A VARA licence application is not only a regulatory process. It is, for many businesses, the moment when latent legal exposures – disputes over token classification, enforcement risk from prior unlicensed activity, contested ownership of the applicant entity – crystallise into concrete problems that can halt or derail an otherwise compliant application. As virtual-asset regulation tightens across the major hubs, the gap between operators who understand that regulatory authorisation and disputes readiness are connected, and those who treat them as separate workstreams, is widening. This page examines the disputes angle that sits inside every VARA licence application: where the friction arises, what the cross-border dimensions look like, and how counsel positions an applicant to move forward when a legal obstacle surfaces.
The core answer is this. A VARA licence application requires an applicant to demonstrate fitness, compliance posture and operational substance to the Virtual Assets Regulatory Authority (VARA) – the Dubai regulator with mainland jurisdiction over virtual-asset activity outside the DIFC financial free zone. That process is procedurally defined and, for well-prepared applicants, manageable. But it triggers disclosure obligations that frequently surface disputes: prior litigation, regulatory sanction in another jurisdiction, contested beneficial ownership and unresolved contractual claims against the applicant. Addressing those disputes, and doing so before VARA asks, is the difference between an application that progresses and one that stalls.
The analysis below maps the disputes landscape inside a VARA application, jurisdiction by jurisdiction where it matters, and provides a decision framework for operators who are licensing in Dubai while carrying cross-border legal exposure.
What VARA regulates and why the scope is broader than most applicants expect
VARA's activity-based licensing regime covers a defined set of virtual-asset services – advisory, broker-dealer, custody, exchange, lending and borrowing, management and investment, and transfer and settlement – and applies to businesses operating in mainland Dubai. That scope is broader in practice than most inbound operators assume, and the assumption that a DIFC or ADGM authorisation provides equivalent mainland cover is a persistent source of applications that are filed in the wrong forum. VARA and the ADGM's Financial Services Regulatory Authority (FSRA) run parallel but distinct regimes; an entity operating across both zones needs a clear analysis of where its activities fall.
The disputes angle enters immediately at the perimeter question. VARA's rulebooks require applicants to characterise their activities accurately. An operator that has been providing what VARA categorises as exchange services while holding only an advisory authorisation – or none at all – enters the application with an undisclosed period of potentially unlicensed conduct. That exposure does not disappear on the day the application is filed. It can surface as an enforcement referral, a customer claim or a challenge from a counterparty who used the unlicensed status as a contractual trigger. In our practice, we routinely advise applicants to run a pre-application audit specifically designed to map any activity that VARA would characterise as regulated, and to address those gaps structurally before the application is submitted.
The cross-border dimension compounds this. A business that has operated under the EU's MiCA transitional regime, under MAS supervision in Singapore, or under the FCA's MLR registration in the UK may carry regulatory correspondence – warnings, clarification requests, informal supervision outcomes – that a VARA application will require it to disclose. Each of those interactions represents a latent dispute or enforcement exposure that needs legal characterisation before VARA reviews it.
What disputes arise inside the VARA application process itself?
Disputes that arise during a VARA application fall into three practical categories: entity-level disputes, activity-level disputes and third-party claims. Each carries a different risk profile and a different legal response.
Entity-level disputes concern the applicant itself. VARA requires disclosure of beneficial ownership, corporate structure and the fitness and propriety of controllers and senior managers. Where ownership is contested – a shareholder dispute, an unperfected transfer of equity interest, a trust arrangement with unclear beneficial entitlement – the application cannot reliably represent the ownership structure. VARA is not a forum in which to resolve ownership disputes; it is a forum that will pause or refuse an application that cannot satisfy its ownership-disclosure requirements. The practical consequence is that entity-level disputes must be resolved, or at minimum put beyond reasonable contest, before the application is submitted.
Activity-level disputes arise where the characterisation of what the applicant does is contested. Token classification is the most frequent source of this tension. A business that issues a token that a counterparty, a former partner or a regulator in another jurisdiction characterises as a security – while the applicant characterises it as a utility token – carries a live legal dispute into its VARA application. VARA will require the applicant to characterise its token activities. A mischaracterisation, or a characterisation that is actively contested elsewhere, is a material risk to the application's integrity.
