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Digital asset laws and regulations – Comparative analysis and Jurisdiction insights

Published: Oct 6, 2025

Digital asset laws and regulations – Comparative analysis and Jurisdiction insights

Overview

Introduction to the Jurisdiction

What is the general regulatory environment for digital assets in UAE?
Are digital assets legally recognized? If so, how are they classified (e.g., as currency, property, securities)?
Which regulatory bodies oversee digital assets and blockchain technology in UAE?
Are there any key definitions or legal terminologies specific to digital assets in UAE that differ from international norms?

Regulatory Framework

What are the primary laws or regulations governing digital assets in UAE?
Are there any specific laws or regulations for cryptocurrencies, stablecoins, or non-fungible tokens (NFTs)?
How does UAE address decentralized finance (DeFi) platforms?
How does UAE address smart contracts?
Is there a licensing regime for businesses dealing with digital assets (e.g., exchanges, wallet providers, custodians)?
How are digital asset-related businesses and activities taxed (e.g., capital gains, VAT, income tax)?
Are there any ongoing regulatory proposals or upcoming changes that businesses should be aware of?
What specific regulations or licensing requirements apply to new fund formations focusing on digital assets?
Are there restrictions or guidance on fund structures investing in digital assets, such as hedge funds, venture funds, or tokenized funds?

Market Access and Licensing

What is the process for obtaining a license to operate as a digital asset business in UAE?
Are there restrictions on foreign companies or individuals operating digital asset-related businesses?
What are the compliance obligations for licensed businesses, such as anti¬money laundering (AML) and counter-terrorist financing (CTF)?
Is there a regulatory sandbox available for digital asset startups or innovative technologies?
What unique considerations should be taken into account for foreign fund managers seeking to establish digital asset funds in UAE?

Security and Consumer Protection

How does UAE address security concerns, such as fraud, hacking, or asset theft?
What consumer protection measures are in place for users of digital assets?
Are there insurance requirements for businesses holding digital assets on behalf of customers?
Are there additional consumer protection rules or safeguards specifically for investors in digital asset funds?

Blockchain and Smart Contracts

Are blockchain-based records legally recognized in UAE (e.g., for contracts or property ownership)?
What are the legal considerations around the enforceability of smart contracts in UAE?
Are there any regulations governing the development and use of blockchain technology?
How are blockchain technologies being leveraged in-fund management for record-keeping, compliance, or automation?

Cross-Border and International Considerations

How does UAE approach cross-border transactions involving digital assets?
Are there specific restrictions or reporting requirements for cross-border transfers of digital assets?
How does UAE align with international regulatory frameworks, such as FATF guidelines?
Are there treaties or agreements with other jurisdictions that facilitate cooperation on digital asset regulation?
What considerations apply to cross-border digital asset funds, especially regarding taxation, investor protection, or regulatory compliance?

Investment and Fundraising

What regulations govern initial coin offerings (ICOs), security token offerings (STOs), or other digital asset fundraising methods?
Are there restrictions on advertising or marketing digital asset investment opportunities?
How are digital asset investment funds regulated in UAE?
Are venture capital and institutional investments in digital assets subject to additional scrutiny or regulations?
Are there any incentives or specific frameworks encouraging the formation of tokenized investment funds?
What limitations or opportunities exist for fundraising through decentralized autonomous organizations (DAOs)?

Taxation

How are gains or losses from digital assets treated under UAE’s tax laws?
Are there specific reporting obligations for digital asset transactions or holdings?
Are there tax incentives for businesses or investors in the digital assets sector?
How are investment funds with digital assets taxed, particularly regarding fund-level gains and distributions to investors?

Enforcement and Dispute Resolution

How are disputes involving digital assets typically resolved (e.g., courts, arbitration)?
Are there precedents or notable cases involving digital assets in UAE?
What penalties or enforcement actions can regulatory authorities impose for non-compliance?
Are there special considerations or precedents regarding disputes involving fund managers or investors in digital asset funds?

Opportunities and Challenges

What are the primary benefits of choosing UAE for digital asset businesses or activities?
Are there specific challenges or risks associated with operating in UAE?
How does public perception or government policy impact the digital assets market in UAE?
Are there incentives or grants available to encourage blockchain or digital asset innovation?
Are there government programs or private initiatives supporting the development of digital asset funds or blockchain-based investment vehicles?

Emerging Trends

How is UAE addressing trends such as central bank digital currencies (CBDCs)?
Are there specific areas of growth or innovation in the digital assets sector (e.g., tokenized real estate, gaming, metaverse applications)?
How is artificial intelligence (AI) being integrated into blockchain or digital asset initiatives in UAE?
What trends are emerging around digital asset fund management, such as tokenized shares, AI-driven strategies, or decentralized fund structures?

Conclusion

What is the outlook for digital assets in UAE over the next 5–10 years?
Are there specific legislative or regulatory changes expected that could significantly impact the digital assets market?
What advice would you give to businesses or investors considering entering the digital assets space in UAE?
What unique opportunities or challenges exist for fund managers launching digital asset funds in UAE?

Introduction

General regulatory environment for digital assets in the UAE

The regulatory environment for digital assets in the UAE is developing steadily, guided by dedicated frameworks rather than fragmented enforcement. At the federal level, the Securities and Commodities Authority (SCA) supervises crypto-asset activities that constitute securities or financial products, while the UAE’s anti-money laundering and counter-terrorism financing framework applies across all virtual asset activities under Federal Decree-Law No.20 of 2018 Cabinet Decision No. 10 of 2019. In the Emirate of Dubai (excluding the DIFC), Dubai Law No.4 of 2022 regulating Virtual Assets established the Dubai Virtual Assets Regulatory Authority (VARA). VARA introduced specific regulations for virtual assets, aiming to provide legal clarity. Digital assets classified as securities fall under the SCA’s oversight. These authorities have issued licensing requirements and operational standards for exchanges, brokers, and custodians, aiming to foster a compliant and transparent ecosystem. In the UAE’s financial free zones, ADGM’s Financial Services Regulatory Authority (FSRA) and the DIFC’s Dubai Financial Services Authority (DFSA) maintain regimes for crypto-assets within their jurisdictions, supported by regulatory sandboxes and detailed guidance. The UAE Central Bank also plays a role, especially in matters related to stablecoins and anti-money laundering compliance.
This structured approach gives issuers, platforms, and investors a more defined regulatory pathway, though implementation remains ongoing. Clear guidelines, such as those in VARA’s rulebooks and SCA’s decisions, aim to reduce ambiguity in areas like token classification and licensing. While interpretation is still evolving, firms can operate with greater confidence under established procedures. Regulatory clarity continues to improve as regulators consult with industry stakeholders to refine frameworks that balance innovation and investor protection.
There is wide recognition in the UAE that a clear, rules-based system is key to long-¬term digital asset growth. Public consultations and regulatory sandbox programs allow for collaborative development of policies. This proactive strategy strengthens market integrity while encouraging technological advancement. Companies are encouraged to remain compliant with current frameworks and seek guidance from legal and regulatory experts to align with the UAE’s maturing digital asset landscape.
Two developments in the area of digital assets have been particularly significant since 2024. First, the DIFC enacted DIFC Law No. 2 of 2024 (Digital Assets Law), a law that characterizes digital assets as intangible property, defines “control,” and sets default rules for title, transfer, remedies and security interests, together with amendments across DIFC contract, damages, insolvency, trust, foundations, security and negotiable instruments laws. Second, the ADGM FSRA implemented amendments to its digital assets framework on 10 June 2025, following Consultation Paper No. 11 of 2024 refining virtual asset approval processes, revising capital and fee schedules.
Courts in the UAE have also begun to resolve substantive digital asset disputes. In Gate MENA DMCC (Huobi OTC) and Huobi MENA FZE v Tabarak Investment Capital Limited and Thurner (DIFC Court of Appeal, Judgment No. 002/2023, 13 June 2024), the court confirmed that Bitcoin is “property” under DIFC law and examined the nature of custody and control in crypto transactions. In parallel, the DIFC’s Digital Economy Court (DEC) has adopted bespoke procedural rules (Part 58 of the RDC) with express powers over digital assets, including orders directing the operation or cancellation of digital assets using keys or access credentials.

