Innovation and Regulation of Cryptocurrencies in the United Arab Emirates

In recent years, cryptocurrencies have evolved into a defining element of the global financial landscape. As digital assets, they are based on cryptographic technologies and function both as a medium of exchange and as decentralized accounting systems. Bitcoin and Ethereum, in particular, have generated enormous market resonance and led to an accelerated need for regulatory action. The United Arab Emirates (UAE) recognized this shift early on and has positioned itself as a leading hub for the regulation and promotion of innovations in the virtual asset sector.

To foster a stable and trustworthy environment for investors and service providers, the UAE adopts a two-pronged approach: consistently developing regulatory frameworks while simultaneously creating targeted space for technological innovation. At the federal level, oversight of the crypto sector primarily rests with the Securities and Commodities Authority (SCA), whose Decision No. 23/2020 contains significant regulations for activities involving crypto assets on the mainland and in selected free zones. In cooperation with the UAE Central Bank, this ensures that both traditional crypto assets and tokenized securities are managed in compliance with legal requirements. Cabinet Resolution No. (111) of 2022 represents a central instrument for embedding regulatory standards. This resolution defines fundamental terms such as virtual assets, virtual asset service providers (VASPs), and the competent supervisory authorities. According to Article 4 of this resolution, any natural or legal person providing services in the area of exchange, transfer, custody, or trading of virtual assets requires appropriate licensing by the SCA or the respective local regulatory authority. Furthermore, pursuant to Article 6, the competent authorities are authorized to monitor activities, ensure data protection, and implement measures to combat money laundering (AML). Compliance with both national and international standards (particularly FATF guidelines) is mandatory. Violations of these regulations can be punished with significant fines of up to 10 million AED, as per Article 12.

The Emirate of Dubai plays a special role within the federal structure of the UAE. Cabinet Resolution No. (112) of 2022 established the Virtual Assets Regulatory Authority (VARA) there, which possesses extensive powers for the supervision, licensing, and regulation of activities in the virtual asset sector. Among other things, VARA is responsible for implementing AML requirements, regulating data protection concerns, and educating investors about potential risks. It cooperates closely with the SCA to establish a unified and robust regulatory system. This institutional framework is complemented by Administrative Decision No. (1) of 2023, which establishes a special appeals committee for resolving disputes related to VARA’s decisions.

With their regulatory approach, the UAE aims to specifically enable innovation while simultaneously ensuring a high degree of legal certainty and transparency. The clear legal framework and consistent licensing practice are intended to effectively combat risks such as money laundering, terrorist financing, and other forms of financial crime. There is an explicit prohibition for unlicensed companies to offer services in the virtual asset sector. At the same time, Dubai, in particular, has developed into an international hub for digital financial innovations. The Emirati approach is increasingly perceived as a model for balanced crypto regulation.

In addition to preventing financial risks, the focus is also on promoting overarching political goals, including consumer protection, fostering economic inclusion, and maintaining a fair competitive environment. The strategic positioning of the UAE as a hub for regulated crypto activities aims to strengthen the trust of international market participants and generate sustainable growth impulses in the long term. Against the backdrop of increasing regulatory complexity at the international level, coordination with foreign supervisory authorities will play a central role in the future – both to prevent regulatory arbitrage and to promote cross-border compliance.

The virtual asset market in the UAE is currently in a phase of consolidation. It is foreseeable that in the coming years, there will be an increase in mergers, acquisitions, and strategic alliances within the sector. Numerous licensed companies in Dubai and Abu Dhabi are already preparing for international expansion and are using their regulatory home as a starting point for entering other markets. With currently over 30 VARA-licensed providers and a growing number of companies regulated under the Abu Dhabi Global Market (ADGM), the UAE underscores its role as a globally competitive location for crypto regulation.