Why The UAE Could Become The Global Hub For Virtual Asset Proprietary Trading: A Practical Guide With Jurisdictional Comparisons To Singapore And Switzerland

1. KEY TAKEAWAYS

• The UAE is emerging as a leading jurisdiction for virtual asset proprietary trading.
• VARA offers clear, activity-specific regulation for Prop Trading in Dubai.
• UAE's AML/CTF framework is risk-based and lighter for proprietary trading firms.
• Singapore and Switzerland require broader compliance even for non-custodial firms.
• UAE offers a crypto-friendly ecosystem with supportive government initiatives.
• Talent mobility and lifestyle advantages attract global crypto professionals to the UAE.
• Compared to Singapore and Switzerland, the UAE provides greater flexibility and ease of entry.

2. INTRODUCTION

Virtual asset proprietary trading ("Prop Trading"), where firms trade digital assets using their own capital has gained significant traction amid the global rise of cryptocurrencies and blockchain-based financial systems. Clear regulatory frameworks, investor-friendly policies, and cutting-edge infrastructure are foundational to attracting high-value Prop Trading activity. Unsurprisingly, the United Arab Emirates (UAE), Singapore, and Switzerland have emerged as global frontrunners in this competitive arena.

This article examines why the UAE is uniquely poised to become the global hub for proprietary virtual asset trading, offering a comparative analysis with Singapore and Switzerland, along with a practical roadmap for structuring operations within the UAE.

3. REGULATORY FRAMEWORK: CLARITY AND SPECIALISATION

The UAE stands out for its proactive and specialised approach to virtual asset regulation. While multiple regulators oversee virtual asset activities across the UAE, Dubai's Virtual Assets Regulatory Authority (VARA) established under Law No. 4 of 2022¹, remains the first global regulator solely dedicated to virtual assets.

Under VARA's regulatory framework, firms engaged in Prop Trading must obtain a proprietary trading obtain a No Objection Certificate (NOC) from VARA. This NOC permits firms to conduct proprietary trading using only their own funds (not client funds), thereby streamlining compliance obligations and reducing anti-money laundering and counter-terrorism financing (AML/CTF) burdens.² VARA explicitly prohibits the handling of third-party funds, over-the-counter (OTC) brokering, or market making unless the firm holds a Virtual Asset Service Provider (VASP) license.

For firms seeking a more "light-touch" regulatory regime while using only their own capital, the RAK Digital Assets Oasis ("RAK DAO") offers a compelling alternative. Unlike VARA, RAK DAO does not require a NOC for Prop Trading, provided no third-party funds are involved.

In contrast, the Monetary Authority of Singapore ("MAS") in Singapore, regulates virtual asset activities under the Payment Services Act (PSA) and the Securities and Futures Act (SFA). MAS enforces rigorous standards aligned with traditional financial services regulation.³ Generally, Prop Trading with firm capital does not require a fund management license if no external funds are involved. However, a license or notification may be necessary under the PSA depending on the nature of the tokens or trading, particularly if the activity involves security tokens, collective investment schemes, or regulated services offered to the public.

In Switzerland, the Swiss Financial Market Supervisory Authority (FINMA) applies financial laws to virtual assets based on the specific activity involved. Prop traders may fall under collective investment or securities dealer rules if not properly structured.⁴ Generally, trading with a firm's own capital does not trigger licensing requirements unless certain thresholds are met such as annual trading turnover exceeding CHF 5 billion or membership in a trading venue or if the trading activity qualifies as a financial service to clients.

The emergence of VARA, along with flexible options like RAK DAO's activity-specific regime, reflects a maturing regulatory landscape that strives to balance investor protection with commercial agility, positioning the UAE as a global leader in virtual asset innovation.

4. CORPORATE STRUCTURING AND FREE ZONE ADVANTAGES

The UAE offers a range of free zones, notably Dubai Multi Commodities Centre (DMCC) and Dubai International Financial Centre (DIFC), each with distinct virtual asset policies. For VARA-licensed entities, the preferred setup is within Dubai World Trade Centre (DWTC), the designated jurisdiction for VARA-regulated firms, but this varies based on the business objectives of the proposed entities.