Regulatory Framework

1. Primary laws and regulations governing digital assets in UAE

2. Specific laws or regulations for cryptocurrencies, stablecoins, or non-fungible tokens (NFTs)?

Digital assets in the UAE are governed under a clear and coordinated regulatory system that incorporates both federal and emirate-level oversight. The Securities and Commodities Authority (SCA) oversees digital assets considered securities, while the Dubai Virtual Assets Regulatory Authority (VARA) supervises virtual asset activities in Dubai (excluding DIFC), including the registration and operations of Virtual Asset Service Providers (VASPs). The ADGM’s Financial Services Regulatory Authority (FSRA) administers a comprehensive virtual asset regime, most recently updated on 10 June 2025. These frameworks include strict anti¬-money laundering (AML) and counter¬terrorism financing (CTF) obligations aligned with the UAE’s Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, reflecting compliance with international standards such as FATF guidelines. For digital assets functioning as financial instruments, firms must comply with licensing, transparency, and conduct rules issued by the relevant authorities. The Central Bank of the UAE may also exert authority over activities involving stablecoins or payment services under the Central Bank Law and Consumer Protection Regulation. The UAE is actively aligning its frameworks with global developments, including preparations for the implementation of the Markets in Crypto¬Assets Regulation (MiCA) across jurisdictions with bilateral recognition, ensuring compatibility with international crypto-asset governance standards.

The UAE regulates cryptocurrencies, stablecoins, and NFTs through a structured legal framework established by multiple regulatory bodies, avoiding reliance on case- by-case enforcement. Instead, the UAE issues formal guidance and licensing schemes for Virtual Asset Service Providers (VASPs), creating clarity across asset classes. The Securities and Commodities Authority (SCA) regulates digital assets that qualify as securities, applying criteria similar to the Howey Test to assess investment characteristics. VARA in Dubai governs a wide scope of virtual asset activities, including those related to cryptocurrencies, exchanges, custody, and issuance, under its detailed rulebooks. Under ADGM’s FSRA framework, crypto assets are treated as “virtual assets” or “accepted virtual assets”. The FSRA’s updates, effective 10 June 2025 refine approvals, capital, fees and intervention powers while maintaining prohibitions on privacy tokens and algorithmic stablecoins.

Stablecoins may fall under the regulatory remit of the Central Bank of the UAE, particularly if they function as e-money or are linked to fiat currencies. These stablecoins must comply with consumer protection laws, payment regulations, and licensing requirements under the Central Bank Law and associated regulations. NFTs are generally treated as digital collectibles, not as financial instruments, unless structured to offer profit expectations, revenue sharing, or fractional ownership. In such cases, they may be reclassified and regulated accordingly under securities laws.

Regulatory Framework

3. How does UAE address decentralized finance (DeFi) platforms?

4. How does UAE address smart contracts?

In the UAE, decentralized finance (DeFi) platforms are not yet subject to a standalone DeFi- specific regulatory regime, but existing regulations apply based on the nature and structure of the activity. Regulatory bodies such as the Securities and Commodities Authority (SCA), the Central Bank of the UAE, and the Dubai Virtual Assets Regulatory Authority (VARA) assess whether DeFi protocols involve activities that fall within their jurisdiction, including securities issuance, lending, custody, or payments. If DeFi platforms facilitate staking, trading or lending involving digital assets that resemble securities or regulated financial services, they may trigger licensing, conduct, and investor protection requirements. Decentralisation does not automatically exempt a protocol from compliance — especially where developers, governance token holders, or protocol operators can be identified or benefit economically. In such cases, regulatory obligations may still apply. Virtual Asset Service Providers (VASPs), including those offering interfaces or access points to DeFi protocols, must meet anti-money laundering (AML) and counter-terrorism financing (CFT) requirements under the UAE’s Federal AML framework and register with relevant authorities like VARA or SCA.

In the UAE, smart contracts are increasingly integrated into the legal and regulatory landscape, although there is no standalone federal legislation solely dedicated to them. Legal recognition is emerging through broader digital and fintech regulatory frameworks. Federal Decree Law No. 46 of 2021 on Electronic Transactions and Trust Services provides a foundation by granting legal validity to electronic contracts and records, which can encompass smart contracts, provided they meet authentication and integrity standards. Emirates Blockchain Strategy 2021 further reinforces the government’s intention to adopt blockchain-based solutions, including smart contracts, in public and private sector operations. Smart contracts may be deemed legally binding under UAE civil law if they fulfill traditional contractual elements such as mutual consent, lawful object, and consideration, in line with the UAE Civil Transactions Law (Federal Law No. 5 of 1985). Regulatory scrutiny depends on the contract’s function: if it facilitates issuance, trading, or custody of financial assets or payment services, authorities such as the SCA, VARA, or the Central Bank may apply relevant securities or financial services laws.

Regulatory Framework

5. Licensing regime for businesses dealing with digital assets

6. How are digital asset-related businesses and activities taxed

In the UAE, businesses operating in the digital asset sector must comply with a cohesive regulatory framework that blends federal oversight with emirate-level licensing, primarily focused on anti-money laundering (AML), investor protection, and financial system integrity. Unlike systems with overlapping state and federal licensing, the UAE offers a centralized yet tailored approach. Virtual Asset Service Providers (VASPs) must register with and obtain licenses from relevant authorities based on their operational jurisdiction— such as the Securities and Commodities Authority (SCA) at the federal level, or the Dubai Virtual Assets Regulatory Authority (VARA) within Dubai (excluding DIFC). Under Cabinet Decision No. 111 of 2022 and related AML regulations, all VASPs must implement strict AML/CFT compliance programs in accordance with Federal Decree Law No. 20 of 2018. Firms offering services such as crypto exchange, brokerage, custody, or issuance are required to be licensed by the SCA or VARA, depending on whether the digital assets qualify as securities or virtual assets. If activities involve stablecoins or payment services, the Central Bank of the UAE may impose additional licensing and operational requirements under the Central Bank Law and Payment Systems Regulations.

In the UAE, digital asset-related businesses and activities are not currently subject to a specific tax framework for cryptocurrencies at the federal level, as the country does not impose personal income tax. However, corporate taxation may apply under the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), which came into effect in 2023. Businesses engaged in digital asset activities —such as trading, exchange, custody, or issuance—may be subject to the standard 9% corporate tax rate on net profits if their annual taxable income exceeds the exempt threshold of AED 375,000. While individuals are not taxed on personal gains from cryptocurrency transactions, digital asset income generated through business activities—such as mining, staking, or providing services for payment in crypto— may be deemed taxable under corporate tax if conducted through a legal entity or as a licensed commercial activity. The Federal Tax Authority (FTA) may also apply value- added tax (VAT) to certain digital asset services, particularly when provided in exchange for fiat or other consideration, depending on the transaction structure and the nature of the token involved.

Regulatory Framework

7. Ongoing regulatory proposals or upcoming changes that businesses should be aware of?

8. Specific regulations or licensing requirements that apply to new fund formations focusing on digital assets

In the UAE, several forthcoming regulatory developments are poised to shape the digital asset sector as the country continues to position itself as a global hub for virtual assets. Key advancements include the continued rollout of frameworks by the Securities and Commodities Authority (SCA) and the Dubai Virtual Assets Regulatory Authority (VARA), with expanded licensing requirements, capital adequacy standards, and consumer protection provisions for Virtual Asset Service Providers (VASPs). VARA’s full implementation of its rulebooks —covering custody, issuance, brokerage, and exchange services—is expected to be fully enforced across 2025. The FSRA’s June 2025 amendments following Consultation Paper 11/2024 introduced a refined virtual asset approval process, product intervention powers, capital/fee updates, and reiterating bans on privacy tokens and algorithmic stablecoins was a major development. Further guidance is expected on institutional market structure and retail access parameters.

In parallel, the UAE is enhancing its anti-money laundering (AML) regime through more stringent enforcement of travel rule requirements and real-time transaction monitoring, aligned with Financial Action Task Force (FATF) recommendations. The Central Bank of the UAE is also developing regulatory treatment for stablecoins and virtual payments, with proposed rules expected to address reserve management, redemption rights, and systemic risk oversight.

In the UAE, new fund formations focused on digital assets must comply with the broader financial regulatory framework, as there is currently no standalone regime specifically tailored for digital asset investment funds. If a fund invests in digital assets classified as securities, it falls under the jurisdiction of the Securities and Commodities Authority (SCA), which may require the fund to be structured as a Collective Investment Fund and adhere to licensing, disclosure, risk management, and investor protection rules. Fund managers must be licensed as financial services providers under SCA regulations, or under the Dubai Financial Services Authority (DFSA) in the DIFC or the Financial Services Regulatory Authority (FSRA) in ADGM, depending on their jurisdiction. For funds dealing in virtual assets that are not categorized as securities, oversight may fall under the Virtual Assets Regulatory Authority (VARA) in Dubai, which has established a licensing regime for asset management and investment services involving virtual assets. Even where digital assets are not deemed financial instruments, fund operators are still subject to strict anti-money laundering (AML) and counter-terrorism financing (CTF) compliance under UAE Federal Decree Law No. 20 of 2018, and may need to register or obtain approval depending on their activities.

