VARA No Objection Certificates: Proprietary Trading, DLT Services & Category 2 Issuance

VARA No Objection Certificates: Proprietary Trading, DLT Services & Category 2 Issuance

Dubai’s virtual asset landscape continues to evolve under the oversight of the Virtual Assets Regulatory Authority (“VARA”). While most commercially meaningful cryptocurrency activities fall under VARA’s full licensing regime, not every virtual asset or cryptocurrency activity requires a licence. Some activities instead fall into a lighter-touch regulatory pathway: the No Objection Certificate (“NOC”).

An NOC does not exempt an entity from VARA oversight. Rather, it confirms that the activity may be undertaken without a VA licence, provided the entity complies with the conditions and ongoing supervision attached to the NOC.

Under VARA’s framework, three activities commonly proceed under this model:

• Proprietary Trading in Virtual Assets

• Distributed Ledger Technology (DLT) Services

• VA Issuance – Category 2 Tokens

Each activity still requires engagement with VARA, including disclosures and, in certain cases, mandatory filings. Below is a detailed breakdown of how each works.

1. Proprietary Trading

What is Proprietary Trading?

Proprietary trading refers to a financial activity where a firm or individual uses its own capital to trade financial instruments, including cryptocurrencies and other virtual assets. Unlike brokers who execute transactions for clients, proprietary traders aim to generate returns for their own balance sheet through trading strategies, algorithmic models, or risk-management techniques.

Under VARA, proprietary trading in virtual assets does not require a licence, but it does require a VARA-issued NOC confirming the activity may be undertaken subject to regulatory oversight.

Mandatory Registration for Large-Scale Proprietary Traders

VARA imposes a specific registration requirement for significant proprietary investors:

• Any entity in Dubai investing USD 250,000,000 equivalent or more in crypto or virtual assets within any rolling 30-day period must register with VARA.

• Registration must occur before such investment takes place, or no later than 3 working days after crossing the threshold.

• The process currently involves submitting a VARA-issued initial disclosure questionnaire, which VARA uses to determine whether the entity’s activity necessitates a licence.

In effect, proprietary trading sits in a unique category: unlicensed but not unregulated.

2. Distributed Ledger Technology (DLT) Services

What is DLT?

DLT Services cover database management solutions and related services that rely on distributed ledger technologies such as blockchain. This includes the development of blockchain infrastructure, Web3 tools, and supporting technology layers underpinning decentralised systems.

Under VARA, DLT Services require an NOC, not a licence. However, the entity must submit an initial disclosure questionnaire, enabling VARA to confirm whether the planned activity remains within the NOC scope or crosses into a regulated licensable service.

DLT activities are infrastructure-focused rather than asset-handling, which is why they sit under this lighter-touch NOC regime.

3. Virtual Asset Issuance – Category 2

Virtual Asset Issuance under VARA covers two broad categories:

• Category 1 – Fiat-Referenced and Asset-Referenced Virtual Assets (e.g., stablecoins, tokenised real-world assets)

• Category 2 – All other virtual assets or cryptocurrencies that are not Category 1 and are not exempt.

Category 2 covers virtual assets that are not fiat-backed, not asset-referenced, and do not fall into an exempt category. In practice, this generally includes:

• Utility tokens

• NFTs

• Governance Tokens

Requirements for Category 2 Issuance

While Category 2 Issuance does not require a VARA licence, it is not an unregulated activity. Entities must:

• Complete and submit the VARA application form for issuance

• Distribute the token exclusively through a VARA-licensed distributor

This creates a regulated issuance pathway for many utility-type or network-access tokens, while reserving licensing obligations for more sensitive or risk-heavy token categories.

Why this matters for entities operating in Dubai

For proprietary traders

You can conduct your own-account trades without obtaining a full licence. However, large-scale traders must comply with registration thresholds and disclosure requirements.

For DLT developers

Infrastructure builders have a clear regulatory pathway that does not require a costly or complex licence. An NOC allows blockchain developers and Web3 infrastructure providers to work within a recognised regulatory environment.

For token issuers

Category 2 tokens now have a defined compliance route: Submit the application form, partner with a licensed distributor, and proceed without triggering a full VA Issuance licence. This brings regulatory clarity to utility token and similar projects that previously fell into grey areas.

For Dubai’s regulatory landscape

NOC-based activities show VARA’s layered approach: not every activity needs a licence, but every activity is captured. That structure reduces regulatory blind spots and supports Dubai’s position as a safe, transparent, innovation-positive jurisdiction for virtual assets and Web3.

How Rasma Legal Can Support You

Navigating VARA’s NOC framework requires precise understanding of what is and is not a regulated virtual asset activity. Whether you are engaging in proprietary trading, building DLT infrastructure, or planning a Category 2 token issuance, the obligations attached to VARA NOCs must be met accurately to avoid unintentionally triggering a full licensing requirement.

Rasma Legal assists clients across the entire NOC lifecycle, from assessing whether the activity qualifies for an NOC, to preparing the required disclosures, drafting supporting documents, and communicating with VARA on your behalf. Our team understands how VARA evaluates NOC submissions and what information the regulator expects in order to grant approval.

We support businesses in structuring their activities so they remain within the permissible NOC boundaries, ensuring that operations stay compliant, scalable, and aligned with VARA’s supervisory expectations.