industry in another country.

Authorized capital
No minimum authorized capital is required for companies not related to the financial sector.

Company registration
Company registration requires a minimum of one shareholder and two directors and a special license to operate with the DIFC.

Representative office in Dubai
It is not a mandatory requirement, but the use of a representative office facilitates the registration process and ensures compliance with regulatory requirements.

It is recommended to consult with Fast Offshore Licenses’ lawyers and specialists with experience in UAE cryptocurrency regulation to clarify all requirements.

The UAE does not have a single “cryptocurrency license”. Instead, it offers different licenses depending on your specific cryptocurrency-related activities and the free zone you choose to operate in. Here are some well-known free zones where you can get a crypto license:

Dubai Multi Commodity Center (DMCC)
DMCC is a popular choice that offers licenses for activities such as cryptocurrency storage, custodial services, basic trading, and Meta services.

Abu Dhabi Global Markets (ADGM)
Abu Dhabi Global Markets (ADGM) is known for a more comprehensive regulatory framework that has been in development since as early as 2018. This free zone offers licenses for a wider range of activities including exchange operations, cryptocurrency storage, security token offerings (STOs), crypto asset marketing, and investment management.

Dubai Airport Free Zone Authority (DAFZA)
DAFZA provides licenses for certain cryptocurrency-related activities such as trading and businesses related to blockchain technology.

Fujairah International Free Zone Authority (IFZA) Cryptocurrency License
The IFZA also actively supports cryptocurrency businesses by enabling commercial activities using crypto-assets, including transactions such as exchanges and storage.

DWTC Cryptocurrency License
The Dubai World Trade Center (DWTC) has positioned itself as a leading-edge hub for businesses related to virtual assets and blockchain technology. Working with the Virtual Asset Regulatory Authority (VARA) and Binance, DWTC has an ambitious goal to become a regional cryptocurrency hub.

As a free zone, DWTC offers several benefits for cryptocurrency companies, including licensing. DWTC was one of the first free zones authorized by VARA to issue cryptocurrency-related licenses.

• Trading of cryptocurrencies, tokens and other digital assets;
• Distributed Ledger Technology (DLT) services in various industries such as logistics, finance, and healthcare.

The specific license you will need will depend on your business model.

Since 2022, the UAE has had Law No. 4 on the Regulation of Virtual Assets in the Emirate of Dubai, which has become the key legislation regulating crypto activities in the jurisdiction. The purpose of the law is to create an advanced legal framework to protect the interests of investors and develop international standards for the management of the virtual asset (VA) industry, to encourage responsible business development by prudential norms. The Law applies to the entire territory of the Emirate, including special development zones and free zones, except the Dubai International Financial Center (DIFC).

The Law also established VARA (Virtual Asset Regulatory Authority), which became the regulatory and supervisory body for all cryptocurrency companies in Dubai. VARA has legal personality and financial autonomy and is part of the Dubai World Trade Center Authority (DWTCA). VARA is responsible for issuing licenses and regulating the sector on the Dubai mainland and in free economic zones (excluding DIFC).

VARA offers a wide range of services in coordination with the UAE Central Bank and the Securities and Commodities Authority (SCA). It is tasked with organizing and establishing rules and controls for virtual asset transactions, including management, clearing, and settlement services, as well as classifying and defining types of virtual assets.

VARA has several important objectives aimed at creating a secure and developed virtual asset ecosystem:

• issuing and trading virtual assets and tokens;
• licensing of companies providing services related to virtual assets;
• ensuring the protection of the personal data of virtual asset owners;
• managing virtual asset platforms and portfolios;
• monitoring transactions involving virtual assets.

VARA regulates a wide range of services related to virtual assets. The following activities require a VARA license:

• managing virtual asset platforms, which includes creating, operating and maintaining platforms where users can trade, store and manage virtual assets;
• exchanging virtual assets for fiat currencies (domestic or foreign);
• exchanging one virtual asset for another;
• transferring virtual assets between different wallets or accounts;
• storage and management of virtual assets;
• services for the formation and management of portfolios of virtual assets;
• offering and trading of virtual tokens.

Since its establishment, VARA has adopted several regulations aimed at ensuring security, transparency, and compliance in the cryptocurrency industry. Among them are the Regulations on Virtual Assets and Related Activities, which came into effect on February 7, 2023. These regulations are mandatory for all virtual asset service providers.

Under the existing regulations, to operate a cryptocurrency business in Dubai, one must apply to the regulatory authority to obtain the appropriate license and ensure compliance with all legal requirements. In addition, cryptocurrency businesses are required to comply with customer identity verification (KYC) and anti-money laundering and anti-terrorist financing (AML) requirements, which include identifying customers and monitoring their transactions to prevent illegal activities.

In the UAE, the tax system for cryptocurrency businesses has several features that offer tax advantages for entrepreneurs in this field:

Absence of corporate and income tax
In most free economic zones and some jurisdictions in the UAE, there is no corporate income tax and no personal income tax. This means that income earned from cryptocurrency transactions can be exempt from taxation.

No capital investment tax
There is no capital investment tax in the UAE, which means that income from cryptocurrency investments, such as gains from trading or asset price appreciation, is generally not taxed.

No VAT on cryptocurrency transactions
There is currently no value-added tax (VAT) on cryptocurrency transactions in the UAE, including the purchase, sale, and exchange of cryptocurrency.

No inheritance and gift tax
There is also no inheritance and gift tax in the UAE, which means that transferring cryptocurrency wealth through inheritance or as a gift can be done without tax liability.

The UAE also offers a high level of privacy and data protection, which is important for cryptocurrency entrepreneurs who care about the security of their financial transactions and the privacy of their customers. These factors make the UAE an attractive destination for cryptocurrency businesses, providing a favorable tax environment and encouraging investment and innovation in this field.