Reading Time: 8 min.
How to Set Up a Crypto Company in the UAE in 2024: The Step-by-Step Guide
In the dynamic world of Web3, the UAE stands out as a beacon of innovation and opportunity. Thanks to its visionary policies and progressive and clear regulatory landscape, the UAE has emerged as a top-tier destination for crypto entrepreneurs.
Imagine a country with minimal taxes, clear regulations for Virtual Asset Service Providers (VASPs), a vibrant Web3 community and abundant venture capital opportunities. Therefore, for those ready to make their mark in the crypto space, the UAE isn’t just a random choice – it’s the premier jurisdiction.
As 2024 sees a surge in the number of companies entering the UAE’s thriving market, our comprehensive legal guide offers the essential steps to launch your crypto venture legally in the UAE. It will steer you clear of costly pitfalls and save you time and effort.
Step 1. Define The Regulatory Business Model
When determining the business model for a crypto company in the UAE, it is important to consider various factors such as the type of activities you plan to undertake, target market, regulatory regime, costs, and timeframes associated with company incorporation and obtaining relevant licenses.
Crypto entrepreneurs often have ambitious plans to offer a wide range of services. However, it is recommended to start with identifying the primary types of activities. This approach will help you to stay focused on the initial stages of building your business. Additionally, it will enable the regulator to more efficiently understand your business model and categorize it under the desired licensed activity.
Practical Tip: To increase your chances of obtaining necessary regulatory permits, it’s important to communicate effectively with the authorities. Make sure that your Regulatory Business Model is properly defined and that you convey this information correctly to the regulators.
Step 2. Have A Regulatory Business Plan Professionally Prepared
One of the common mistakes made by crypto entrepreneurs is not having a detailed Business Plan and White Paper professionally prepared when registering their company or communicating with government bodies. In the UAE, having these documents is essential at every stage of building your business, starting from registering a company to obtaining necessary licenses or attracting investors.
A Regulatory Business Plan is a document that describes a company’s regulatory activities as well as commercial objectives, along with the strategies it plans to implement in order to achieve them. Typically, such business plan must include detailed information regarding the company’s products and services, management structure, and the targeted market.
White Paper provides a comprehensive overview of the project’s technical architecture and functionalities. It is intended to outline the core ideas and mechanics of a project, acting as both a technical guide and a marketing tool.
Practical Tips: It is recommended that those documents are reviewed for compliance with the relevant VASP regulations by an experienced crypto lawyer to ensure that they align with the core business activities and adhere to the regulatory regime to which the company is seeking to become subject to before such documents are shared with any regulatory authority.
Step 3. Examine Regulatory Regimes
The UAE is a unique jurisdiction and, thus, an attractive place for crypto founders as it has several Virtual Assets (VA) regulatory frameworks, aka VASP regimes, throughout the country. At present, the regulatory framework within the UAE governing the provision of virtual asset services comprises:
- Federal Regulations
- Financial Free Zones Regulations: DIFC and ADGM
- Local Regulations in the Emirate of Dubai
Federal Regulations
At the Federal level, there are two financial regulators authorized to regulate Virtual Assets activities:
- Securities & Commodities Authority (SCA), which is the primary VA regulator in the country (except for the Financial Free Zones).
- UAE Central Bank (CBUAE) regulates everything related to payment tokens and CBDCs.
Financial Free Zones Regulations
The UAE has two Financial Free Zones: Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). These Zones are not governed by Federal Regulations and operate under a common law legal system. As a result, each of the Financial Free Zones has its own regulatory authorities.
- The Financial Services Regulatory Authority (FSRA) is the regulatory body for the ADGM Free Zone.
- The Dubai Financial Services Authority (DFSA) is responsible for the DIFC.
Consequently, each of these Free Zones has its own VA framework.
ADGM introduced its VASP regime back in 2018 and extended the scope of its existing financial services activities, including advising, dealing, arranging, trading, and custody, to apply to the provision of products and services in relation to virtual assets. Since then, the VASP regime and supplementary rules and regulations have been regularly updated, with the latest versions issued in September 2022. Notably, in late 2023, ADGM introduced the first DLT Foundation legal framework in the region, which aims to attract and target DAOs to join the ADGM ecosystem.
DIFC adopted a similar to the ADGM approach, adding virtual assets activities to the traditional financial services activities available within the Free Zone. Under the regulatory framework, the provision of products and services in relation to crypto tokens can be added as a part of financial services activities, which include advising, dealing, arranging, trading, and custody.
Emirate of Dubai: VARA
In early 2022, Dubai established its own Virtual Asset Regulatory Authority (VARA). This regulatory body is responsible for overseeing the activities of VASPs throughout the Emirate of Dubai, with the exception of the DIFC.
In February 2023, VARA introduced the Virtual Assets and Related Activities Regulations (VARA Regulations). According to these regulations, there are different types of virtual asset activities that a VASP can offer, and the licensing regime depends on the type of service provided. VARA has identified seven distinct categories of virtual asset activities that cover the whole spectrum of services that a VASP may offer.
It is important to note that VA Issuance is also a regulated activity under VARA’s regime and requires obtaining either a license or approval to issue tokens. However, certain token types are exempt from these regulations.
Practical Tips: Reach out to the relevant regulator before company incorporation and applying for a license. If the business model is too sophisticated, it is necessary to ensure that a license for the company’s activities is available and can be issued by the relevant regulator.