Key corporate benefits include:

• 100% foreign ownership
• No personal or corporate income taxes (in most free zones)
• Simplified visa and immigration processes
• Fast-track licensing pathways

In Singapore, companies face stricter governance and financial reporting obligations under the Accounting and Corporate Regulatory Authority (ACRA).⁵ In Switzerland, while tax-neutral structures exist, operating costs and regulatory interpretation are more complex.⁶

Hence, the UAE offers more streamlined incorporation processes, ownership flexibility, and regulatory certainty, enabling faster market entry.

5. AML/CFT AND COMPLIANCE CONSIDERATIONS

While Prop Trading firms do not manage client assets, they remain subject to AML/CFT requirements.

In the UAE, VARA's framework for "Proprietary Trading in Virtual Assets" explicitly distinguishes between activities involving only the firm's own capital and those handling client/third-party assets. NOC-registered) proprietary trading that does not manage client funds, VARA applies lighter-touch AML/CFT compliance in line with FATF's risk-based approach. Specifically, there are:

• No KYC or onboarding obligations toward clients (since there are none).
• Firms are still expected to maintain robust internal controls (transaction screening, ongoing monitoring, etc.) to detect and prevent misuse of their infrastructure for illicit purposes (e.g., control over wallets, trading activity).

In Singapore, Singapore maintains high AML/CFT compliance for all DPT licensees, often regardless of asset custody.⁷ In Switzerland, FINMA's activity-based regime means that firms only transacting with their own capital are not deemed financial intermediaries and do not trigger registration, supervision, or heightened AML obligations..⁸ However, Structural ambiguity can arise where prop trading models inadvertently involve third-party funds (such as pooled vehicles, affiliate accounts, etc.). FINMA closely examines the substance over form.

6. CONCLUSION

Compared to other leading global jurisdictions, the UAE, through frameworks like VARA and Ras RAK DAO has carved out a uniquely attractive landscape for proprietary trading in virtual assets. By blending regulatory clarity with operational flexibility and expedited market entry, the UAE offers well-defined guardrails that clearly distinguish between proprietary and client-facing activities.

VARA delivers a comprehensive, institution-oriented licensing regime that supports robust governance, while RAK DAO offers a streamlined, non-custodial path ideal for firms trading solely with their own capital. This dual-track approach caters effectively to both well-established financial institutions and agile, digital-native ventures. In contrast, jurisdictions like Singapore and Switzerland, while lauded for their regulatory integrity and investor protection, often impose more traditional and, at times, intricate compliance obligations, even for activities that do not involve client funds.

With its balanced, forward-thinking approach, the UAE is emerging as a global frontrunner in enabling the next wave of institutional and proprietary trading innovation in the digital asset ecosystem

Footnotes

1. Government of Dubai. (2022). Dubai Law No. 4 of 2022 on the Regulation of Virtual Assets. Retrieved from https://www.vara.ae

2. VARA. (2024). Virtual Asset Activity Licensing Guidelines. Retrieved from https://www.vara.ae/en/rulebooks

3. Monetary Authority of Singapore (MAS). (2024). Payment Services Act Overview. Retrieved from https://www.mas.gov.sg

4. FINMA. (2023). Guidelines for Initial Coin Offerings and Virtual Asset Providers. Retrieved from https://www.finma.ch

5. Accounting and Corporate Regulatory Authority (ACRA). (2023). Compliance Requirements for Companies in Singapore. Retrieved from https://www.acra.gov.sg

6. Swiss Financial Market Supervisory Authority (FINMA). (2023). FINMA Guidelines for Blockchain and DLT Companies. Retrieved from https://www.finma.ch

7. Monetary Authority of Singapore (MAS). (2023). Guidelines to Notice PSN01 – Prevention of Money Laundering and Countering the Financing of Terrorism (AML/CFT). Retrieved from https://www.mas.gov.sg

8. Swiss Financial Market Supervisory Authority (FINMA). (2021). FINMA Guidance: Supervisory Requirements for Financial Intermediaries Involved in Virtual Asset Services. Retrieved from https://www.finma.ch

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.