Dubai is making it easier for crypto startups to enter the market. In May 2025, the Virtual Assets Regulatory Authority (VARA) introduced a new model called the “Sponsored VASP Regime.” This allows smaller virtual asset service providers (VASPs) to operate under the license of an already-approved company—called a Regulated Sponsor—instead of going through the full, costly licensing process themselves.
The goal is clear: support innovation while maintaining strong oversight. Startups can now focus on developing their products, while the Regulated Sponsor handles compliance duties like audits, risk management, and reporting to VARA.
But this isn’t a shortcut. Sponsored VASPs must be legally registered in Dubai and must clearly state their status in all communication. Sponsors carry full legal responsibility for their partners’ activities. All customer complaints and regulatory issues go through them.
This setup creates a kind of legal “incubator,” where new crypto ventures can grow securely within a regulated framework. It’s a win for both sides—established firms can create new revenue streams and partnerships, while new entrants get faster access to one of the world’s most advanced crypto hubs.
Dubai’s approach stands out globally. While other countries tighten crypto rules and restrict new players, VARA is building a layered and flexible system that encourages growth without sacrificing control. The Sponsored VASP model may well become a foundation for the next wave of blockchain innovation in the UAE.