Dubai’s decisive crypto move in 2022 was not to remove regulation. It was to create a regulator.
Law No. 4 of 2022 established the Dubai Virtual Assets Regulatory Authority, or VARA, and gave it powers to regulate, supervise and oversee virtual-asset services across Dubai, including free zones, with the Dubai International Financial Centre excluded from its scope.
The signal was clear: Dubai wanted virtual-asset businesses, but it wanted them inside a dedicated regulatory perimeter.
Key takeaways
- VARA’s creation was a choice for sector-specific regulation, not permission for an unregulated crypto market.
- In March 2022, the regulator existed but the mature rulebook system that firms know today did not.
- A licence is only one layer of a regulated business; governance, controls, capital, people and bankability remain separate operating questions.
What happened in 2022
Dubai enacted Law No. 4 of 2022 regulating virtual assets in the Emirate.
The Law established VARA as a public corporation with legal personality and administrative and financial autonomy. Its statutory objectives included developing the rules and standards needed to regulate and supervise virtual-asset platforms, service providers and related activities.
The Law also defined VARA’s scope across the Emirate, including special development zones and free zones, while excluding DIFC.
For a market often described through the language of speed, innovation and “crypto-friendly” jurisdictions, this was a significant institutional choice.
What could be known then
In March 2022, one could say with confidence that Dubai had created a dedicated virtual-asset regulator and had given it a broad mandate.
One could not honestly write the 2025 or 2026 VARA rulebooks back into that moment.
The detailed operating framework evolved later. Activity-based rulebooks, compulsory rulebooks, market-conduct requirements, compliance and risk-management rules, and later revisions all came after the founding law.
The historical story is therefore one of direction before detail.
Why it was a turning point
Crypto businesses face a recurring jurisdictional problem. They may be able to incorporate a company quickly, but incorporation does not answer whether the activity is regulated, whether the business can legally serve its customers, whether a bank will onboard it or whether its governance is sufficient for supervision.
VARA made that distinction harder to ignore in Dubai.
A virtual-asset project could no longer treat a commercial licence or a company certificate as the end of the regulatory analysis. The relevant question became: what activity is being performed, and which regulatory permissions, systems and controls follow from it?
That is the difference between “buying a licence” and building a regulated business.
What was misunderstood
The most obvious misunderstanding was that Dubai’s enthusiasm for crypto meant a regulatory free-for-all.
The founding law itself contradicts that interpretation. VARA was created to regulate, supervise, issue permits, classify activities and assets, develop investor-protection rules and curb illegal practices.
The opposite misunderstanding is also unhelpful: that regulation itself guarantees commercial viability.
A VARA authorisation does not automatically produce a bank account, customers, liquidity, competent staff or a sustainable business model. Regulatory capital is not the same as operating runway. Passing fit-and-proper requirements is not the same as establishing a profitable company.
Regulation can make a business permissible. It cannot make the business work.
What happened next
Dubai progressively built the detailed framework that the 2022 law had enabled.
VARA issued the Virtual Assets and Related Activities Regulations and a set of rulebooks covering compulsory requirements and specific regulated activities. Those rules were subsequently revised, including Version 2.0 activity rulebooks with full compliance required from 19 June 2025 for affected firms.
This later detail should be understood as the implementation of the 2022 choice, not as something that already existed when VARA was created.
What changed since then?
By 2026 VARA is no longer simply a newly created regulator. It operates a developed rulebook architecture.
For a prospective VASP, that shifts the practical workload from asking whether Dubai regulates the activity to mapping the exact activity, regulatory category, governance requirements, technology and information controls, compliance functions and ongoing obligations.
Dubai still competes for virtual-asset businesses. It does so through a recognisable regulatory system.
The strongest objection
A reasonable objection is that more regulation can raise barriers to entry and favour larger, better-funded firms.
That is true. Dedicated regulation can increase legal costs, staffing needs, minimum-capital requirements and time to market.
But the relevant comparison is not simply “regulated versus free”. A business that depends on banking, institutional counterparties or international credibility may also bear a cost when a jurisdiction lacks a clear framework.
The trade-off is therefore between different forms of friction, not between friction and no friction.
What it means for an international crypto business
The correct sequence is operational:
activity → regulatory perimeter → entity and licence → people and governance → capital → controls → banking → ongoing supervision.
Skipping steps creates fragile structures.
A founder should distinguish at least:
- corporate capital from regulatory capital and operating cash;
- a commercial licence from regulatory authorisation;
- legal permission from bankability;
- outsourced compliance support from accountable management; and
- a launch budget from the cost of maintaining a regulated business.
The 2022 turning point was Dubai’s decision to make that regulated-business logic explicit.
Sources
- Dubai Legislation — Law No. 4 of 2022 Regulating Virtual Assets
- VARA — Rulebooks
- VARA — Updated Activity Rulebooks, 2025
Disclaimer
This article is general historical and regulatory information, not legal, regulatory, investment or financial advice. Virtual-asset licensing depends on the precise activity, entity, customer base and current rulebooks. Regulatory approval does not guarantee banking or commercial viability.