Regulatory Framework

9. Restrictions or guidance on fund structures investing in digital assets, such as hedge funds, venture funds, or tokenized funds?

In the UAE, hedge funds, venture funds, and tokenized funds investing in digital assets are regulated under the existing financial framework for collective investment vehicles, as there is no dedicated structure exclusively for digital asset-focused funds. These funds are typically structured as Qualified Investor Funds (QIFs) or Exempt Funds and must be licensed by the Securities and Commodities Authority (SCA) or the relevant financial free zone regulators—namely, the Dubai Financial Services Authority (DFSA) in DIFC or the Financial Services Regulatory Authority (FSRA) in ADGM—depending on the jurisdiction and investor profile.

Such funds are usually classified as alternative investment funds (AIFs) and must be managed by licensed fund managers authorized to deal in digital assets. To reduce regulatory burdens, they often limit participation to professional or qualified investors, thereby avoiding retail fund obligations. Tokenized fund structures, where fund units are represented by blockchain-based tokens, are also subject to approval under the applicable digital asset frameworks established by VARA (in Dubai) or the free zone authorities, with specific rules on custody, technology infrastructure, and risk disclosure.

Fund managers must fulfill anti-money laundering (AML) and know-your-customer (KYC) obligations in accordance with UAE Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, and must register or be approved by the appropriate regulator based on their activity. The UAE’s regulatory framework continues to evolve to support innovation in fund structuring while ensuring financial integrity and investor protection.

Market Access and Licensing

1. Process for obtaining a license to operate as a digital asset business in UAE

2. Restrictions on foreign companies or individuals operating digital asset- related businesses?

In the UAE, licensing a digital asset business requires adherence to both federal and emirate-level regulatory frameworks, depending on the services offered and the classification of the digital assets involved. All Virtual Asset Service Providers (VASPs)— including firms engaged in the exchange, transfer, brokerage, or custody of virtual assets—must obtain a license from the appropriate regulatory authority. At the federal level, the Securities and Commodities Authority (SCA) oversees activities involving digital assets that are classified as securities, while the Dubai Virtual Assets Regulatory Authority (VARA) governs virtual asset businesses operating in Dubai (excluding DIFC). Licensing triggers full compliance with the UAE’s anti-money laundering (AML) and counter-terrorism financing (CTF) laws, particularly under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. These include obligations to implement robust KYC processes, ongoing transaction monitoring, and reporting of suspicious activities. If the business involves payment like functionalities—such as stablecoins or crypto-based remittances—it may fall under the regulatory scope of the Central Bank of the UAE, requiring additional approval and compliance with payment systems regulations.

Foreign companies or individuals operating digital asset-related businesses in the UAE must comply with the same regulatory requirements as local entities if they offer services to UAE residents or conduct activities within UAE jurisdiction. Any foreign Virtual Asset Service Provider (VASP) targeting users in the UAE—whether through a physical presence, online platform, or cross-border services—must obtain a license from the appropriate regulatory authority, such as the Securities and Commodities Authority (SCA) at the federal level or the Dubai Virtual Assets Regulatory Authority (VARA) within Dubai (excluding DIFC). Licensing triggers full compliance with the UAE’s anti-money laundering (AML) and counter-terrorism financing (CTF) laws under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, including implementation of KYC processes, transaction monitoring, and suspicious transaction reporting. If the foreign entity provides services involving digital assets classified as securities, payment tools, or e¬-money equivalents, it may also need additional authorization from the SCA or the Central Bank of the UAE.

Market Access and Licensing

3. What are the compliance obligations for licensed businesses, such as anti-money laundering (AML) and counter-terrorist financing (CTF)?

4. Is there a regulatory sandbox available for digital asset startups or innovative technologies?

Licensed digital asset businesses in the UAE are required to meet rigorous compliance obligations, particularly in relation to anti¬money laundering (AML) and counter¬terrorism financing (CTF), under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. All Virtual Asset Service Providers (VASPs) must be licensed by the relevant authority—such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), or the financial free zone regulators—and implement comprehensive AML compliance programs. These programs must include robust know-your-customer (KYC) procedures to verify the identities of customers and beneficial owners, continuous transaction monitoring for suspicious patterns, and mandatory reporting of suspicious transactions to the UAE Financial Intelligence Unit (FIU). Firms are also obligated to retain records in accordance with regulatory requirements, conduct regular staff training on AML/CTF policies, and undergo independent compliance audits to ensure sustained adherence to local and international standards.

The UAE offers structured regulatory sandbox environments that support digital asset startups and fintech innovation through various authorities. While there is no sandbox exclusively dedicated to digital assets, firms operating in blockchain, crypto, or virtual asset services may apply to broader innovation programs administered by the Central Bank of the UAE, the Abu Dhabi Global Market (ADGM), and the Dubai International Financial Centre (DIFC). These sandboxes allow eligible businesses to test products and services under tailored regulatory conditions, typically for a limited period and under close supervision. In ADGM, the RegLab program permits fintech firms—including those offering crypto¬related solutions—to operate in a controlled environment with temporary regulatory relief, while still ensuring adherence to core principles such as consumer protection, AML/KYC compliance, and risk management. Similarly, DIFC’s Innovation Testing Licence enables startups to test innovative financial services under oversight by the Dubai Financial Services Authority (DFSA).

Market Access and Licensing

5. Unique considerations to be taken into account for foreign fund managers seeking to establish digital asset funds in UAE

Foreign fund managers seeking to establish digital asset funds in the UAE must comply with the country’s regulatory framework, which varies by jurisdiction—federal, mainland, or financial free zones. If the fund is marketed to UAE investors or managed from within the UAE, the manager must obtain authorization from the appropriate regulatory authority. For funds involving digital assets classified as securities, approval from the Securities and Commodities Authority (SCA) is required. In Dubai, digital asset funds may fall under the Virtual Assets Regulatory Authority (VARA), which licenses fund managers and investment services involving virtual assets. In the financial free zones, foreign managers may establish or market funds through the Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM), subject to licensing by the Dubai Financial Services Authority (DFSA) or the Financial Services Regulatory Authority (FSRA), respectively. Funds investing in digital assets may be classified as Qualified Investor Funds (QIFs) or Exempt Funds, and must appoint an authorized fund manager with appropriate permissions to handle crypto-related instruments.

Marketing to UAE investors requires adherence to investor qualification rules— typically restricting access to professional or institutional investors—and clear disclosure obligations. All fund activities must comply with UAE anti-money laundering (AML) and know-your-customer (KYC) laws under Federal Decree Law No. 20 of 2018. If acting as a Virtual Asset Service Provider (VASP), managers may also be required to register and maintain compliance with specific AML/CTF frameworks relevant to the asset class and jurisdiction.

Security and Consumer Protection

1. How does UAE address security concerns, such as fraud, hacking, or asset theft?

2. What consumer protection measures are in place for users of digital assets

The UAE addresses digital asset security concerns—such as fraud, hacking, and asset misappropriation—through a comprehensive framework combining regulatory oversight, cybersecurity mandates, and strict enforcement protocols. Regulators including the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), and financial free zone authorities require licensed Virtual Asset Service Providers (VASPs) to implement robust risk management systems, secure custody infrastructure, and internal controls, particularly when offering services to the public or handling client funds. Under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, all VASPs must comply with stringent anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, including know-your-customer (KYC) procedures, transaction monitoring, and suspicious activity reporting to the UAE Financial Intelligence Unit (FIU). Regulatory frameworks also require incident response plans and operational safeguards to prevent breaches and data loss. Cybercrime and digital asset-related fraud are actively prosecuted by UAE law enforcement authorities, including the Cybercrimes Department and specialized economic crime units, often in collaboration with international bodies such as Interpol and FATF.

In the UAE, consumer protection for users of digital assets is enforced through a combination of existing financial regulations, anti-money laundering (AML) laws, and specific frameworks introduced by regulatory bodies such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), and financial free zone regulators like the DFSA (DIFC) and FSRA (ADGM). While there is no standalone consumer protection law exclusive to digital assets, multiple regulatory mechanisms serve to safeguard users. If a digital asset is classified as a security or financial product, it is subject to investor protection requirements under SCA rules, which include disclosure obligations, transparency on risks, suitability assessments, and conduct standards for intermediaries. VARA’s rulebooks also impose strict operational, custody, and disclosure standards on Virtual Asset Service Providers (VASPs) to ensure fair treatment of users and protection of client assets. All VASPs must comply with the UAE’s AML and counter-terrorism financing (CTF) laws under Federal Decree Law No. 20 of 2018, which mandate KYC procedures, customer identity verification, transaction monitoring, and reporting of suspicious activities to the UAE Financial Intelligence Unit (FIU). These rules help prevent fraud and misuse while increasing trust and security for consumers.

