Regulatory Developments in the Virtual Asset Space in the UAE

The United Arab Emirates (UAE) continues to solidify its position as a global leader in the regulation and development of virtual assets (VAs). In line with its ambitions to build a diversified, digital-first economy, the UAE has introduced a series of regulatory frameworks across both federal and financial free zone jurisdictions. These developments aim to support innovation, enhance investor protection, and ensure that virtual asset activities are conducted within a transparent, well-governed ecosystem.

At Support Legal, we closely track these legal and regulatory changes to help businesses operating in or entering the UAE navigate this complex and rapidly evolving space. This article outlines the most recent updates from the UAE’s key regulators: the Central Bank of the UAE (CBUAE), the Securities and Commodities Authority (SCA), and the Abu Dhabi Global Market (ADGM).

Each authority has issued proposals or enacted measures that directly impact virtual asset service providers (VASPs), fintech operators, and investors.

1. Central Bank of the UAE (CBUAE): Payment Token Services Regulations

In August 2024, the CBUAE issued the Payment Token Services Regulations, establishing a clear legal basis for virtual asset payment services in the UAE mainland.

Key Features of the Framework:

Definition of Payment Tokens: Tokens used—or intended to be used—as a medium of exchange or for settling debts. Notably, this exclusion applies to central bank digital currencies (CBDCs), utility tokens, commodity tokens, and security tokens.

Scope of Application:

Applies to entities offering custody, exchange, brokerage, or transfer of payment tokens to clients in the United Arab Emirates (UAE), regardless of whether the operations are based onshore or offshore.

Licensing Obligations:

• Affected businesses must obtain a licence from the CBUAE.

• Applicants must demonstrate robust governance, cybersecurity, risk management, and operational readiness.

Ongoing Regulatory Duties:

• AML/CTF compliance.

• Transaction monitoring and reporting.

• Consumer protection and transparency.

• Annual audits and regulatory disclosures.

Prohibited Activities:

• Operating without a licence.

• Facilitating anonymous or pseudonymous transactions.

• Misleading advertisements or promotions.

• Engagement with non-compliant or unregulated counterparties.

Transitional Period:

A one-year grace period, from August 2024 to August 2025, is in effect for existing service providers to comply. Failure to regularise by the deadline may result in enforcement action and prohibition from operating in the UAE mainland.

Strategic Implications:

This marks the first clear step by the CBUAE to regulate the payment functions of virtual assets. For market participants, the emphasis is on formalising operations, meeting local governance standards, and preparing compliance systems well ahead of the August 2025 deadline.

2. Securities and Commodities Authority (SCA): Draft Regulations for Security and Commodity Tokens

In January 2024, the SCA released draft regulations and opened a consultation to define and regulate Security Tokens and Commodity Tokens, closing its feedback window in March 2024. Highlights from the Draft Regulations:

Token Classification:

• Security Tokens: Tokens that confer rights similar to equity or debt instruments, such as governance, profit participation, or dividend entitlement.

• Commodity Tokens: Tokens backed by, or referencing, physical commodities (e.g., oil, gold, or agricultural produce).

Activities in Scope:

Issuance, offering, custody, trading, and exchange listing of these token types within the UAE.

Issuer and Market Requirements:

• Registration with the SCA and submission of detailed whitepapers.

• Disclosure of token structure, legal rights, and investor risks.

• Compliance with capital adequacy, governance, and transparency standards.

• Classification assessments to be completed in advance of public offerings or tokenised fundraising.

Exchange Responsibilities:

• Ensure that appropriate listing and delisting processes are in place.

• Conduct real-time market surveillance.

• Maintain fair and orderly markets.

Next Steps for Firms:

With the consultation phase now concluded, issuers and intermediaries should be evaluating how their tokens will be categorised and what obligations will follow. Legal and technical teams should prepare for full regulatory implementation once final rules are published.

3. Abu Dhabi Global Market (ADGM): Consultation Paper No. 11 of 2024

ADGM’s Financial Services Regulatory Authority (FSRA) remains a key innovator in the region’s virtual asset space. In March 2024, it published Consultation Paper No. 11, refining its already mature framework for virtual assets.

Key Areas of Proposed Reform:

Updated Token Classification:

• Additional clarity on stablecoins, staking services, and DeFi protocols.

• Consideration of risks posed by algorithmic stablecoins and asset-linked tokens.

Enhanced Prudential and Risk Controls:

• Adjustments to capital and liquidity standards for VASPs.

• Stronger safeguards for client assets.

• Revised outsourcing and third-party risk management protocols.

Strengthened AML/CTF Provisions:

• Stricter onboarding and KYC requirements.

• Enhanced transaction monitoring tools and regulatory reporting.

Consumer Protection Measures:

• Emphasis on product disclosures, advertising accuracy, and redress mechanisms.

• Clearer standards for service-level agreements and custodial security.

What This Means for Regulated Entities:

Firms already licensed by ADGM should begin gap assessments against proposed changes, with a focus on DeFi-related activity and consumer protection. Those considering licensing in ADGM will benefit from the more explicit guidance on risk-based supervision and market conduct expectations.

Strategic Preparation is Critical

The UAE is moving rapidly toward a harmonised, transparent, and innovation-friendly virtual asset regulatory landscape. The coordinated efforts of the CBUAE, SCA, and ADGM reflect a maturing approach that gives regulatory certainty to businesses while also aligning with global standards for investor protection and financial integrity.

Firms operating in this space should treat 2025 as a critical compliance window. Whether you are issuing tokens, operating an exchange, offering custody, or providing related advisory services, early legal engagement is essential to mitigate disruption, protect stakeholder value, and preserve market access.

At Support Legal, we work at the intersection of innovation and regulatory rigour. Our team advises token issuers, fintech operators, asset managers, and exchanges on structuring, licensing, regulatory response strategies, and cross-border considerations. For businesses navigating the evolving VA landscape in the UAE, we offer depth, regional experience, and practical insight.

To discuss this further, contact Eugenie Levy

____________________

This material is provided for general information only. It should not be relied upon for the provision of or as a substitute for legal or other professional advice.