The legal starting point

VARA's perimeter is the seven Virtual Asset Services in the VARA Regulations 2023. Each Service contemplates activity for or with third parties. Pure proprietary trading — trading your own money, with your own capital, with no client involvement — falls outside the seven Services on the face of the Rulebooks.

But VARA's Compliance and Risk Management Rulebook applies a principle-based, scale-sensitive standard. At sufficient scale, even pure proprietary activity intersects with the integrity of VARA-licensed markets — it moves prices on VARA exchanges, it interacts with VARA-licensed brokers, it concentrates risk in a Dubai entity. That is where the $250M figure comes in.

Where the AED 250M figure comes from

The figure is not a single line in a single Rulebook. It is a composite that emerges from three places: (i) the Compliance & Risk Management Rulebook's "scale and systemic-importance" criteria; (ii) VARA's informal supervisory practice toward systemically active proprietary participants; (iii) the federal anti-money-laundering regime, where Cabinet Decision 24 of 2022 and FATF Recommendation 15 contemplate scale-based regulatory engagement for VASPs. In our practical experience, AED 250M of daily turnover is the level at which VARA asks for a conversation, even where no Service is being provided.

Below the threshold, with genuine prop-only activity, no licence is required. Above the threshold, the safer path is to engage with VARA early and document why the activity remains outside the seven Services — typically with a no-action letter or comfort note.

The three "purity" conditions

For proprietary trading to remain outside the VARA perimeter at any scale, three conditions must hold:

  1. Pure own-account. Every AED traded is owned by the trading entity. No client funds, no nominee accounts, no friends-and-family pooled capital, no related-party investment that is in substance a fund.
  2. No service to others. No marketing of strategy, no performance disclosure, no public website soliciting capital, no "managed account" arrangement, no copy-trading.
  3. No exchange or broker functions. The entity does not maintain a public order book, does not match third-party orders, does not act as principal in trades with retail customers.

If any of these fails — even partially — the activity is a Virtual Asset Service and a VARA licence is required.

The federal overlay — SCA

VARA is not the only relevant regulator. The federal Securities and Commodities Authority retains jurisdiction over investment activity and collective investment schemes. A vehicle that pools investor money to trade — even crypto — is a fund under federal rules and requires SCA authorisation (or DFSA/FSRA if in DIFC/ADGM). Calling it "proprietary" does not change the substance: if the capital came from third parties, it is regulated.

How we structure prop trading in Dubai

For a single-family office or a single-shareholder prop firm trading own capital, the structure is straightforward:

  • DMCC, IFZA or Meydan SPV with a Proprietary Trading commercial activity. The activity codes exist and are well-tested.
  • Single shareholder — typically the founder, a personal holding company, or a DIFC Foundation for family-office cases.
  • Documented internal trading policy covering risk limits, asset universe, leverage caps, valuation, and reporting to the board.
  • No marketing: no website, no LinkedIn solicitation, no investor decks. Outbound communications limited to counterparty onboarding (exchanges, OTC desks, custodians).
  • UAE corporate tax: trading gains taxable in the UAE at 9% (or 0% if the entity qualifies for Small Business Relief under MD 73 of 2023, AED 3M revenue threshold to 2026; or 0% as a Qualifying Free Zone Person if the activity is Qualifying Income — note that proprietary trading income is generally not "Qualifying Income" for QFZP purposes).

The two real-world failure modes

1. The "friends round". A founder structures a prop entity, then accepts AED 5M from each of four friends "to participate in the upside". This is a collective investment scheme. SCA jurisdiction, VARA Cat 7 (VA Management). Both will be engaged, both will require remediation.

2. The performance-flexing problem. The founder posts trading P&L on Twitter, LinkedIn, or to a closed Telegram of "sophisticated investors". This is solicitation. VARA and SCA both treat this as the start of an unregistered investment-advisory or fund-management service.

The above-threshold dialogue

If your treasury or family office is genuinely trading at AED 250M+ daily turnover, the conservative path is to:

  1. Pre-engage with VARA via Neo Legal or another specialist counsel for a perimeter discussion.
  2. Document the proprietary nature in detail — capital provenance, governance, trading mandate, absence of third-party economic exposure.
  3. Consider voluntary registration under VARA's "qualifying entity" framework (where applicable to category 7 systemically-relevant participants).
  4. Maintain audited annual accounts and a clean AML file — even though not formally required, this is the file you want when VARA asks.