Step 4. Incorporate A Company
Once the regulatory analysis is completed, you will be able to decide where to incorporate your company. If the business activities are considered regulated, meaning they require obtaining a license from the relevant Financial / VA regulator, you must select one of the licensing regimes mentioned above, which will determine the jurisdiction of incorporation for the company.
If the activities are not regulated, there are two options: either a mainland jurisdiction in one of the Emirates or one of 45+ commercial free zones available throughout the UAE.
Mainland companies are registered under the Department of Economic Development of the concerned Emirate, and operate onshore. Free Zone companies are formed within a special jurisdiction that comes under a particular Emirate.
Currently, there are over 45 Free Zones operating in the UAE. Each Free Zone focuses on certain activities and has its own regulations and a regulatory body known as the Free Zone Authority.
Towards the end of 2023, a new economic free zone known as RAK Digital Assets Oasis (RAK DAO) officially launched in Ras Al Khaimah. This free zone is the first of its kind, dedicated specifically to Web3 activities. However, there are several other free zones where companies can engage in crypto-related activities, including DMCC, DWTC, and IFZA.
Practical Tips: For a crypto company, a free zone domicile is more advisable as it offers more flexibility in terms of company incorporation, visa issuance, ongoing compliance, and renewal obligations. Additionally, they provide facilities, infrastructure, networking opportunities, and access to investors.
Step 5. Obtain Residency Permits For Shareholders And Managers
This particular step is optional, as some crypto founders may not relocate to the UAE after registering their company. However, if the shareholders intend to stay and reside in the UAE, they must obtain a residency permit, also known as a residency visa. The company incorporation enables shareholders to obtain an investor visa as the owner of the company. Additionally, if the company plans to hire staff in the UAE who are not residents, they will need to sponsor employees’ visas as well. The process of obtaining UAE residency is quite straightforward:
- Obtaining an Immigration Establishment Card for the company.
- Application for Entry Permit / Visa Status Change (this depends on whether the person is in the UAE or outside).
- Go through a Medical Examination.
- Go through a biometrics procedure.
- Apply for the Emirates ID.
Practical Tips: Having an experienced ‘public relations officer’ (aka PRO) to take you through every step of the immigration procedure is invaluable. They speak the language, know the exact form to fill out, and know every possible shortcut, to navigate what can be a bureaucratic and confusing process.
Step 6. Open A Bank Account And A Crypto Exchange Account
Banking still remains a sensitive area for crypto companies globally, but the UAE is making efforts to make a change. Currently, there are several options available for a bank account for VASPs in the UAE. However, each company will be subjected to individual approaches, and eligibility will depend on the company’s activities, citizenship or residency of shareholders, and specific bank internal policies.
To open a bank account or a crypto exchange account, one will need the following documents:
- Company’s Business License.
- Certificate of Incorporation or Registration.
- Memorandum / Articles of Association.
- Shareholders Register.
- Shareholders’ and Managers’ Documents (Passport copies, Proof of address, Emirates IDs).
Some banks may require additional documents such as CVs for shareholders and managers, a business plan, or financial statements for existing companies.
Practical Tips: It is important to ensure that the person who is authorized to open and operate a bank account holds a valid Emirates ID. Usually, this person will be one of the shareholders or the manager of the company. Furthermore, even if the company’s MOA/AOA specifies who the authorized signatory is, it is still recommended to prepare a Board Resolution that authorizes the opening of the account and clearly identifies the individuals who have the authority to operate it. To make sure the bank approves that Resolution, stamp it with the company seal.
Step 7. Obtain A Corporate Tax Registration Number
In 2022, the UAE introduced a Federal Corporate Tax at a rate of 9%. Prior to this, only certain businesses were subject to a 5% VAT and most of the UAE companies did not have to obtain a tax number. However, from June 1, 2023, all companies and individuals earning business income must register with the Federal Tax Authority and obtain a Corporate Tax Registration Number. As per the law, the deadline for filing tax returns is 9 months after the end of the tax period. For most companies, the first tax year commenced on January 1st, 2024. Hence, the deadline for filing tax returns for most companies will be September 2025.
Practical Tips: Initially, the deadline for registering and obtaining a tax number was the same as the deadline for filing taxes. However, in February 2024, the Federal Tax Authority (FTA) updated its requirements and issued a new timeline for registering taxable persons for Corporate Tax. Now, for example, the deadline for a juridical person depends on their category and the time of incorporation, with the earliest deadline being 31 May 2024. The penalty for late registration is 10,000 AED, so it is important to be aware of this timeline.
Step 8. Ensure Ongoing Compliance
Starting a crypto business entails complying with legal requirements that apply to all businesses within the country on an ongoing basis. These obligations include:
- Accounting and Audit
- Filing Tax Returns
- AML / CTF Regulations Compliance
- Data Protection and Privacy Laws
- License Renewal
- Office Lease Renewal
Wrapping Up
The UAE Federal Law specifically prescribes that no entity can engage in Virtual Assets-related activities unless approval and license are obtained from the Financial Regulator (SCA) or its delegate in a specific Emirate (VARA in Dubai).
Failure to comply can lead to heavy sanctions, fines of up to 50 million AED, disgorgement of profits, and even criminal liability for founders and managers. Consequently, before engaging in any crypto activity in the UAE, it is necessary to study the regulatory regimes and identify whether the business activities of the company are regulated and require a license under the VASP Regime. Ensure to engage a professional crypto lawyer to avoid costly consequences.