Virtual asset regulatory framework in the UAE

March 5, 2024 | 10 min read

The growth and demand for Cryptocurrency as an asset form as skyrocketed over the past decade or so. This has prompted several governments around the world to regulate it. Countries like Singapore, Australia, Japan, United and Kingdom Canada have passed regulations governing cryptocurrency. The regulations will ensure business operate within a defined regulatory framework and ensure that Crypto businesses comply with AML/CFT regulations in order to prevent money laundering and fraudulent activities.

UAE is fast evolving as a premier destination for Crypto businesses and the United Arab Emirates (UAE) has established a robust regulatory framework for virtual assets, encompassing various regulatory bodies and frameworks to govern virtual asset services within the country.

At present, there are five main regulatory frameworks within the UAE governing the provision of virtual asset services, comprising:

  • Federal regulations issued pursuant to Cabinet Resolution No. Law 111 on virtual assets;
  • Regulations issued within the two financial free zones of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM);
  • Regulations applicable to Virtual Asset Service Providers in Dubai governed by Virtual Assets Regulatory Authority (VARA);
  • Licensing framework applicable within the Dubai Multi Commodities Centre free zone (DMCC).

A Brief overview of the licensing and regulatory framework in these jurisdiction as follows:

Particulars Dubai (VARA) DIFC ADGM DMCC Federal Level
Regulator and Licensing Authority Virtual Asset Regulatory Authority Dubai Financial Services Authority (DFSA) Financial Services Regulatory Authority (FSRA) Dubai Multi Commodities Centre Authority (DMCC) Securities and Commodities Authority (SCA)   Central Bank of the United Arab Emirates (CBUAE)
Jurisdiction Emirate of Dubai (excluding DIFC) Dubai International Financial Centre (DIFC) Abu Dhabi Global Market (Al Maryah Island) DMCC free zone situated in Dubai Entire United Arab Emirates excluding DIFC and ADGM
Permissible Regulated Activities/Virtual Assets

1. Provision of virtual asset platform operation and management services;

2. Provision of services for the exchange between virtual assets and national or foreign currencies;

3. Provision of services for the exchange between one or more forms of virtual assets;

4. Provision of virtual asset transfer services;

5. Provision of virtual asset safekeeping, management or control services;

6. Provision of services related to virtual asset wallets; and

7.Provision of services related to offering, and trading in, virtual tokens

1. Dealing in investments as principal;

2. Dealing in investments as agent;

3. Arranging deals in investments;

4. Managing assets;

5. Advising on financial products;

6. Operating an exchange;

7. Providing custody;

8. Arranging custody;

9. Operating a clearing house; and

10. Operating an alternative trading system.

1. Digital securities (e.g., digital/virtual tokens that have the features and characteristics of a security under the FSMR);

2. Virtual Assets (non-fiat virtual asset currencies, virtual asset exchange tokens;

3. Derivatives and collective investment funds of virtual assets, digital securities and utility tokens;

4. Utility Tokens are tokens that can be redeemed for access to a specific product or service;

5. Fiat tokens (e.g. stablecoins whose value are fully backed by underlying fiat currencies).

1. Issuing of NFTs;

2. Dealing in Investments in Principal as license activity

1. Provision of Virtual Asset Platform operation and management services;

2. Provision of exchange services between one or more forms of virtual assets;

3. Provision of Virtual Asset transfer services;

4. Provision of brokerage services in trading operations in Virtual Assets;

5. Provision of Virtual Asset custody, management, and control services;

6. Provision of financial services related to offering and/or selling by the issuer to the Virtual assets, or participating in providing those services.

Applicable Regulations

1. Virtual Asset and Related Activities Regulations 2023;

2. Law No. 4 of 2022 Regulating Virtual Assets in Dubai;

3. Cabinet Decision No. 111/2022 on the Regulation of Virtual Assets and Their Service Providers;

4. Cabinet Decision No. 112/2022 on Delegating Certain Competencies related to the Regulation of Virtual Assets;

5. Marketing Regulations;

6. Activity Specific Rulebooks

1. The Regulatory Law 2004, as amended including the rulebooks;

2. The Law Regulating Islamic Financial Business 2004;

3. The Investment Trust Law 2006;

4. The Collective Investment Law 2010;

5. The Markets Law 2012;

6. Rulebooks as applicable

1. The Financial Services and Markets Regulations (FSMR);

2. Guidance on Regulation of Digital Securities Activities in ADGM;

3. Guidance on Regulation of Digital Security Offerings and Virtual Assets under the FSMR;

4. Guidance on Regulation of Virtual Asset Activities in ADGM

There are no specific regulations governing crypto assets in DMCC, there are only a list of licensed activities as decided by DMCC

1. Cabinet Resolution No. (111) of 2022 Concerning the Regulation of Virtual Assets and their Service Providers;

2. Stored Value Facilities Regulations issued by Central Bank

Licensing Costs Initial License Application  Fee of AED 40,000 to AED 200,000 depending on the activity and annual supervision fee and ongoing costs Initial License Application  Fee of USD 15,000 to USD 175,000 depending on the activity and annual supervision fee and ongoing costs Initial License Application  Fee of USD 20,000 to USD 145,000 depending on the activity and annual supervision fee and ongoing costs Initial License Application fee of AED 35,000 and ancillary costs as applicable Initial License Application fee between AED 53,000 and AED 505,000 depending on the activity and annual supervision fee and ongoing costs

The UAE's commitment to fostering an innovative yet secure environment for virtual asset services is evident through its evolving regulatory landscape aimed at protecting investors, preventing financial crime, and supporting industry growth. As the industry continues to evolve, additional regulatory measures are expected to adapt to new challenges and opportunities facing the sector

We have experience in working with Virtual Asset Service Providers and can assist with formation of entities intending to provide such Virtual Asset services.

We can also assist in providing legal and regulatory guidance to companies wishing to enter this space or are already established across different jurisdictions in UAE

Contact to set up a consultation meeting.

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