Dubai didn’t just regulate crypto — it created the most structured virtual asset regulatory framework on the planet. VARA (Virtual Assets Regulatory Authority) operates under Dubai’s Virtual Assets Law No. 4 of 2022, and its rulebooks set a standard that other jurisdictions are now studying.
For VASPs (Virtual Asset Service Providers), VARA compliance isn’t just about getting a license — it’s about maintaining one. And the cybersecurity requirements are among the most demanding in the industry.
Who Needs VARA Compliance?
Any entity conducting virtual asset activities in or from Dubai must be licensed by VARA. This includes:
- Exchanges — Platforms facilitating crypto trading
- Brokers — Intermediaries in virtual asset transactions
- Custodians — Entities holding virtual assets on behalf of clients
- Lending/Borrowing — DeFi and CeFi lending platforms
- Payment Services — Using virtual assets for payments/remittances
- Management & Investment — Fund management involving virtual assets
- Transfer Services — Moving virtual assets between parties
⚠️ Important: VARA’s jurisdiction extends to the Emirate of Dubai, excluding the DIFC (which has its own virtual asset regime under DFSA). If you’re in DIFC, different rules apply.
VARA’s Cybersecurity Requirements
VARA’s Technology and Information Security rulebook is where VASPs face the most operational complexity. Key requirements include:
1. Information Security Management System (ISMS)
VASPs must establish and maintain an ISMS aligned with international standards (ISO 27001 is the implicit benchmark). This isn’t a suggestion — it’s a licensing condition.
What VARA Expects:
- Documented security policies covering all operational areas
- Risk assessment methodology with regular (at minimum annual) execution
- Defined roles: CISO (or equivalent), security operations, incident response
- Board-level oversight of cybersecurity (not delegated to IT)
- Regular independent security assessments
2. Smart Contract Security
If your VASP uses smart contracts, VARA requires:
- Independent security audits of all smart contracts before deployment
- Continuous monitoring for vulnerabilities post-deployment
- Upgrade/pause mechanisms — ability to halt smart contracts if vulnerabilities are discovered
- Formal verification for high-value contracts (recommended)
3. Custody Security
The custody requirements are where VARA gets serious. For entities holding client assets:
- Cold storage — Majority of assets must be in offline storage
- Multi-signature — No single individual can move client assets
- Key management — Formal key ceremony procedures, backup/recovery, geographic distribution
- Insurance — Coverage for digital assets in custody
- Segregation — Client assets must be segregated from operational assets
4. Transaction Monitoring & AML
Cybersecurity and AML merge in the virtual asset world:
- Real-time transaction monitoring for suspicious patterns
- Blockchain analytics tooling (Chainalysis, Elliptic, or equivalent)
- Travel Rule compliance (FATF Recommendation 16)
- Sanctions screening against UAE, UN, and OFAC lists
- KYC/KYB with ongoing due diligence
5. Incident Response
VARA’s incident reporting requirements are strict:
Incident Reporting Timelines
- Material incident: Report to VARA within 24 hours
- Client asset impact: Immediate notification to affected clients
- Full incident report: Detailed root cause analysis within 14 days
- Remediation plan: Timeline and actions within the full report
The VARA Compliance Roadmap for VASPs
Phase 1: Pre-Application (Months 1-3)
Before you even apply for a VARA license, you need your house in order:
- Establish the ISMS framework
- Conduct initial risk assessment
- Document all security policies and procedures
- Implement core technical controls (access management, encryption, monitoring)
- Engage independent security auditors for smart contracts and infrastructure
Phase 2: Application & Assessment (Months 3-6)
VARA’s assessment process is thorough:
- Submit detailed technology and security documentation
- Demonstrate operational readiness through evidence
- Respond to VARA’s technical queries (expect deep, specific questions)
- Address any remediation requirements before provisional license
Phase 3: Operational Compliance (Ongoing)
Getting the license is the beginning, not the end:
- Continuous compliance monitoring and evidence collection
- Regular penetration testing (minimum annually, quarterly recommended)
- Ongoing smart contract security reviews
- VARA’s periodic inspections and compliance checks
- Annual compliance reporting to VARA
VARA + Other Frameworks
VASPs in Dubai don’t operate in a vacuum. Depending on your activities, you may also face:
| If You… | You Also Need… |
|---|---|
| Handle fiat currency | CBUAE licensing + cybersecurity framework |
| Process card payments | PCI DSS v4 compliance |
| Handle personal data | UAE PDPL compliance (when enforced) |
| Operate critical infrastructure | NESA + UAE IA v2.1 |
| Serve Saudi clients | Consider NCA ECC + SAMA CSF alignment |
Managing VARA requirements alongside these overlapping frameworks is where a unified compliance platform becomes essential.
The Bottom Line
VARA has set the global standard for virtual asset regulation. For VASPs, this is a competitive advantage — “VARA-regulated” carries weight with institutional investors and enterprise clients. But earning and keeping that status requires genuine, continuous cybersecurity and compliance investment.
Cut corners, and you’ll lose more than your license — you’ll lose the trust that Dubai’s regulatory framework is designed to build.
Complyan supports VARA compliance alongside CBUAE, PCI DSS, and UAE IA frameworks — enabling VASPs to manage their full regulatory burden from a single platform. Automated cross-mapping ensures no requirement falls through the cracks. Explore VARA compliance with Complyan →