Crypto License in Dubai IFZA

Crypto-authorization Process in the Dubai IFZA Virtual Currency Registry

The IFZA administration advertises itself as a very business-friendly entity, with a simple procedure to get licensed. The crypto authorization process in Dubai IFZA is one of the easiest.

The Registration of Dubai IFZA Company in the Register of Crypto Currency Companies

The registration of a Dubai IFZA crypto-licensed company is done through a simple procedure. It consists of two steps: the incorporation of the company in the IFZA free zone and the license application.

The second step requires to acknowledge the requirements for the planned activity. A fair share of these requirements are directly communicated by the IFZA administration to the applicant after contact has been established during the registration of the legal entity.

As the required documents and requirements are fulfilled by the applicant and communicated to the agents of the IFZA, a business license shall be granted quickly.

Governmental Statements on Crypto in Dubai IFZA

In a blog post published at the end of 2022, the official IFZA website named crypto and blockchain in general as one of the three most promising industries for the years to come. The two other trends to follow in their opinion were e-commerce and immersive customer experiences.

Though 2023 has been rough in the crypto sphere with a prolonged bear market, this statement shows the confidence of the IFZA team in the future of cryptocurrency. A statement that is reinforced by the existence of business licenses for crypto activities in the IFZA.

Requirements for Companies Engaged in Crypto Activities in Dubai IFZA

To engage in crypto activities, a company should be registered in the UAE IFZA first. For this purpose, an ultimate beneficial owner (UBO) must be appointed as the individual behind the company. The individual shall have a clean criminal record.

The company shall have an office space in the Dubai Silicon Oasis (DSO), the physical area of the Dubai IFZA. The UBO should apply for a residency visa if they are not a resident of the UAE. This visa application is facilitated by the IFZA.

Then, the application stage can begin, in order to receive one or more licenses pertaining to crypto. The application is carried out through direct contact with the free zone administration’s teams. Please read carefully the chapter about “Types of Licenses in Dubai IFZA”, as only specific activities are allowed by this license.

AML-CFT rules applicable from the VARA Guidelines must be enforced, as well as having a KYC procedure for companies whose business model requires onboarding customers.

A minimum share capital of 2 to 100 million AED shall be declared, but does not need to be paid up. The minimum share capital amount is set by the regulator during the application stage, depending on the chosen license and activity.

A licensing fee, depending on the license activity, shall be paid at the application stage.

An AML officer shall also be appointed, as well as an accountant (can be outsourced). Those are requirements in spite of the fact that the crypto licenses in Dubai IFZA are not regulated. The AML officer can be the UBO.

The Process of Setting up a Company for a Cryptocurrency Business in Dubai IFZA

Setting up a company remotely in Dubai IFZA for a cryptocurrency business is simple and fast. The process can be carried out online by filling out the necessary form and providing the required documents about the UBO. A fee should also be paid to the IFZA for registration.

This free zone is one of the only in the United Arab Emirates that allows for complete foreign ownership.

Taxation for Cryptocurrency Companies in Dubai IFZA

Companies registered in Dubai IFZA, as well as its domestic personnel, are not liable to pay income tax. This applies equally to cryptocurrency companies licensed in the free zone.

The IFZA also does not levy any taxes on capital repatriated outside of the UAE. The official information insists that 100% of the gains can be held and kept by the company and individual who generated them.

Obligations for Crypto Companies in Dubai IFZA

Crypto companies in the IFZA are not regulated as they are regulated in other jurisdictions as does VARA in the UAE, the MAS in Singapore, or the GIIF in Poland. There is no regulatory authority to overlook the activity of crypto businesses. This is explained in part by the impossibility of registering a crypto exchange of any sort or providing custodial services of any sort.

Nonetheless, a crypto licensed company in the IFZA must maintain AML/KYC policies at all times. Bookkeeping and annual audit reporting are mandatory. Though not supervised by the VARA, the rules laid out in its rulebooks also apply to IFZA crypto companies.

Maintaining the license requires paying an annual fee. It is possible to pay for 3 or 5 years ahead of licensing fees.

Sanctions for Violating Dubai IFZA Crypto-Business Obligations

Despite its separate framework, the Dubai IFZA rules have similar sanctions as the Dubai Virtual Assets Regulatory Authority (VARA).

Carrying out illegally a licensed activity, or breaching the rules established by the VARA, is sanctioned by fines the highest of:

• 50,000,000 AED (about 13,500,000 USD);
• 15% of the company’s annual gross revenue;
• 300% of the profits gained or loss avoided by the breach of the rules.

A 1% monthly penalty applies to unpaid fines.

Additionally, the VARA can sanction a company with an IFZA license, if it deems that this company is malevolent or acting in bad faith. The license can be revoked, fines can be issued and the responsible individuals can face imprisonment.