Third-party claims are the category that most frequently surprises applicants. Customer claims, supplier disputes, former employee claims and IP or data-related litigation can each constitute a material pending proceeding that VARA's fitness requirements require the applicant to disclose. A pending arbitration or a court claim in England and Wales, Singapore or the DIFC Courts does not automatically disqualify an applicant – but an undisclosed one can.
For a scoped pre-application disputes audit, contact OBOLUS at info@oboluslaw.com. The process above describes the standard disclosure path. Your facts – the entity, the activity history, the prior regulatory interactions – change the analysis materially. A structured read before you file is the most cost-effective intervention available.
How does prior cross-border enforcement exposure affect a VARA application?
Prior enforcement action in another jurisdiction is not a disqualifier from a VARA licence, but it is a disclosure obligation that requires careful legal framing. VARA's fitness and propriety standard looks at the regulatory history of the applicant, its controllers and its senior managers across all jurisdictions – not only the UAE. An operator that received an FCA warning notice, a MAS supervisory direction or an SEC Wells Notice while operating from another hub carries that history into its Dubai application.
The legal task is not to conceal – it is to contextualise and, where resolution is possible, to show that it has been obtained. An FCA registration refusal that followed a deficient AML/KYC programme, for example, can be accompanied by evidence of a full programme rebuild, a compliance hire and a remediation audit. A CIMA registration that lapsed due to a corporate restructuring can be accompanied by a clear explanation of the commercial rationale. VARA, like most sophisticated regulators, distinguishes between applicants who disclose and explain and those who do not.
The cross-border complexity is acute for applicants who have operated under multiple regimes. A business that has held a MiCA-transitional VASP registration in Lithuania, operated custody services from a Malta MFSA-authorised entity and provided exchange services from an AIFC AFSA-regulated vehicle is a common structural profile in the mid-market. Each of those regulatory relationships represents a potential enforcement exposure, a disclosure obligation and, in some cases, an active supervisory relationship that needs to be managed concurrently with the VARA process. In our cross-border practice, we coordinate that multi-regime disclosure strategy across the relevant regulated entities to ensure that what VARA sees is accurate, complete and presented in the most favourable light the facts support.
Can the DIFC Courts grant freezing relief that affects a VARA applicant?
A worldwide freezing order (an injunction freezing a defendant's assets globally) issued by the DIFC Courts can directly affect a VARA application. The DIFC Courts are a leading common-law forum with a well-developed asset-preservation jurisdiction; in recent practice they have granted freezing relief in support of foreign proceedings as well as in domestic claims. An applicant whose assets are subject to a DIFC Courts freezing order faces a direct conflict: the order affects the financial resources that the VARA application must demonstrate, and the litigation itself is a disclosure obligation.
The DIFC Courts' jurisdiction – which sits in the Dubai International Financial Centre, separate from VARA's mainland Dubai scope – does not overlap with VARA's regulatory jurisdiction, but the legal consequences of an order in the DIFC can reach across the border. An asset freeze, a disclosure order compelling production of corporate records, or an injunction restraining a controller from acting in management roles will each affect the VARA application process in practice.
The practical response is to coordinate the litigation and the licensing workstreams. In a recent matter, a mid-market exchange operator faced a freezing application in the DIFC Courts, brought by a former institutional liquidity provider, at the same point as it was preparing its VARA application. We coordinated the two workstreams – instructing allied counsel in the DIFC proceedings while advising on the regulatory disclosure strategy – and the licensing timetable was preserved. The freezing application was contested, the injunction was limited in scope before the return date, and the VARA application proceeded with full disclosure of the proceedings and their resolution.
Decision matrix: which operator profile faces which disputes risk in a VARA application?
Not every VARA applicant faces the same disputes exposure. The risk profile turns on three variables: the operator's prior regulatory history, the structure of its entity and ownership, and whether it carries any outstanding third-party claims. The analysis below maps three common profiles.
Profile A: Clean-start applicant. A new entity, purpose-built for the Dubai market, with no prior regulated activity in any jurisdiction and no contested ownership. Disputes exposure is low. The principal risk is activity characterisation – ensuring that the activities for which a licence is sought match what the entity actually does or plans to do, and that no prior informal activity in the UAE or elsewhere is undisclosed. Timeline to a well-prepared application is typically a matter of months; the main disputes-related work is a pre-application activity audit and a beneficial-ownership clean-up.
