VARA Issuance License: What You Need to Know
The starting point of any crypto ecosystem is the token. Whether you’re building a blockchain, launching a Decentralized Finance (DeFi) protocol, or rolling out a utility token for your platform, issuance is the foundation of the entire virtual asset economy. In Dubai, token issuance isn’t left to guesswork, it sits under a structured, increasingly sophisticated framework governed by the Virtual Assets Regulatory Authority (“VARA”).Dubai’s approach is simple: tokens power the industry, but the industry must run on clarity. So, VARA regulates the issuance of cryptocurrencies, virtual assets, digital assets, and any token or coin that falls within its rulebooks. Certain tokens are fully allowed, others are restricted, and some are outright prohibited such as anonymity-enhanced cryptocurrencies and algorithmic stablecoins.
Issuance Categories
To navigate this landscape properly, you need to understand VARA’s three issuance categories:
- Category 1 Issuance
- Category 2 Issuance
- Exempt Virtual Assets
Category 1 Issuance: Fiat-Referenced & Asset-Referenced Virtual Assets
Category 1 covers the virtual assets with the highest systemic and consumer-impact risks, which is why they require a full VARA licence.
Fiat-Referenced Virtual Assets (FVRAs)
These are stablecoins backed 1:1 by a fiat currency (for example, USD-backed or AED-backed tokens).A key nuance: Dirham-backed stablecoins fall under the Central Bank of the UAE (CBUAE), not VARA.For issuers of FVRAs that do fall under VARA, the obligations are strict:
- Maintain 100% reserve backing at all times
- Ensure tokens are fully redeemable by holders
- Hold paid-up capital of AED 1,500,000 + 2% of the value of the circulating supply
Stablecoins are treated as financial infrastructure, and VARA wants these foundations to be rock-solid.
Asset-Referenced Virtual Assets (ARVAs)
These include any token backed by a real-world asset (RWA) such as:
- Tokenised gold or silver
- Tokenised real estate
- Other tangible assets that provide direct ownership rights
To be licensed, ARVA issuers must demonstrate:
- A clear, legally recognised link between the token and its underlying asset
- That token holders receive direct rights or value associated with that asset
- A stable methodology for maintaining value and asset correlation
- Professional support, including the possibility of a legal opinion confirming all representations made in whitepapers or filings
- Paid-up capital of AED 1,500,000 or 2% of the average 24-month market value of reserve assets, whichever is higher
Category 1 issuers are building financial instruments that affect wider markets. That’s why the licensing bar is intentionally high.
Category 2 Issuance: All Other Virtual Assets
Category 2 covers almost every other token in the crypto world, meaning:
- Most cryptocurrencies
- Protocol tokens
- Governance tokens
- NFTs
- Utility or access tokens
- General blockchain ecosystem tokens
These do not require a VARA licence. But they are regulated.Instead, Category 2 Issuance must be distributed through a VARA-licensed distributor, typically a Broker-Dealer licensed to provide token distribution services.This structure gives issuers a compliant pathway:
- You submit your Category 2 Issuance application to VARA
- A licensed broker-dealer handles placement, marketing, or distribution
- You launch legally without the heavy lift of a full Category 1 licence
For most projects entering Dubai, this is the pathway that opens the door.
Exempt Virtual Assets: When Issuance Falls Outside Any VARA Category
Some tokens simply do not fall within the regulatory perimeter. VARA classifies these as “Exempt VAs”, meaning they require no licence and no approval.To qualify, the token must be one of the following:
- A non-transferable virtual asset
- A redeemable closed-loop virtual asset (like loyalty points usable only within one ecosystem)
- Any other virtual asset VARA may designate as exempt
These tokens aren’t traded, speculated upon, or used in external markets, which is why VARA leaves them outside its licensing scope.
Why This Matters for Issuers Building in Dubai
Dubai’s token issuance regime sends a clear message: innovation is welcome, but structure is mandatory.For Category 1 issuers: You’re building regulated instruments with real financial impact. Expect full licensing, significant oversight, and capital requirements that mirror traditional finance.For Category 2 issuers: You have a clean, accessible pathway to market. No licence needed, just proper filings and a partnership with a licensed distributor under VARA’s framework.For exempt issuers: You can operate freely where your token clearly falls outside the scope of tradable virtual assets.For Dubai: This layered model eliminates regulatory blind spots. It separates stablecoins from utility tokens, separates RWAs from NFTs, and ensures every category has its own set of rules.Dubai isn’t trying to slow the industry down; it’s trying to give it a foundation that global institutions can trust.
How Rasma Legal Can Support You
Rasma Legal helps businesses navigate every stage of the VARA licensing and compliance journey. Our team has successfully worked with VARA across multiple licensing categories and understands the practical and regulatory requirements for operating in Dubai’s fast-evolving digital or crypto asset market. Whether you are applying for a VARA license or strengthening your ongoing compliance, we provide the strategic guidance and hands-on support you need to build a secure, compliant, and scalable VA business.
