How to Set Up a Virtual Asset Business in Dubai: Mainland or Free Zone?

If you’re considering launching a Virtual Asset Business in Dubai, you’ll soon face a key strategic choice whether you should set up on the mainland or in a free zone. The difference goes beyond the office address. It touches the market access, tax treatment, regulatory overhead and ultimately whether your business model aligns with your location. In this article, we’ll break down exactly how the Virtual Assets Regulatory Authority (VARA) framework applies, also compare mainland vs free zone set-ups & show you how to get started the right way.

1. Introduction

If you’re planning a Virtual Asset Business in Dubai, here’s something to consider first decide your jurisdiction early. Your choice of mainland or free zone will shape what clients you can serve, how you’re taxed, how you operate and how banks will treat you. This is a strategic decision in what follows, we’ll guide you step by step through the regulatory architecture of the Virtual Assets Regulatory Authority (VARA), map out the pros and cons of mainland vs free zone, and give you a clear route to launching a compliant business.

2. Understanding the Regulatory Backbone | VARA and Its Mandate

• VARA was set up under Dubai Law No. 4 of 2022 which regulates virtual assets in the Emirate of Dubai excludes the Dubai Financial Services Authority (DFSA) governed Dubai International Financial Centre (DIFC).
  
• VARA’s remit is broad & it oversees virtual assets and virtual asset service providers (VASPs) across Dubai’s mainland and most free zones.
  
• VARA classifies VASP activities into categories such as advisory services, broker-dealer services, custody, exchange services, lending/borrowing, token issuance, investment/portfolio management, and transfer/settlement services.
  
• The rules are identical irrespective of whether the company is in the mainland or a free zone the difference lies in corporate or tax setup, market reach and administrative context.
  
• Key duties for a VARA-licensed firm includes AML/CFT compliance, governance structure, cybersecurity, physical presence/substance in Dubai, and licensing capital thresholds.

3. Mainland vs Free Zone | Legal & Operational Distinctions

Let’s compare the two settings across several dimensions, for your Virtual Asset Business in Dubai.

Scope of Operations

• Mainland company that are under the Dubai Department of Economy and Tourism, DET, can conduct business across Dubai and generally the UAE without the need of many additional permissions.
  
• Free zone companies, for e.g., in Dubai Multi Commodities Centre (DMCC) or Dubai World Trade Centre Authority (DWTC) Free Zone, are typically structured to operate inside the zone and internationally. Direct business in the Dubai mainland or other emirates may need extra regulatory steps for e.g, a no-objection certificate if you plan on serving the UAE domestic clients.
  
• For your Virtual Asset Business in Dubai, will you target UAE retail or institutional clients onshore? or are you primarily serving international users/customers? If it’s onshore UAE the mainland may offer an easier path & if it’s a global or cross-border focus with minimal local footprint, the free zone may benefit
  

Corporate Tax & Profit Treatment

• The UAE introduced a federal corporate tax of 9% on net profits above AED 375,000 for mainland companies.
  
• Free zone entities can enjoy 0% corporate tax on their qualifying income & if they satisfy the conditions of a qualifying Free Zone Person, and importantly, if they avoid mainland-sourced revenue.
  
• But if the free zone company starts earning income from UAE mainland clients, that income may become taxable at 9%. So you must align your revenue sources accordingly.
  
• In short, for your Virtual Asset Business in Dubai, if your model is international and minimal local UAE revenue, the tax advantage points toward the free zone. And if you anticipate substantial UAE market involvement, the tax benefit may diminish.
  

Regulatory & Licensing Process

• Regardless of jurisdiction, your Virtual Asset Business in Dubai will need to undergo the VARA licensing process, including an initial application (Initial Disclosure Questionnaire), incorporation of the company,and then a full operational license.
  
• For a mainland setup, you will register the commercial entity with DET and then apply to VARA for a VASP license. For a free zone setup, you’ll register with the relevant free zone authority for e.g., DMCC, DWTC, then apply for a VARA license.
  
• Minimum paid-up share capital will depend on the activity for e.g., advisory vs full exchange. For example, small advisory services may start with lower capital; an exchange would need much more.
  

Office, Substance & Local Presence

• VARA insists on a real physical office in Dubai & not just a virtual desk and at least two Responsible Individuals such as a CEO and a Compliance/Money Laundering Reporting Officer, resident in the UAE.
  
• Mainland entities can lease office space anywhere in Dubai; free zone companies must lease inside the free zone and adhere to the zone-visa/office size rules.
  
• For your Virtual Asset Business in Dubai, ensure that your business model, staffing plan and premises align with VARA’s expectations since the oversight is real.
  

Ecosystem & Market Perception

• A mainland company signals a full onshore presence in Dubai’s business environment; banks and institutions may view it as more local.
  
• Free zones often provide specialised crypto/fintech ecosystems and networks. For example, DWTC Free Zone promotes itself as a new home for the virtual assets ecosystem.
  
• For your Virtual Asset Business in Dubai, if you value being part of a dedicated crypto cluster and you are more internationally oriented, the free zone may provide you with networking and peer benefits. If you prioritise UAE‐resident clients or institutional onshore access, then the mainland will give you an advantage.

4. Steps to Launch Your Virtual Asset Business in Dubai

Here’s how to proceed, tailored for a Virtual Asset Business in Dubai:

• Define Business Model – Clearly define which VARA-regulated activity you’ll conduct like exchange, custody, advisory, etc, so pick the category early.
  
• Choose Jurisdiction – Mainland or Free Zone based on where your clients are, tax strategy, and the office needs.
  
• Obtain Initial Approval (Approval to Incorporate) – Submit IDQ/initial disclosure to VARA.
  
• Register the Company – If it’s mainland, then register via DET & if it’s a free zone then register via the free zone authority for e.g., DMCC, DWTC, and the lease office.
  
• Deposit Required Capital – Open a UAE bank account & deposit a paid-up share capital, and the amount depends on the license type.
  
• Submit Full Licence Application to VARA – Provide governance documentation, compliance policies, staffing, and systems. VARA reviews and grants a license when the regulations are met.
  
• Establish Substance and Operations – Have the physical office, hire responsible individuals in the UAE, and ensure that the systems are live.
  
• Ongoing Compliance – After license grant, maintain governance, AML/CFT controls, audits, and regulatory reporting & non-compliance can lead you to serious fines.

5. Key Challenges to Be Aware Of

• Banking access: Crypto businesses still face a cautious approach from banks, even with a VARA license.
  
• Talent and staffing: When you have UAE-resident senior executives, it increases the costs.
  
• Budgeting: It includes licensing, compliance, physical office, also staff & costs add up.
  
• Timeline: The process can take between 6-12 months this depends on the business complexity.

6. Decision Table | Mainland vs Free Zone for Your Virtual Asset Business in Dubai

7. Conclusion

Choosing where to set up your Virtual Asset Business in Dubai isn’t just a formality; it’s a decision that shapes how your company actually operates. VARA ensures that both mainland and free zone firms be abide by the regulatory rules, but everything else like client reach, taxation, perception, and growth potential it all differs. If your aim is to build strong UAE market ties and credibility with local banks, the mainland is your base. If your focus is global users, lighter taxes, and crypto-focused networks, a free zone fits better. Either way, success comes from understanding VARA’s expectations and running a business built on real compliance and trust. With Arnifi, you get end-to-end support from VARA licensing to banking and compliance handled by specialists who know the system inside out. We don’t just register your company, we position it for long-term success in Dubai’s fast-evolving crypto market.