An Introduction to Cryptocurrency Law in Dubai and the UAE: A Multi-Regulatory Framework

The United Arab Emirates (UAE) has firmly positioned itself as a global hub for digital finance and virtual assets (VAs), moving beyond fragmented guidelines to establish a comprehensive and innovative regulatory framework. This ecosystem, characterized by multiple governing bodies, is designed to foster innovation while ensuring robust investor protection and compliance with stringent Anti-Money Laundering (AML) standards.
Understanding the UAE’s crypto law requires recognizing the distinct roles of the various federal and local authorities that regulate this space.

1. The Core Regulator: Virtual Assets Regulatory Authority (VARA)
   Established by Dubai Law No. (4) of 2022, VARA is the cornerstone of virtual asset regulation in the Emirate of Dubai.

• Jurisdiction: VARA has the mandate to regulate, supervise, and oversee all VA activities in the Emirate of Dubai, including Special Development Zones and Free Zones. It is important to note that VARA specifically excludes the Dubai International Financial Centre (DIFC) from its jurisdiction.
• Mission: VARA’s core objective is to promote Dubai as an international hub for VAs, attract investment, and develop a legal framework that protects investors and curbs illegal practices.
• VARA Rulebook: In 2023, VARA released its detailed Virtual Assets and Related Activities Regulations, establishing a comprehensive framework that includes compulsory rulebooks covering:
• Company licensing and governance.
• Compliance and Risk Management (including AML/KYC).
• Technology and Information security.
• Market Conduct.
• Licensing: All entities operating as Virtual Asset Service Providers (VASPs)—such as exchanges, custodians, and broker-dealers—in onshore Dubai must obtain a VARA license.

1. Federal Oversight and Mainland Regulation: The SCA and CBUAE
   Outside of the specialized local regimes, two federal bodies play critical roles:
   Securities and Commodities Authority (SCA)
   The SCA is the federal regulator for financial markets in the UAE (excluding Financial Free Zones).

• Role: The SCA issues regulations for crypto-asset activities that constitute securities or financial products. Since 2020, the SCA has been tasked with supervising the crypto sector nationwide and licensing companies offering crypto-related services.
• AML/KYC Compliance: All licensed VASPs, regardless of their primary regulator, must adhere strictly to the UAE’s federal Anti-Money Laundering (AML) and Know Your Customer (KYC) laws.
  Central Bank of the UAE (CBUAE)
  The CBUAE governs financial stability, payments, and banking services.
• Role: The CBUAE primarily regulates fiat-to-crypto transactions, digital payments, and Stored Value Facilities (SVF). It mandates strict licensing and compliance for financial institutions dealing with VASPs.
• Stablecoins: The CBUAE is actively developing a framework for the licensing and oversight of UAE Dirham-backed stablecoins, positioning itself as the primary regulator for this specific category of digital asset.

1. Financial Free Zones: Specialized Independent Regimes
   The UAE’s two major Financial Free Zones operate with independent legal and regulatory jurisdictions, providing alternative regimes for Virtual Assets.
   Dubai International Financial Centre (DIFC)

• Regulator: Dubai Financial Services Authority (DFSA).
• Focus: The DFSA has a comprehensive Digital Assets Framework primarily focused on regulating Security Tokens. It applies a rigorous, risk-based approach to the licensing of firms dealing with these assets within its jurisdiction.
  Abu Dhabi Global Market (ADGM)
• Regulator: Financial Services Regulatory Authority (FSRA).
• Focus: The ADGM was the first in the region to introduce a detailed VA regulatory framework in 2018. It regulates a broad range of activities, including exchanges, custodians, and brokers, treating Virtual Assets as Commodities rather than specified investments.
  Conclusion
  The UAE’s approach to cryptocurrency law is neither prohibitive nor laissez-faire; it is proactive, specialized, and multi-layered. By separating the regulatory oversight across federal bodies (SCA, CBUAE) and specialized local/free zone authorities (VARA, DFSA, FSRA), the country ensures both strict financial crime prevention and regulatory certainty. This robust framework provides a clear pathway for legitimate crypto businesses to operate, establishing the UAE as a globally competitive and secure destination for digital asset innovation.