VARA, SCA, and the Code: Defining the Future of Crypto Regulation in the UAE

The United Arab Emirates, led by Dubai, is rapidly shedding its image as a regulatory gray zone for cryptocurrencies and is solidifying its position as a global hub for virtual assets (VAs). Rather than adopting a single, centralized approach, the UAE has implemented a comprehensive, multi-layered regulatory matrix designed to categorize, license, and govern every type of crypto token and associated service. 

This new regime, anchored by the Virtual Assets Regulatory Authority (VARA) in Dubai and the Securities and Commodities Authority (SCA) at the Federal level, is a calculated effort to marry aggressive innovation with robust investor protection and market integrity. 
VARA: The Catalyst for Crypto-Native Innovation in Dubai
VARA, established under Dubai Law No. 4 of 2022, is the world’s first independent regulator focused exclusively on virtual assets. Its rules primarily govern all VA activities conducted in onshore Dubai (excluding the Dubai International Financial Centre, DIFC). 
Clear Token Classification and Licensing
VARA’s success lies in creating a clear, tiered licensing system that covers the entire value chain of virtual asset services (VASP). Key activities requiring a VARA license include: 

• Virtual Asset Issuance: This covers businesses creating and launching new tokens. 
• Virtual Asset Exchange Services: Required for operating any crypto trading platform. 
• Broker-Dealer Services: Facilitating transactions between users. 
• Custody Services: Holding or managing clients’ virtual assets. 
  Strict Market Conduct and Investor Protection
  VARA has been notably proactive in setting standards for market behavior. Its regulations are particularly strict on: 
• Marketing and Advertising: Firms must provide clear disclaimers, avoid sensational claims (like “guaranteed profits”), and ensure all communication is fair, clear, and not misleading to protect retail investors. 
• Token Disclosures: Issuers must provide detailed Whitepaper Disclosures, outlining the token’s utility, underlying assets, and associated risks—a foundational step toward ensuring transparency. 
• Anti-Money Laundering (AML): VARA enforces rigorous compliance with federal AML/CFT laws, including implementing the “Travel Rule” which mandates the collection and transmission of originator and beneficiary information for transactions above a certain threshold. 
  SCA: Integrating Digital Assets into Federal Capital Markets
  While VARA manages the “crypto-native” space, the federal regulator, the Securities and Commodities Authority (SCA), has focused on integrating tokens that represent traditional financial instruments into the UAE’s established capital markets framework.
  A New Regime for Security and Commodity Tokens
  The SCA’s Decision No. 15/RM/2025 is a landmark piece of legislation that creates a legal framework for Security Tokens (STs) and Commodity Token Contracts (CTs). This move champions the principle of technological neutrality: 
• Definition: If a token legally represents a share, a bond, or a tradeable debt (a Security Token), or if it represents physical assets like gold or oil (a Commodity Token), it is regulated exactly like its traditional counterpart. 
• Trading Mandate: Crucially, STs and CTs must be traded and settled on a licensed “Market” or an Alternative Trading System (ATS) authorized by the SCA. This effectively plugs DLT-based financial products directly into regulated venues like the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM). 
  This approach provides legal certainty and opens the door for the tokenization of real-world assets (RWA) under a known regulatory framework, appealing directly to institutional finance.
  The Central Bank and Financial Free Zones: A Unified Ecosystem
  The regulatory landscape is further defined by other key authorities:
• Central Bank of the UAE (CBUAE): The Central Bank’s Payment Token Services Regulation (PTSR) governs any service that connects crypto to the conventional financial system, such as fiat-to-crypto conversions and payment services, ensuring control over systemic financial risk. 
• Abu Dhabi Global Market (ADGM): The Financial Services Regulatory Authority (FSRA) in ADGM continues to refine its own comprehensive regime, particularly for Fiat-Referenced Tokens (FRTs) or stablecoins, often pioneering clear rules before the onshore regulators. 
  The UAE’s Differentiating Strategy
  The UAE’s token regime is not just about control; it’s about strategic global competitiveness. By offering clear, detailed rules across multiple regulatory bodies (VARA for innovation, SCA for capital markets, CBUAE for payments), the UAE offers a regulatory pathway for virtually every type of crypto business. 
  The result is a highly attractive proposition for major global exchanges and fintech firms seeking stability, clarity, and access to the regional market, positioning the Emirates as the world’s most deliberate and comprehensive jurisdiction for the digital asset economy.