Profile B: Multi-jurisdiction operator entering Dubai. An entity that has operated under one or more regulatory regimes elsewhere – MiCA in the EU, the Payment Services Act in Singapore, the VASP Act in the BVI or Cayman – and is now seeking a VARA licence as part of a hub expansion. Disputes exposure is moderate to high. Prior regulatory correspondence, customer disputes in other jurisdictions and token-classification questions carried from other regimes all require pre-application review. Allied counsel in each relevant jurisdiction should be briefed before the VARA application is filed, not after VARA raises questions.
Profile C: Applicant with pending litigation or regulatory investigation. An entity or its controllers are subject to active proceedings – a court claim, an arbitration, a regulatory investigation or a law-enforcement inquiry – in any jurisdiction. Disputes exposure is high. The application cannot proceed safely without a legal strategy for the disclosure of those proceedings, a realistic assessment of their likely timeline and outcome, and, where possible, a resolution or stay before the VARA submission. In some cases the right answer is to defer the application; in others a carefully structured disclosure package can allow the process to continue.
To map your profile and the disputes exposure it carries before you commit to a VARA timeline, write to OBOLUS at info@oboluslaw.com. If a prior application stalled or a regulatory interaction has gone unanswered, a structural read can surface the reason and the path forward.
How do token classification disputes affect VARA licensing?
Token classification is one of the most consequential and most contested questions in any VARA application. VARA's activity-based regime licences service providers, not token issuers directly, but the nature of the tokens a business handles shapes which activities it is performing and therefore which licence it requires. An exchange that lists tokens that a regulator in another jurisdiction – the SEC or ESMA, for example – characterises as securities may be performing brokerage or dealing activities that require a different or additional VARA licence category than the one it has applied for.
The disputes angle is direct. If a token issuer whose tokens are listed on the applicant's exchange has received a regulatory characterisation of those tokens as securities, that characterisation is a live legal dispute between the issuer and the regulator. The exchange that lists those tokens is not a party to that dispute, but it carries the exposure of having facilitated trading in what may be characterised as an unlicensed securities market. VARA will expect an applicant to demonstrate that it has a token-listing policy and a classification process that addresses this risk.
Token classification is not only a regulatory question – it is increasingly a litigation trigger. Investors in tokens that decline in value frequently bring claims asserting that the token was an unregistered security and that the platform on which they bought it is liable as an unlicensed dealer. That pattern, which has been most visible in US litigation, is beginning to appear in common-law forums including England and Wales and Singapore. An applicant with exposure to those claims carries litigation risk directly into its VARA fitness assessment.
A common assumption is that a utility token label, applied at issuance and maintained in white papers and marketing materials, insulates a business from classification risk. It does not. The substance of the rights conferred by a token – the economic entitlement, the governance participation, the redemption mechanism – determines its classification under most developed regulatory frameworks, not the label applied to it. VARA, consistent with international standards, applies a substance-over-label analysis. An applicant that has relied on a utility label without conducting a substantive classification analysis has a gap that needs to be addressed before the application is filed.
How do AML and Travel Rule compliance gaps create disputes exposure in a VARA application?
The Travel Rule (the obligation to pass originator and beneficiary data with a virtual-asset transfer, derived from the FATF Recommendations) is a baseline requirement across all leading regulatory regimes, including VARA's. An applicant that has processed transfers without Travel Rule-compliant messaging – whether because it operated under a regime that did not yet enforce the rule, or because its technical infrastructure did not support it – carries a compliance gap that VARA will identify in its review of the applicant's AML/CFT programme.
That gap is not only a compliance issue; it is a latent disputes exposure. A business that received funds from a counterparty that was subsequently sanctioned, or that processed transactions that are now under investigation by a foreign financial intelligence unit, carries a risk of enforcement action that needs to be legally assessed before it is disclosed to VARA. The interaction between AML/CFT history and VARA's fitness review is one of the areas in which specialist disputes and licensing counsel working together adds the most concrete value.
In our practice, we have seen applications where an operator's AML programme was technically compliant with the domestic regime under which it operated, but fell short of the FATF baseline that VARA applies. The correction is operational – a programme rebuild, a compliance officer appointment, a retrospective transaction review. But the legal framing of the gap, and the disclosure of any prior regulatory correspondence about it, requires counsel who understand both the regulatory and the disputes dimensions.
A common assumption: a single offshore licence is enough
A persistent belief among early-stage and mid-market operators is that a single offshore VASP registration – from the BVI, the Cayman Islands or a similar jurisdiction – provides adequate cover to serve clients globally, including in Dubai. This is incorrect, and it is a belief that creates the kind of unlicensed-activity exposure that surfaces acutely in a VARA application.
