Opinion: Irina Heaver, Crypto Lawyer.
The founders, who treat regulatory structuring as a central part of their market strategy, have flourished in the UAE. Unfortunately, many founders view licensing as an afterthought.
The United Arab Emirates is not a place where you can cut corners. But it is where a thoughtful, well-prepared founder pays off speed, clarity and access to a highly supportive ecosystem.
Contrary to the beliefs of some founders, regulators are not the issue. Confusion, poor planning, lack of preparation.
The UAE crypto-licensing landscape is difficult to grasp, and even experienced venture capitalists, serial entrepreneurs and global law firms often misinterpret the administration.
Let’s clarify the situation.
One country, two legal systems
The United Arab Emirates is a federal country made up of seven emirates operating under two different legal systems.
The mainland legal system known as the “onshore” regime covers the entire UAE territory and includes more than 45 economic free zones. These jurisdictions fall under the UAE civil law and are governed by the UAE court system.
The Financial Free Zone, Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) operate independently under the English common law. They also maintain their own regulatory and court system, apart from the mainland’s judicial system.
Understanding this branch is important as the regulatory authority that governs your cryptographic activity primarily depends on the legal framework you choose to operate.
1 country, 5 cryptographic regulators
Five independent authorities regulate cryptography and related activities, each with their own jurisdiction, delegation and licensing frameworks.
On the mainland side, the three related regulators are:
UAE Central Bank (CBUAE): Regulates activities including stables controlled by AEDs, crypto payments and remittances, and approves foreign stationary coins.
Securities and Products Agency (SCA): Regulates the provision of crypto exchanges, broker-dealers and tokens similar to securities and product contracts.
Dubai Virtual Asset Regulatory Authority (VARA): Regulates most virtual asset service providers (VASPs) operating in Dubai, except those of DIFC.
Related: RLUSD Stablecoin from Dubai Regulator Greenlights Ripple
The Financial Free Zone has two independent regulatory authorities.
Financial Services Regulatory Authority (FSRA): ADGM’s financial watchdog agency that developed one of the most advanced regulatory frameworks for digital assets in 2018.
Dubai Financial Services Authority (DFSA): DIFC’s regulatory authority.
This unique framework can be both a blessing and a challenge. Choosing the wrong regulator or failing to understand the scope of each authority can lead to wasting time, missing opportunities, or even fully exerting licensing obstacles in some cases.
Select the appropriate regulator
The appropriate jurisdiction depends entirely on a particular business model. Some common scenarios are:
Start the crypto exchange
Are you planning to become the next Binance? Be prepared to navigate strict license paths. Vara, SCA, or ADGM is a potential home for you. Each has its own requirements, nothing for the faint of heart.
Issuing Stablecoin
If you’re thinking about comparable to tethers in AED, welcome to the adult table. It will deal with the UAE central bank.
Build a tokenized RWA platform
Want to turn your luxury real estate, fine art or whiskey warehouse into a blockchain-based asset? Vala’s newly introduced structure for asset support tokens is a must-read. No, slap a “utility token” in the white paper won’t cut it here.
Starting a crypto fund
Have you got the capital to deploy and the vision to support the next Crypto Unicorn? It’s time to become a best friend at ADGM’s FSRA. This is one of the most advanced digital asset frameworks, but we definitely expect a real compliance chop.
Launch the payment app
Do you want to make a big money move? The central bank is looking at you carefully. Don’t expect a light touch approach when processing your clients’ funds.
I’m trying to do it all
Please do not. Founders often want to build an entire offering at once. This could be a regulatory burnout recipe. It’s much better to start narrower – get one license, create traction and then scale.
More Best Practices
Founders who prioritize regulatory structuring as a core component of their market strategy have been a success in the UAE.
Success requires thorough regulatory assessments from the start, collaboration with the right jurisdiction and authority of the business model, and collaboration with legal experts who truly understand the local landscape.
In the United Arab Emirates, cutting corners is not permitted. Founders who plan carefully and actively engage with regulators will be rewarded with speed, clarity and access to a highly supportive ecosystem.
Opinion: Irina Heaver, Crypto Lawyer.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