Security and Consumer Protection

3. Insurance requirements for businesses holding digital assets on behalf of customers

4. Additional consumer protection rules or safeguards specifically for investors in digital asset funds

In the UAE, there is currently no explicit national requirement mandating insurance coverage for digital asset businesses that hold customer assets. However, regulators such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), and financial free zone authorities (e.g., DFSA in DIFC, FSRA in ADGM) expect licensed Virtual Asset Service Providers (VASPs) to implement comprehensive risk mitigation strategies as part of their licensing and operational compliance obligations. Although insurance is not compulsory, obtaining coverage against risks such as cyberattacks, theft, fraud, and internal misconduct is increasingly regarded as a regulatory best practice— especially for custodial service providers safeguarding client funds. Regulators may assess whether firms have in place adequate internal controls, cybersecurity systems, and asset protection measures when evaluating license applications or conducting audits. VARA’s regulatory framework, in particular, places emphasis on safekeeping of client assets and may require evidence of operational resilience, which can include insurance coverage. Similarly, the SCA and Central Bank may evaluate the robustness of custodial arrangements for digital assets classified as securities or used in payment functions.

In the UAE, investors in digital asset funds are protected through existing financial and regulatory frameworks, particularly when the fund involves virtual assets classified as securities or is structured under regulated collective investment schemes. Fund managers must be licensed by the appropriate authority—such as the Securities and Commodities Authority (SCA), Dubai Virtual Assets Regulatory Authority (VARA), or financial free zone regulators like the DFSA (DIFC) and FSRA (ADGM)—and are subject to strict requirements on investor protection, transparency, and fiduciary duty.

Regulations mandate clear disclosures regarding investment risks, fees, fund structure, and potential conflicts of interest. Managers must adhere to fiduciary responsibilities and ensure fair treatment of investors. Comprehensive anti-money laundering (AML) and know-your-customer (KYC) procedures are also mandatory under Federal Decree Law No. 20 of 2018, ensuring investor eligibility and compliance with financial integrity standards. Safekeeping of digital assets must be handled by licensed custodians that meet regulatory standards for asset security, segregation, and operational resilience. If digital assets are classified as securities or fall under regulated virtual asset categories, custodians must be authorized and subject to oversight, with ongoing reporting obligations to both investors and regulators.

Blockchain and Smart Contracts

1. Are blockchain-based records legally recognized in UAE?

2. Legal considerations around the enforceability of smart contracts in UAE?

Yes, blockchain-based records are legally recognized in the UAE, with their admissibility and enforceability supported by national legislation and aligned with the country’s broader digital transformation initiatives. Under Federal Decree Law No. 46 of 2021 on Electronic Transactions and Trust Services, the UAE grants legal validity to electronic records and contracts— including those based on blockchain or distributed ledger technology (DLT)—as long as they meet specific integrity, authenticity, and reliability standards.

This legal framework enables blockchain records to be used in place of traditional documentation for various civil, commercial, and governmental purposes, including contracts, timestamping, and digital notarization. Public sector strategies like the Emirates Blockchain Strategy 2021 further support the adoption of blockchain for official and evidentiary uses, such as in land registries, licensing, and digital identity verification. In practice, blockchain is increasingly being explored for use in corporate governance, transaction verification, and regulatory compliance, especially in sectors like real estate, finance, and logistics. A

In the UAE, smart contracts are generally enforceable under existing civil law principles, provided they meet the core contractual requirements set out in the UAE Civil Transactions Law (Federal Law No. 5 of 1985). These requirements include mutual consent (offer and acceptance), a lawful object, and a clear intent to create binding legal obligations. The use of digital or blockchain-based mediums does not affect a contract’s enforceability as long as these legal elements are present. Legal recognition of smart contracts is supported by Federal Decree Law No. 46 of 2021 on Electronic Transactions and Trust Services, which affirms that electronic and automated systems—including those based on blockchain or distributed ledger technology (DLT)—can be used to create binding agreements and fulfil requirements for electronic signatures and timestamps. This law establishes that smart contracts have the same legal value as traditional contracts, provided they meet technical standards related to authenticity, integrity, and verifiability. Although no specific certification body like UAE’s AgID exists, UAE regulators are actively supporting blockchain integration across sectors such as finance, logistics, and government services. Smart contracts are already being adopted in areas like digital identity, automated payments, and trade finance.

Blockchain and Smart Contracts

3. Regulations governing the development and use of blockchain technology

4. How are blockchain technologies being leveraged in fund management for record-keeping, compliance, or automation?

In the UAE, there is no standalone regulation specifically governing blockchain technology itself; rather, blockchain applications are regulated based on their use case, particularly when they intersect with financial services, digital assets, or data protection. Regulatory oversight is determined by the function of the blockchain deployment and the type of assets or services involved. Authorities such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), the Central Bank of the UAE, and free zone regulators (DFSA in DIFC and FSRA in ADGM) are responsible for enforcing compliance when blockchain is used in trading, custody, payments, or investment services. For example, if a blockchain-based platform facilitates trading of tokenized securities or other regulated instruments, it must comply with financial market laws and obtain relevant licenses. If the platform involves money transmission or payment functionality, it may fall under the Central Bank’s oversight and must meet AML and KYC obligations under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. Blockchain as a technology is fully permitted and even encouraged under national initiatives like the Emirates Blockchain Strategy 2021, but its application within regulated sectors must align with existing legal frameworks.

In the UAE, blockchain technology is increasingly being integrated into fund management to enhance transparency, efficiency, and regulatory compliance. Fund managers are leveraging blockchain’s real time, tamper-proof ledger to streamline operations such as tracking investor ownership, capital inflows and outflows, redemptions, and net asset valuations (NAV), significantly reducing reliance on intermediaries and manual processes. This leads to improved accuracy, faster settlement, and operational cost savings. From a compliance standpoint, blockchain supports auditability and assists in fulfilling anti-money laundering (AML) and know-your- customer (KYC) obligations under Federal Decree Law No. 20 of 2018. Smart contracts are also being used to automate onboarding, verification, reporting, and other regulatory processes, helping to reduce risk and human error while maintaining regulatory consistency. Tokenization of fund units— where investors receive digital tokens representing their stake—enables seamless dividend distributions, real-time cap table management, and the potential for compliant secondary trading on licensed platforms. These features improve investor engagement and fund governance.

Cross Border International

Considerations

1. How UAE approaches cross-border transactions involving digital assets

2. Are there specific restrictions or reporting requirements for cross-border transfers of digital assets?

The UAE addresses cross-border digital asset transactions through a coordinated regulatory approach that combines national financial laws with international compliance standards. Foreign entities providing digital asset services to users in the UAE—whether through direct marketing, online platforms, or remote operations—must comply with local licensing requirements. This includes obtaining approval from the relevant authority, such as the Securities and Commodities Authority (SCA) at the federal level, the Dubai Virtual Assets Regulatory Authority (VARA) within Dubai, or financial free zone regulators like the DFSA (DIFC) and FSRA (ADGM), depending on the jurisdiction of service delivery. All cross-border service providers are subject to strict anti-money laundering (AML) and counter-terrorism financing (CTF) obligations under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019. These include mandatory know-your-customer (KYC) checks, ongoing transaction monitoring, and reporting of suspicious activities to the UAE Financial Intelligence Unit (FIU). If the digital assets involved are classified as securities or payment instruments, additional oversight may be triggered by the SCA or the Central Bank of the UAE. Moreover, all digital asset transactions—whether domestic or cross border—must comply with the UAE’s obligations under international sanctions regimes.

Yes, the UAE imposes specific restrictions and reporting requirements on cross-border transfers of digital assets, grounded in its anti-money laundering (AML), counter¬terrorism financing (CTF), and international sanctions frameworks. Under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, all Virtual Asset Service Providers (VASPs) operating in the UAE must implement comprehensive due diligence and risk-based AML/CTF procedures. These include verifying customer identities, monitoring cross-border transactions, and reporting suspicious activity to the UAE Financial Intelligence Unit (FIU). Cross-border digital asset transfers—particularly those involving high-risk jurisdictions or large sums —require enhanced scrutiny. The UAE has adopted measures aligned with the Financial Action Task Force (FATF) standards, including the “Travel Rule,” which mandates that originator and beneficiary information be collected and transmitted for virtual asset transfers exceeding AED 3,670 (approximately €1,000). This applies to transactions between VASPs, whether domestic or international. Furthermore, digital asset transactions must comply with the UAE’s strict sanctions enforcement policies.

