The Middle East region is investing significantly in becoming a hub for digital assets and the broader web3 ecosystem. This investment has resulted in the Middle East having the fastest-growing volume of crypto transactions compared to any other region globally. The United Arab Emirates (UAE), with Dubai and Abu Dhabi as the focal points, is a key driver of this growth. The UAE’s share in the global crypto market surged by 500% between July 2020 and June 2021, reaching over US$25 billion in transaction value. This growth has positioned the UAE as a key player in the digital asset space [1].​​

 

In the dynamic world of digital assets, the Middle East has emerged as a pivotal player, unveiling groundbreaking regulatory frameworks that are setting new standards for the industry. This shift signals a transformative phase in the region’s financial landscape, as governments and financial authorities are actively shaping policies to govern the burgeoning digital asset market.

 

The Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) have both introduced virtual asset-related regulations within the economic free zones of Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) respectively, marking a significant step in the UAE’s approach to managing digital finance. The Virtual Assets Regulatory Authority (VARA), a financial services regulator established in Dubai in 2022, plays a crucial role in regulating virtual asset-related financial activities within the emirate​​ outside of DIFC [2] .

 

DIFC has further proposed a groundbreaking Digital Assets Law, the first-of-its-kind in the region [3]. This new legislation, alongside amendments to existing laws, aims to cater to the growing requirements of digital assets in the Middle East, Africa, and South Asia (MEASA) region [4]​​. Simultaneously, the UAE Securities and Commodities Authority (SCA) has introduced new regulations for Virtual Assets Service Providers (VASPs), reflecting the federal-level commitment to overseeing the digital asset space​​ [5].

 

Another noteworthy development in the region is the introduction of the Distributed Ledger Technology (DLT) Foundations Regulations 2023 by Abu Dhabi Global Market (ADGM). This represents a significant milestone not only for the Middle East but also for the international digital assets regulatory landscape [6]​​.

 

Drawing parallels to the Silicon Valley boom from 2001 to 2005, the UAE boasts three critical ingredients that are catalyzing its rise as a blockchain hub:

 

  • Talented Workforce: The UAE has attracted a pool of brilliant talent in the blockchain space. There’s a burgeoning community of developers, entrepreneurs, and tech innovators who are establishing the region as a knowledge-based economy.

 

  • Venture Capital and Funding: Just as in the early days of Silicon Valley, there is a robust availability of capital in the UAE. Both public and private investment flows into blockchain initiatives, indicating strong confidence in the technology’s future and its applications in the region.

 

  • Enabling Regulation: Perhaps most significantly, the UAE stands out for its progressive regulatory stance on blockchain and cryptocurrency. Unlike the complex and sometimes restrictive frameworks in some other jurisdictions, such as the US, the UAE has crafted a regulatory environment that fosters rapid development and innovation. Regulators are seen as partners rather than obstacles, engaging in open dialogue with companies to shape policies that support growth and evolution in the blockchain sector.


The UAE is actively fostering a digital economy, aligning with its Digital National Economy strategy. The country is investing heavily in digital innovation, evidenced by initiatives such as ADGM’s Hub71+ Digital Assets dedicating $2 billion to Web3 businesses [7], Dubai’s strategy to become a hub for 1,000 blockchain and metaverse companies, over 500 crypto startups in DMCC, and the recent “Digital Oasis” project in Ras al Khaimah [8].

The key regulators & timeline

 

Key regulators that have issued crypto asset regulations include the Securities and Commodities Authority (SCA) [9] for onshore UAE, Virtual Assets Regulatory Authority (VARA) for Dubai excluding the Dubai International Financial Centre (DIFC), Dubai Financial Services Authority (DFSA) for DIFC, and Financial Services Regulatory Authority (FSRA) for Abu Dhabi Global Market (ADGM) [10]

 

The diverse regulations reflect UAE’s commitment to becoming a leading digital and crypto-friendly economy while ensuring robust regulatory oversight. The evolution of the regulatory framework for cryptocurrencies and Virtual Assets (VAs) can be traced as follows [11]:

 

  • ADGM’s FSRA: Pioneered the regional regulatory landscape for crypto, Virtual Assets (VAs), and Digital Securities with guidance established in June 2018 and ICO guidance in October 2017.

 

  • DIFC’s DFSA: Implemented its Crypto Token regime in November 2022, following the establishment of an Investment Token framework in October 2021. In November 2023, XRP was recognised as the fourth crypto token under this framework. 

 

  • Onshore UAE (SCA): Initiated crypto-related regulations in November 2020 with Decision No. (23/RM) outlining the treatment of various token types and regulations for Crypto Asset Exchanges and other Virtual Asset Service Provider (VASP) activities, mirroring approaches by regulatory entities such as The Swiss Financial Market Supervisory Authority (FINMA).

 

  • Central Bank of the U.A.E (CBUAE): Introduced the Retail Payment Services and Card Schemes Regulation (RPSCS) Regulation in July 2021, which addressed Payment Tokens and related services, and the Stored Value Facilities (SVF) Regulations in September 2020 for wallet facilities covering VAs, updating previous EPS Regulations. The CBUAE has also engaged in Central Bank Digital Currency (CBDC) initiatives, including Project Aber and the recent ‘Digital Dirham’ strategy.