BVI FSC registration under the VASP Act 2022 and CIMA registration under the Cayman VASP regime authorise activity within those jurisdictions' regulatory perimeters. Neither authorises an operator to conduct virtual-asset service activities in mainland Dubai, to solicit UAE-resident clients, or to hold itself out as a regulated entity under VARA. An operator that has done any of those things while holding only an offshore registration has, from VARA's perspective, conducted unregistered virtual-asset business in its jurisdiction.
The consequences are not theoretical. Enforcement by VARA for prior unlicensed conduct is a real risk, and it is a risk that a VARA application – which requires full disclosure of prior activities – can trigger. The response, in our practice, is to conduct a pre-application activity analysis that maps what the operator actually did, in which markets, and under which authorisation it believed it was acting. That analysis defines the disclosure strategy and, in some cases, supports a voluntary-disclosure approach to VARA that is materially better than a disclosure made in response to a regulatory inquiry.
The offshore-licence myth also intersects with banking. A business that banked under an offshore VASP registration may find that its banking relationships are reviewed or terminated when it applies for a VARA licence, because the banking institution's own compliance programme re-evaluates the relationship in light of the new regulatory context. That banking disruption can itself become a legal dispute – a contested account closure, a claim for funds held in transit, a disagreement about the contractual basis for termination.
Related at OBOLUS
- Licensing and Registration for Digital-Asset Businesses – the full licensing-stack framework across 70+ jurisdictions
- Digital-Asset Custody Licensing in Jersey – custody authorisation in a leading offshore centre
- Airdrop Legal Structuring for Early-Stage Founders – token distribution design with classification analysis built in
FAQ
How long does a crypto licence take to obtain?
Timelines vary significantly by jurisdiction, licence category and applicant preparation. Under VARA in Dubai, well-prepared applicants with clean regulatory histories and complete documentation typically measure the process in months, not weeks. Jurisdictions with lighter-touch VASP registration frameworks – BVI, Cayman, some EU member-state routes under MiCA transitional arrangements – may move faster, but the authorisation conferred is narrower in scope. Any disputes or disclosure gaps, if not addressed before filing, can extend the timeline materially. A realistic pre-application assessment is the most reliable way to set a credible timetable.
Which jurisdiction is best for licensing my crypto business?
There is no universal answer. The right jurisdiction depends on where your users are, where your banking will sit, what activities you perform, and whether you need passporting across a broader market. VARA provides a credible, activity-based Dubai authorisation with access to the UAE banking sector. MiCA CASP authorisation in an EU member state provides EU passporting. MAS in Singapore and the SFC in Hong Kong serve the Asia-Pacific operator. Most serious businesses ultimately carry licences in more than one jurisdiction. The question is which licences in which sequence – and that analysis should be completed before any application is filed.
Do I need a separate custody licence?
In most leading regulatory regimes, custody of virtual assets is a separately regulated activity. Under VARA, custody services require their own licence category; an exchange licence does not automatically cover the safeguarding of client assets. The same pattern applies under MiCA, the MAS Payment Services Act regime, and the SFC's VATP framework in Hong Kong. An operator that holds client assets – whether as a primary service or as an ancillary part of an exchange or lending product – should assume that custody authorisation is required and verify that assumption with jurisdiction-specific advice before operating.
OBOLUS is an independent digital-asset law boutique acting only for businesses. We advise exchanges, custodians, token issuers and funds on licensing across 70+ jurisdictions, on disputes and on-chain asset recovery across 25+ forums, and on the tax, banking and compliance that sit around those activities. Our disputes team coordinates freezing relief and on-chain tracing across leading common-law forums. We map the licence stack across operating, custody and payment layers before you commit. Digital assets are the whole of our practice. To discuss your situation, contact info@oboluslaw.com or message us at t.me/oboluslaw.
By Glen Sorensen, Disputes & Recovery Analyst – cross-border virtual-asset enforcement, freezing relief and the disputes dimensions of regulatory authorisation in the major hubs.
This publication is general information about the law and does not constitute legal advice. It is not a substitute for advice tailored to your circumstances. OBOLUS accepts no liability for action taken or not taken on the basis of this material. For advice on your situation, contact info@oboluslaw.com.