Cross Border International

Considerations

3. How does UAE align with international regulatory frameworks, such as FATF guidelines?

4. Treaties or agreements with other jurisdictions facilitating cooperation on digital asset regulation

The UAE closely aligns with international regulatory standards, particularly the Financial Action Task Force (FATF) guidelines. As a member of the FATF and a jurisdiction committed to financial integrity, the UAE has embedded FATF recommendations into its national framework—especially regarding anti-money laundering (AML) and counter¬terrorism financing (CTF). Under Federal Decree Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019, all Virtual Asset Service Providers (VASPs) are subject to comprehensive AML/CTF compliance, including customer due diligence (CDD), enhanced due diligence for high-risk cases, transaction monitoring, and mandatory suspicious activity reporting to the UAE Financial Intelligence Unit (FIU). The UAE also supports implementation of the FATF Travel Rule. Regulatory authorities—including the Securities and Commodities Authority (SCA), Dubai Virtual Assets Regulatory Authority (VARA), and financial free zone regulators (DFSA and FSRA)—require VASPs to collect, transmit, and retain originator and beneficiary information for virtual asset transfers exceeding AED 3,670 (approximately €1,000), including for cross¬border transactions. This aligns with FATF’s Recommendation 16 and reinforces traceability and transparency in digital asset transfers.

The UAE does not currently have a standalone international treaty focused exclusively on digital asset regulation but actively operates within a network of bilateral and multilateral cooperation agreements, global regulatory forums, and international standards to support cross border oversight and enforcement. UAE regulatory bodies—including the Securities and Commodities Authority (SCA), Dubai Virtual Assets Regulatory Authority (VARA), the Central Bank of the UAE, and financial free zone regulators like the DFSA and FSRA— engage with international organizations such as the Financial Action Task Force (FATF), the International Organization of Securities Commissions (IOSCO), and the Global Financial Innovation Network (GFIN).

While the UAE is not part of the European Union, it maintains regulatory interoperability through its commitment to FATF guidelines, including those on virtual assets and virtual asset service providers (VASPs), and often aligns with frameworks like the EU’s Markets in Crypto-Assets Regulation (MiCA) and the Transfer of Funds Regulation (TFR) when structuring domestic policies. Through IOSCO membership and MoUs with international regulators, the UAE fosters cross-border information sharing, regulatory harmonization, and enforcement cooperation—particularly in cases involving digital assets that qualify as securities or

Cross Border International

Considerations

5. What considerations apply to cross-border digital asset funds, especially regarding taxation, investor protection, or regulatory compliance?

Cross-border digital asset funds operating in the UAE must comply with layered regulatory, tax, and investor protection requirements, especially when targeting UAE- based investors or conducting fund management activities within the country. From a regulatory standpoint, such funds must be authorized by the relevant authority depending on the jurisdiction—either the Securities and Commodities Authority (SCA) at the federal level, the Dubai Virtual Assets Regulatory Authority (VARA) in Dubai (excluding DIFC), or financial free zone regulators like the Dubai Financial Services Authority (DFSA) in DIFC and the Financial Services Regulatory Authority (FSRA) in ADGM.

If a foreign fund markets digital asset-based interests to UAE investors—especially if the underlying assets qualify as securities or virtual assets—it may be subject to approval requirements, investor qualification thresholds, and disclosure obligations. Funds involving tokenized units, trading platforms, or custody arrangements must meet applicable licensing, cybersecurity, and safekeeping standards under local rules. Access to retail investors is typically restricted unless full fund registration and disclosure processes are followed.

From a tax perspective, while the UAE does not impose personal income tax on investors, corporate tax may apply under Federal Decree-Law No. 47 of 2022 if fund operations or management entities are based in the UAE and earn qualifying income above the corporate tax threshold. Additionally, any VAT implications must be considered for fund-related services provided in the UAE.

Investor protection remains a core focus, with mandatory anti-money laundering (AML), know-your-customer (KYC), and transaction monitoring requirements applicable under Federal Decree Law No. 20 of 2018. Funds must also ensure transparent communication of risks, fees, and investment terms to maintain compliance and avoid regulatory scrutiny when operating across UAE borders.

Investment and Fundraising

1. Regulations that govern initial coin offerings (ICOs), security token offerings (STOs), or other digital asset fundraising methods

Restrictions on advertising or marketing digital asset investment opportunities?

In the UAE, Initial Coin Offerings (ICOs), Security Token Offerings (STOs), and other digital asset fundraising methods are regulated under existing financial and virtual asset frameworks, depending on the classification and function of the tokens offered. If a token qualifies as a security— based on its economic substance and investor rights—it falls under the jurisdiction of the Securities and Commodities Authority (SCA), which regulates securities offerings under the UAE’s federal securities laws. STOs are treated similarly to traditional securities and must comply with disclosure, investor protection, and licensing requirements, including the potential need to publish a prospectus and obtain prior SCA approval.

For tokens that do not qualify as securities— such as utility tokens or other virtual assets —the Dubai Virtual Assets Regulatory Authority (VARA) may oversee the offering, particularly when fundraising targets users in Dubai (excluding DIFC). VARA’s regulatory framework includes requirements for token issuance, marketing, whitepaper disclosures, and anti-money laundering (AML) compliance. Platforms facilitating ICOs, STOs, or token sales may also need to be licensed as Virtual Asset Service Providers (VASPs) or as financial service firms, depending on the nature of their activity.

In the UAE, marketing digital asset investment opportunities is subject to strict regulatory oversight, especially when the assets are classified as securities or regulated virtual assets. If the offering involves tokens that qualify as securities, all marketing and promotional activities fall under the authority of the Securities and Commodities Authority (SCA) and must comply with UAE securities laws. This includes transparency, fair presentation, and prior approval of prospectuses or marketing materials, particularly when targeting retail investors. For virtual assets that are not considered securities, the Dubai Virtual Assets Regulatory Authority (VARA) governs marketing activities within Dubai (excluding DIFC), with detailed guidelines on permissible promotional content. VARA requires all marketing communications—including social media posts, advertisements, and whitepapers—to be clear, factual, and include prominent risk disclosures. Exaggerated claims regarding returns, false endorsements, or misrepresentations of regulatory approvals are prohibited and may lead to enforcement actions.

Investment and Fundraising

How are digital asset investment funds regulated in UAE

4. Are venture capital and institutional investments in digital assets subject to additional scrutiny or regulations?

In the UAE, digital asset investment funds are regulated under the existing financial and virtual asset frameworks, depending on the classification of the underlying assets. If the fund invests in digital assets considered securities, it falls under the jurisdiction of the Securities and Commodities Authority (SCA) and is treated similarly to a traditional collective investment fund. Fund managers must be licensed and are subject to transparency, risk management, capital adequacy, and investor protection requirements, particularly when targeting retail investors or publicly marketing fund units. For funds structured around virtual assets that are not securities—such as cryptocurrencies or utility tokens—regulation is governed by the Dubai Virtual Assets Regulatory Authority (VARA) within Dubai (excluding DIFC), or by free zone regulators such as the Dubai Financial Services Authority (DFSA) in DIFC and the Financial Services Regulatory Authority (FSRA) in ADGM. These regulators require fund managers to be licensed, maintain operational resilience, and comply with investor disclosure standards. Funds are typically restricted to qualified or professional investors unless full public offering approval is obtained.

Yes, in the UAE, venture capital (VC) and institutional investments in digital assets are subject to regulatory oversight, particularly when the assets are classified as securities or fall under the definition of regulated virtual assets. If the investment involves security tokens or tokenized assets, the activity may fall under the jurisdiction of the Securities and Commodities Authority (SCA), which enforces disclosure, licensing, and investor protection requirements in accordance with federal securities laws. For digital assets not classified as securities, such as cryptocurrencies or utility tokens, regulatory oversight depends on the jurisdiction. In Dubai (excluding DIFC), the Dubai Virtual Assets Regulatory Authority (VARA) governs investments and activities involving virtual assets. In financial free zones like DIFC and ADGM, oversight is provided by the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA), respectively. These authorities impose licensing requirements on platforms and fund managers facilitating token issuance, trading, or custody. VC and institutional investors must also comply with robust anti-money laundering (AML) and know-your-customer (KYC) requirements under Federal Decree Law No. 20 of 2018.

Investment and Fundraising

Are there any incentives or specific frameworks encouraging the formation of tokenized investment funds?

