vara
Overview
Dubai's Virtual Assets Regulatory Authority (VARA) is the only UAE regulatory body offering a discrete Lending and Borrowing Services license category. VARA 2.0 (May 2025) updated all twelve Rulebooks and introduced the ARVA (Asset-Referenced Virtual Assets) category for tokenized RWAs.
Strategic Recommendation
Defer VARA Lending license to Series A. The cost (USD 500K–1M+) and personnel requirements (resident CEO, 3-person board with banking + crypto wallet security experience) exceed current budget. Instead, leverage custodians' existing VARA licenses for Dubai market coverage in the interim.
VARA Lending License Requirements
Minimum capital
Higher of AED 500,000 (~USD 136,300) or 25% of fixed annual overheads
Net liquid assets
Must exceed current liabilities by 1.2× monthly operating expenses
Reserve backing
100% of client liabilities in same virtual asset, held in UAE trust account
LTV requirements
Automatic margin call at 80% LTV. No single stablecoin > 40% of posted collateral
Personnel
3-person board (banking + crypto experience), resident CEO, COO, CISO, CCO/MLRO, two VARA-approved Responsible Individuals
Application fee
AED 100,000 (~USD 27,300) per activity
Annual supervision
From AED 63,800
Timeline
Minimum 9 months (two-stage process)
Realistic budget
USD 500,000–1,000,000+ all-in
VARA 2.0 Updates (May 2025)
Key changes in the updated Rulebooks:
ARVA category: Asset-Referenced Virtual Assets for tokenized RWAs — relevant for Parthenon's RWA collateral products
FRVA category: Fiat-Referenced Virtual Assets — standardized stablecoin framework
Sponsored VASP regime: Entities can operate under a licensed Regulated Sponsor without their own full license
Enhanced penalties: Up to AED 100 million for companies
Interim Strategy
Before obtaining a VARA license, Parthenon can serve Dubai-market counterparties through:
Custodian coverage: Custodians with existing VARA licenses can facilitate Dubai-connected transactions
ADGM entity: ADGM-licensed entities can serve UAE-wide institutional counterparties
Sponsored VASP: Explore operating under a Regulated Sponsor for initial Dubai market access
DMCC Integration
The DMCC-VARA partnership (October 2025) for tokenized commodities and the FinX platform launch (November 2025) create a regulated pathway for commodity tokenization. This feeds directly into Parthenon's lending collateral pipeline for commodity-backed facilities.
DMCC licensing starts at approximately AED 34,000 (~USD 9,200) with 4-week setup — significantly more accessible than VARA Lending.
Federal Decree-Law No. 6 of 2025
Effective September 16, 2025, this decree consolidates banking, insurance, payments, and financial infrastructure under one statute. It explicitly captures any technology used to facilitate licensed financial activities — including DeFi, dApps, and protocols.
Key implications:
Compliance deadline: September 16, 2026
Administrative fines up to AED 1 billion
Criminal penalties for unlicensed activity
ADGM and DIFC are excluded from CBUAE's direct scope
VARA-licensed entities remain subject to CBUAE for payment token activities
This reinforces the ADGM-first strategy — ADGM's exclusion from CBUAE scope provides regulatory clarity that VARA entities do not have for payment token activities.