 

  • Dubai Blockchain Strategy and VARA: Following Dubai’s Blockchain Strategy in 2016, Law No. (4) of 2022 was enacted, creating VARA as a dedicated VA-sector regulator. VARA’s comprehensive regulations were issued in February 2023, detailing conduct, and compliance for VASPs in Dubai [12].

 

  • UAE Cabinet Resolutions: To demarcate the regulatory boundaries between VARA and SCA, Cabinet Resolution No. (111) and Decision No. (112) of 2022 were issued. These clarified SCA’s role as the federal VASP-sector regulator and established the cooperative regulatory dynamics between SCA and VARA. The publication of UAE Cabinet Resolution 111 led to the removal of the SCA Crypto Regulations from the SCA website, creating initial uncertainty about its status until the SCA VA Exchange Regulations officially repealed it, clarifying the regulatory stance.

 

UAE’s blockchain landscape is vibrant and growing, underpinned by a strong talent pool, ample funding, and an enabling regulatory climate, all of which are drawing global blockchain enterprises to its shores, including Ripple and Metaco. These developments represent a broader trend across the Middle East – a concerted effort to establish a regulated, credible, and thriving digital asset market. Through these initiatives, the UAE is not only adapting to the digital finance revolution but also setting a benchmark for regulatory innovation in the digital asset realm for the broader region and the rest of the world.

[1] “A Spotlight on Digital Asset Regulation in Dubai – Polymesh.” 21 Dec. 2022, https://polymesh.network/blog/a-spotlight-on-digital-asset-regulation-in-dubai. Accessed 13 Nov. 2023.
[2] “Dubai introduces new virtual asset regulatory framework.” 24 Feb. 2023, https://www.reedsmith.com/en/perspectives/2023/02/dubai-introduces-new-virtual-asset-regulatory-framework. Accessed 13 Nov. 2023.
[3] “DIFC announces consultation on new Digital Assets Law and Law of ….” 12 Oct. 2023, https://connectedworld.clydeco.com/post/102ipsf/difc-announces-consultation-on-new-digital-assets-law-and-law-of-security-regime. Accessed 13 Nov. 2023.
[4] “DIFC Announces Consultation on New Digital Assets Law, New Law ….” 28 Sept. 2023, https://www.difc.ae/whats-on/news/difc-announces-consultation-new-digital-assets-law-new-law-security. Accessed 13 Nov. 2023.
[5] “UAE: SCA issues new regulations relevant to virtual assets.” 12 May. 2023, https://me-insights.bakermckenzie.com/2023/05/12/uae-sca-issues-new-regulations-relevant-to-virtual-assets-paving-the-way-for-the-uaes-new-onshore-federal-va-framework/. Accessed 13 Nov. 2023.
[6] “ADGM introduces the world’s first DLT Foundations Regime.” 2 Nov. 2023, https://www.adgm.com/media/announcements/adgm-introduces-the-worlds-first-dlt-foundations-regime. Accessed 13 Nov. 2023.
[7] “Tokenized Funds, The Next Investment Trend? Regulatory ….” https://www.morganlewis.com/pubs/2023/05/tokenized-funds-the-next-investment-trend-regulatory-developments-in-the-uk-eu-and-uae. Accessed 5 Nov. 2023.
[8]”Tokenized Funds, The Next Investment Trend? Regulatory ….” https://www.morganlewis.com/pubs/2023/05/tokenized-funds-the-next-investment-trend-regulatory-developments-in-the-uk-eu-and-uae. Accessed 5 Nov. 2023.
[9] “UAE: Securities and Commodities Authority issues new regulations ….” 18 May. 2023, https://www.globalcompliancenews.com/2023/05/18/https-insightplus-bakermckenzie-com-bm-financial-institutions_1-united-arab-emirates-securities-and-commodities-authority-issues-new-regulations-relevant-to-virtual-assets-paving-the-way-for-the-uae/. Accessed 5 Nov. 2023.
[10] “Tokenized Funds, The Next Investment Trend? Regulatory ….” https://www.morganlewis.com/pubs/2023/05/tokenized-funds-the-next-investment-trend-regulatory-developments-in-the-uk-eu-and-uae. Accessed 5 Nov. 2023.
[11] “UAE: Securities and Commodities Authority issues new regulations ….” https://insightplus.bakermckenzie.com/bm/attachment_dw.action?attkey=FRbANEucS95NMLRN47z%2BeeOgEFCt8EGQJsWJiCH2WAXENnrNzNVLuvt5eK180Onb&nav=FRbANEucS95NMLRN47z%2BeeOgEFCt8EGQbuwypnpZjc4%3D&attdocparam=pB7HEsg%2FZ312Bk8OIuOIH1c%2BY4beLEAeoIRHvxyDMQM%3D&fromContentView=1. Accessed 5 Nov. 2023.
[12] “Dubai’s Crypto Industry Welcomes New Licensing Regime Amid ….” 2 Mar. 2023, https://www.coindesk.com/policy/2023/03/02/dubais-crypto-industry-welcomes-new-licensing-regime-amid-global-regulatory-uncertainty/. Accessed 5 Nov. 2023.

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