6. What limitations or opportunities exist for fundraising through decentralized autonomous organizations (DAOs)?

In the UAE, there are currently no formal national incentives or a dedicated regulatory framework specifically designed to promote the formation of tokenized investment funds. However, tokenized funds—investment vehicles that issue ownership interests as blockchain-based tokens—are permitted to operate within the existing regulatory environment, provided they comply with the relevant financial and virtual asset laws. If the tokens represent securities or ownership in a fund, such structures are subject to the Securities and Commodities Authority (SCA) regulations and may be treated as collective investment funds or alternative investment vehicles. These require proper licensing, investor disclosures, and adherence to risk management and custody standards. In Dubai, such funds may also fall under the jurisdiction of the Dubai Virtual Assets Regulatory Authority (VARA) if they involve virtual assets that are not securities. In DIFC and ADGM, tokenized funds can be established under the regulatory supervision of the DFSA and FSRA, respectively, and must comply with fund structuring and offering rules applicable to Qualified Investor Funds (QIFs) or Exempt Funds.

In the UAE, Decentralized Autonomous Organizations (DAOs) currently exist within a regulatory gray area, with limited explicit recognition but increasing scrutiny— especially when DAOs raise funds through token offerings or digital asset sales. If a DAO issues tokens that function as securities or investment contracts—such as offering profit-sharing or voting rights tied to economic value—such activity may fall under the jurisdiction of the Securities and Commodities Authority (SCA), triggering compliance with securities laws, including disclosure requirements, prospectus approval (unless exempt), and restrictions on retail offerings. DAOs conducting virtual asset-related activities—such as token issuance, trading, or secondary market facilitation—within Dubai may fall under the Dubai Virtual Assets Regulatory Authority (VARA), which imposes licensing requirements on Virtual Asset Service Providers (VASPs), including those involved in issuance, brokerage, exchange, and custody. In financial free zones such as DIFC and ADGM, DAOs interacting with investors or providing financial services may also require approval or authorization from the Dubai Financial Services Authority (DFSA) or the Financial Services Regulatory Authority (FSRA).

Taxation

1. How are gains or losses from digital assets treated under UAE tax laws?

2. Specific reporting obligations for digital asset transactions or holdings

In the UAE, gains or losses from digital assets are not currently subject to personal income tax, as the country does not impose income tax on individuals. This means that capital gains from the sale, exchange, or appreciation of cryptocurrencies and other digital assets held by individuals are generally tax-exempt. There is also no wealth tax, and individuals are not required to report digital asset holdings for personal tax purposes. However, corporate tax obligations may arise under Federal Decree¬-Law No. 47 of 2022 if digital asset activities are conducted through a business entity. Businesses engaging in trading, mining, staking, or offering virtual asset services may be subject to the UAE’s 9% corporate tax if their annual taxable income exceeds the AED 375,000 threshold. In such cases, digital assets received through mining, staking, or yield-generating activities would be treated as business income and included in the taxable profit base, with the fair market value at the time of receipt forming the cost basis for future disposals. While there is currently no mandatory tax reporting regime for individuals holding digital assets, businesses and Virtual Asset Service Providers (VASPs) must maintain detailed records and comply with anti-money laundering (AML) and counter¬terrorism financing (CTF) requirements under Federal Decree Law No. 20 of 2018.

In the UAE, there is currently no requirement for individual taxpayers to report digital asset holdings or transactions as part of a personal income tax return, as the UAE does not levy personal income tax or wealth tax. Individuals holding or transacting in cryptocurrencies or other digital assets are not subject to income tax on gains, and there is no formal disclosure obligation for private holdings, whether on local or foreign platforms. However, businesses and entities engaging in digital asset-related activities—such as trading, mining, staking, or accepting crypto as payment—must maintain proper accounting records and may be subject to corporate tax under Federal Decree-Law No. 47 of 2022. Digital assets received as income must be recorded at their fair market value at the time of receipt and included in taxable profits if the business exceeds the AED 375,000 annual threshold. That recorded value becomes the cost basis for future disposals or exchanges.

Taxation

3. Tax incentives for businesses or investors in the digital assets sector

4. How are investment funds with digital assets taxed, particularly regarding fund-level gains and distributions to investors?

In the UAE, there are currently no specific tax incentives tailored exclusively to businesses or investors in the digital asset sector. However, the UAE’s overall tax environment is highly favorable for digital asset participants, due to its absence of personal income tax and the relatively low corporate tax rate of 9%, which only applies if annual taxable business income exceeds AED 375,000. Although there are no digital asset–specific tax reliefs, certain general incentives and regulatory advantages may benefit businesses involved in blockchain development, crypto services, or infrastructure deployment. Companies operating in designated free zones—such as Dubai Multi Commodities Centre (DMCC), Dubai International Financial Centre (DIFC), or Abu Dhabi Global Market (ADGM)—may qualify for benefits such as full foreign ownership, 0% corporate tax (subject to qualifying activity requirements), customs duty exemptions, streamlined licensing for fintech and blockchain companies.

Entities engaged in blockchain R&D or software development for digital asset platforms may also access innovation support programs or incubators sponsored by free zone authorities or government initiatives like the UAE’s Artificial Intelligence Office or Dubai Future Foundation.

In the UAE, investment funds holding digital assets are not subject to tax at the fund level, provided they meet certain conditions, such as being structured within a free zone or qualifying as exempt under Federal Decree-Law No. 47 of 2022 on Corporate Tax. Funds established in financial free zones like DIFC or ADGM typically benefit from 0% corporate tax, assuming they are managed by licensed fund managers and meet the regulatory criteria for investment funds or Qualified Investor Funds (QIFs). For UAE-based investors, there is no personal income tax or capital gains tax on distributions or redemptions from digital asset funds. As such, individuals are not taxed on capital gains, dividends, or other income arising from fund investments in cryptocurrencies, tokenized assets, or blockchain-based financial instruments. If a fund is actively engaged in staking, mining, or yield-generating strategies, any income earned may be taxed at the fund level if the fund is deemed to be conducting a commercial business and does not qualify for exempt status.

Enforcement and Dispute Resolution

1. How disputes involving digital assets are typically resolved

2. Precedents or notable cases involving digital assets in UAE

In the UAE, disputes involving digital assets are typically resolved through a combination of civil litigation in local courts, enforcement actions by regulatory authorities, or private arbitration—depending on the nature of the dispute and the contractual terms agreed upon by the parties. The DIFC established the Digital Economy Court (DEC) in 2021. Pursuant to the new Part 58 of the DIFC Court Rules (RDC), the DEC is a specialized division for complex digital economy disputes, empowered to issue orders directed at digital assets and cryptographic credentials and to conduct fully remote proceedings with electronic service, including by email and social media, supported by smart forms and AI-enabled case management. Civil disputes related to breach of contract, misrepresentation, loss of digital assets, or custody issues are adjudicated under UAE civil law (Federal Law No. 5 of 1985) or in financial free zone courts (DIFC or ADGM) if the parties fall within their jurisdiction. If the dispute involves regulatory violations—such as unlicensed virtual asset activity, investor fraud, or market manipulation—regulators such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), or the financial free zone regulators (DFSA, FSRA) may initiate enforcement actions, impose administrative penalties, or refer cases for criminal prosecution under the UAE Penal Code or anti-money laundering laws (Federal Decree Law No. 20 of 2018). Many digital asset service providers operating in the UAE include arbitration clauses in their terms of service. Disputes may be referred to local arbitration centers such as the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), or international bodies such as the ICC or LCIA.

DIFC Court of Appeal judgment (Gate Mena DMCC (Huobi OTC DMCC) v Tabarak Investment Capital Limited & Christian Thurner (13 June 2024)) is an important DIFC decision on the legal status of digital assets, particularly Bitcoin, and the obligations of parties involved in their custody and transfer. The case arose from a failed over-the-counter (OTC) Bitcoin transaction, where the digital assets were stolen during the process, and the parties disputed who should bear the loss.

The DIFC Court provided a detailed analysis of the nature of digital assets under both common law and the DIFC’s statutory framework. The Court recognized that the legal understanding of digital assets has evolved rapidly, referencing international developments, including the UK Law Commission’s reports and the UK Jurisdiction Taskforce’s legal statement on crypto-assets.

The DIFC Court affirmed that Bitcoin and similar crypto-assets are a form of property. It adopted the reasoning from the English case AA v Unknown Persons [2019] EWHC 3556 (Comm), which held that crypto-assets, while not fitting neatly into traditional categories of property (choses in possession or in action), are nonetheless property capable of being owned and transferred. The DIFC Court noted that the DIFC’s Personal Property Law defines property broadly enough to encompass digital assets, as “anything which is capable of being owned and transferred.”

A key legal development in the judgment is the recognition that, for digital assets, the concept of “control” is more appropriate than “possession.” The DIFC Court drew on the Law Commission’s recommendation that legal principles should develop around the notion of control, which better reflects the technological realities of digital assets. Control, in this context, refers to the ability to access and transfer the asset, typically through knowledge of the private key.

The DIFC Court also addressed the legal relationships that can arise in the context of digital asset custody. It considered whether a custodian or intermediary could be a bailee of digital assets, given that physical possession is not possible. The DIFC Court suggested that under DIFC law, which codifies much of the common law, the definition of bailment could extend to factual control of digital assets, such as through the delivery of a private key, even if physical possession is not possible.

In Dubai Court of Appeal Judgment No. 31 of 2024 dated 6 February 2024, the Dubai Court of Appeal addressed several important legal issues regarding digital assets and evidence in civil proceedings. The Court recognized the validity of digital asset transactions and the enforceability of agreements relating to such assets, provided that the transactions are supported by sufficient evidence.

In Ras Al Khaimah Court of Appeal judgment 898, 900 of 2018, the court adjudicated a dispute over a cryptocurrency (bitcoin) investment partnership. The case arose after the Claimant invested USD 300,000 for a 25% share in a bitcoin mining operation, with the expectation of receiving profits from the mining activities. The Public Prosecution also became involved, alleging misappropriation and breach of trust by the Defendant.

The court clarified that, in this case, the contractual terms governing a bitcoin investment partnership were enforceable, and the parties were held to their agreement. The court found no criminal wrongdoing in the management or distribution of the investment, and the civil claim for damages was also dismissed. The decision provides a clear example of how UAE courts may approach disputes involving cryptocurrency investments, focusing on the specific terms of the contract and the actual conduct of the parties.

International rulings such as SEC v. Ripple Labs or SEC v. Terraform Labs, also serve as important reference points for UAE regulators— including the Securities and Commodities Authority (SCA) and the Dubai Virtual Assets Regulatory Authority (VARA)—as they refine their approach to digital asset classification and enforcement. Under the UAE’s regulatory framework, the classification of a digital asset as a security or virtual asset depends on its underlying characteristics, economic purpose, and the rights it confers to investors —particularly if the asset reflects features of an investment contract or profit-sharing mechanism. This approach mirrors key considerations from the Ripple case, which emphasized how the method of token distribution and marketing influences whether an asset falls under securities law.

The UAE is likely to follow a functional and substance-over-form analysis, consistent with global standards such as those promoted by IOSCO and FATF. Regulators distinguish between private token placements, institutional offerings, and retail-facing sales, applying stricter requirements—including whitepaper disclosures, prospectus-style filings, and licensing—where public solicitation or investment expectations are evident.

Enforcement and Dispute Resolution

3. What penalties or enforcement actions can regulatory authorities impose for non-compliance?

4. Are there special considerations or precedents regarding disputes involving fund managers or investors in digital asset funds?

In the UAE, regulatory authorities—including the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), the Central Bank of the UAE, and, where applicable, judicial authorities—have broad powers to impose penalties and enforcement actions for non¬compliance in the digital asset sector.

SCA can issue administrative fines, suspend or cancel licenses, and initiate legal proceedings against entities conducting unauthorized activities—such as issuing tokens that qualify as securities or offering investment services without approval. It also has authority to halt public offerings, impose marketing bans, and publish warnings to protect investors. VARA, which regulates virtual asset activities in Dubai (excluding DIFC), may enforce compliance through penalties, operational suspensions, license revocation, and the restriction of services for breaches of its rulebooks. This includes failures in licensing, custodial arrangements, or disclosure obligations, particularly where retail investors are involved. The Central Bank of the UAE oversees AML/CTF compliance and may impose financial penalties, issue corrective directives, or limit operations for firms that violate obligations under Federal Decree Law No. 20 of 2018.

In the UAE, disputes between fund managers and investors in digital asset funds present complex legal and regulatory challenges, primarily due to the evolving classification of virtual assets and the regulatory responsibilities imposed on fund operators. Key points of dispute often include the valuation of digital assets, the security and legality of custody arrangements, and the adequacy of risk disclosures, especially when the fund is exposed to staking, DeFi protocols, or illiquid tokens. Disputes often centre on who had “control” over the digital assets, especially in cases of loss, theft, or mismanagement. The legal relationship—whether trust, bailment, or contractual custody—determines the duties and liabilities of fund managers. Courts are moving toward recognizing “factual control” (e.g., access to private keys) as analogous to possession for digital assets.

When fund managers fail to clearly disclose the regulatory risks, jurisdictional uncertainties, or technical vulnerabilities related to specific digital asset strategies, investors may raise claims of misrepresentation, breach of fiduciary duty, or non-compliance with regulatory requirements. Disputes also arise in cases where fund managers promote offerings that involve unlicensed issuance or exposure to digital assets that may be reclassified as securities, triggering oversight by the Securities and Commodities Authority (SCA) or Dubai Virtual Assets Regulatory Authority (VARA).

Opportunities and Challenges

1. What are the primary benefits of choosing UAE for digital asset businesses or activities?

2. Are there specific challenges or risks associated with operating in UAE?

The primary benefits of operating digital asset businesses or activities in the UAE include a favorable regulatory environment, tax efficiency, strategic geographic positioning, and dedicated digital asset authorities that support innovation and institutional adoption. The UAE’s multi- jurisdictional structure offers regulatory flexibility, with specialized frameworks provided by the Securities and Commodities Authority (SCA) at the federal level, Dubai Virtual Assets Regulatory Authority (VARA) in Dubai, and independent regulators in financial free zones such as DIFC (DFSA) and ADGM (FSRA). The UAE’s zero personal income tax, competitive 9% corporate tax (with generous thresholds), and absence of capital gains tax for individuals make it highly attractive for digital asset entrepreneurs and investors. Businesses in approved free zones also benefit from full foreign ownership, 100% repatriation of profits, and customs duty exemptions. The UAE is internationally recognized for its proactive regulatory stance on virtual assets, offering clear licensing paths for exchanges, custodians, brokers, and token issuers. Regulatory sandboxes and phased licensing programs—especially under VARA and the FSRA—enable controlled innovation and faster time-to-market for blockchain solutions.

Operating a digital asset business in the UAE presents several challenges and regulatory risks, primarily due to the jurisdictional complexity, evolving compliance expectations, and the rapid pace of regulatory development. One key challenge is determining the correct regulatory authority —SCA, VARA, DFSA (DIFC), or FSRA (ADGM)— as oversight varies depending on the location, type of digital asset, and business activity. Misclassification of assets (e.g., whether a token is a security, utility, or stablecoin) can expose businesses to licensing risks, misaligned compliance efforts, and potential enforcement. While the UAE has made significant progress in establishing clear rules, regulatory fragmentation across jurisdictions may require entities to seek multiple approvals or navigate different legal standards. Businesses operating in or targeting Dubai, for example, must comply with VARA’s comprehensive rulebooks, which include specific requirements for token issuance, marketing, custody, and exchange services. Entities that fail to meet these obligations may face license revocation, operational bans, or financial penalties. Another challenge is the stringent AML/KYC compliance required under Federal Decree Law No. 20 of 2018, especially with the UAE’s strong focus on FATF alignment.

Opportunities and Challenges

3. How does public perception or government policy impact the digital assets market in UAE?

Are there incentives or grants available to encourage blockchain or digital asset innovation?

In the UAE, public perception and government policy are central to shaping the digital assets market, driving both regulatory development and institutional adoption. The UAE government has taken a proactive and innovation-driven approach, positioning the country as a global hub for virtual assets while emphasizing robust regulatory oversight, financial stability, and compliance with international standards like those set by FATF. Unlike enforcement-heavy jurisdictions, the UAE has focused on building clear, forward-looking frameworks through authorities such as the Dubai Virtual Assets Regulatory Authority (VARA) and the Securities and Commodities Authority (SCA). These bodies are working to create a transparent, compliant ecosystem that fosters both investment and innovation, especially in emerging areas like tokenization, metaverse applications, and Web3 infrastructure. Public perception of digital assets in the UAE is generally positive and forward-leaning, especially among younger demographics, tech entrepreneurs, and institutional investors. Widespread government initiatives—such as the Emirates Blockchain Strategy, Dubai Metaverse Strategy, and R&D support for AI and DLT projects—have enhanced confidence in the sector and signaled long-term policy support.

In the UAE, there are currently no blockchain- or digital asset-specific national grant programs, but businesses operating in these sectors can access broad government support mechanisms and innovation-focused incentives through various free zones, strategic initiatives, and public-private partnerships. The UAE’s approach emphasizes regulatory enablement, infrastructure support, and startup acceleration rather than direct financial grants. Key national strategies—such as the UAE Blockchain Strategy 2021, the UAE Digital Economy Strategy, and Dubai’s Metaverse Strategy—include blockchain as a priority area for transformation and investment. These frameworks facilitate access to regulatory sandboxes, licensing support, and pilot project opportunities in government sectors like finance, logistics, and digital identity. Free zones such as Dubai Multi Commodities Centre (DMCC), Dubai International Financial Centre (DIFC), and Abu Dhabi Global Market (ADGM) offer incentives for blockchain startups, including: reduced or waived setup and licensing fees, access to accelerators and venture capital networks, office space, R&D facilities, and mentorship programs, fast-track regulatory pathways via innovation testing licenses or digital asset-specific frameworks.

Opportunities and Challenges

5. Are there government programs or private initiatives supporting the development of digital asset funds or blockchain-based investment vehicles?

In the UAE, there are currently no dedicated national government programs specifically aimed at supporting the development of digital asset funds or blockchain-based investment vehicles. However, the sector is supported indirectly through a combination of progressive regulatory frameworks, innovation-focused free zone policies, and broader digital economy strategies. While the UAE has not established a separate legal structure for tokenized investment funds, existing fund categories such as Qualified Investor Funds (QIFs) or Exempt Funds— particularly within the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM)—can incorporate digital assets, provided they comply with fund licensing, custody, and disclosure requirements.

Fund managers engaged in blockchain- related activity may also benefit from innovation support through regulatory sandboxes, streamlined licensing for fintech entities, and initiatives like the UAE Blockchain Strategy or the Dubai Future Foundation’s accelerator programs. These frameworks allow for experimentation with smart contracts, token issuance, and decentralized asset management under controlled conditions. While there are no direct grants or tax credits like those seen in some European countries, businesses can benefit from the UAE’s zero income tax regime, access to venture capital networks, and simplified setup procedures in free zones.

Furthermore, regulatory bodies such as the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), and the financial free zone regulators are actively working to expand legal clarity around custody, tokenization, fund structures, and digital asset risk management. As these frameworks mature, they are expected to create a supportive environment for the formalization and growth of blockchain-based investment vehicles in the UAE.

Emerging Trends

1. How is UAE addressing trends such as central bank digital currencies (CBDCs)?

2. Are there specific areas of growth or innovation in the digital assets sector (e.g., tokenized real estate, gaming, metaverse applications)?

The UAE is actively developing its own central bank digital currency (CBDC), known as the Digital Dirham, as part of its broader digital transformation and financial innovation strategy. Unlike UAE, which participates in a Eurozone-wide initiative, the UAE is pursuing an independent, national CBDC through the Central Bank of the UAE (CBUAE). The Digital Dirham forms a central pillar of the CBUAE’s Financial Infrastructure Transformation (FIT) Programme, launched in 2023, which aims to enhance the efficiency, security, and competitiveness of the country’s payment ecosystem. The UAE has already entered the implementation phase of its CBDC strategy. In early 2023, the CBUAE completed a proof-of-concept for cross¬border CBDC transactions in partnership with the Hong Kong Monetary Authority, the Bank of Thailand, and the Digital Currency Institute of the People’s Bank of China, under the mBridge project. This initiative demonstrated the potential of CBDCs for faster, cheaper, and more transparent cross border settlements. In parallel, the UAE is exploring domestic CBDC use cases for retail and wholesale payments to modernize interbank transactions and improve financial inclusion.

In the UAE, the tokenization of real estate assets is gaining significant momentum, supported by government-led digital transformation strategies and a generally favorable regulatory environment. Through blockchain-based tokens that represent fractional ownership in real estate, tokenization enables greater market accessibility, improves liquidity, and simplifies property transfer processes. Several projects in Dubai and Abu Dhabi have already begun implementing tokenized real estate models, often through regulated platforms operating within free zones such as DIFC and ADGM. While the UAE has not introduced standalone legislation specific to real estate tokenization, these activities fall under the purview of existing property, financial services, and anti-money laundering regulations, depending on the structure of the offering and the rights attached to the tokens. If the tokens confer investment returns or rental income, they may be classified as securities, triggering oversight by the Securities and Commodities Authority (SCA) or free zone regulators. Blockchain based gaming, including play-to-earn (P2E) models, is also expanding in the UAE, particularly among younger demographics and Web3 developers.

Emerging Trends

3. How is artificial intelligence (AI) being integrated into blockchain or digital asset initiatives in UAE?

4. What trends are emerging around digital asset fund management, such as tokenized shares, AI-driven strategies, or decentralized fund structures?

In the UAE, artificial intelligence (AI) is increasingly being integrated into blockchain and digital asset ecosystems to enhance operational performance, automate compliance, and support market innovation. AI plays a central role in digital asset trading platforms across the region, where it is used for algorithmic execution, sentiment analysis, market forecasting, and anomaly detection. UAE-based fintech firms and virtual asset service providers (VASPs) are leveraging AI to enhance trade precision, detect market manipulation, and optimize execution across centralized and decentralized exchanges. In the DeFi space, AI is being applied to optimize yield farming strategies, monitor liquidity pool dynamics, and assess smart contract risks in real time. AI-powered models are also assisting governance protocols by simulating market scenarios and recommending protocol adjustments based on user behavior and projected outcomes. These tools are valuable for improving transparency, stability, and automated decision-making in decentralized ecosystems. From a compliance perspective, AI is instrumental in strengthening anti¬money laundering (AML) and know-your- customer (KYC) systems in line with Federal Decree Law No. 20 of 2018.

Emerging trends in digital asset fund management in the UAE reflect a strong shift toward tokenization, AI-driven strategies, and experimentation with decentralized governance, all within the framework of an evolving and innovation-friendly regulatory landscape. Tokenized fund units are gaining popularity for enabling fractional ownership, improving liquidity, and automating processes such as investor onboarding, dividend distribution, and cap table management through smart contracts. These structures must comply with the UAE’s financial regulations, particularly those enforced by the Securities and Commodities Authority (SCA), Dubai Virtual Assets Regulatory Authority (VARA), and free zone regulators like the DFSA and FSRA. Fund managers in the UAE are increasingly incorporating AI and machine learning to enhance investment decision-making, automate trade execution, and assess market sentiment. These tools are especially valuable in managing volatility across crypto markets and optimizing exposure to DeFi protocols, tokenized assets, and real-time data streams. AI is also being used in compliance systems for risk scoring, transaction monitoring, and fraud detection, in line with AML obligations under Federal Decree Law No. 20 of 2018.

Conclusion

Over the next 5–10 years, the UAE is expected to solidify its position as a leading global hub for digital asset innovation, supported by a proactive regulatory approach, expanding infrastructure, and deep institutional engagement. With comprehensive frameworks already in place through the Securities and Commodities Authority (SCA), Dubai Virtual Assets Regulatory Authority (VARA), and free zone regulators like the DFSA and FSRA, the UAE is moving swiftly toward full-scale implementation of policies governing token issuance, custody, trading, and investment management.
Key areas of development will include the regulation and adoption of tokenized financial instruments, stablecoins, and decentralized finance (DeFi) platforms, along with the rollout of the Digital Dirham—a central bank digital currency (CBDC) led by the Central Bank of the UAE. These developments will be underpinned by the integration of emerging technologies such as artificial intelligence (AI), smart contracts, and blockchain interoperability, enabling real-time compliance, automated governance, and risk-managed DeFi infrastructure.
The UAE is also aligning with global standards from FATF and other international bodies, which will influence enhanced tax transparency, travel rule implementation, and cross-border supervision of virtual asset service providers (VASPs). While there is no personal income tax, corporate tax compliance and AML enforcement will become increasingly critical for businesses as the ecosystem matures.
For digital asset firms, the UAE offers a competitive advantage through innovation friendly licensing regimes, 0% personal income tax, full foreign ownership in designated zones, and access to deep capital pools and institutional partnerships. Government strategies like the Emirates Blockchain Strategy and the UAE Digital Economy Strategy further support long-term growth in tokenization, digital finance, and Web3 technologies.
Overall, the UAE is well-positioned to drive the next phase of global digital asset adoption, especially for firms that prioritize regulatory engagement, operational resilience, and technology-driven scalability.

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m.davis@tamimi.com

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Digital asset laws and regulations – Comparative analysis and Jurisdiction insights

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