Opinion by: Irina Heaver, crypto attorney.
The founders who treat the structure of regulation as a central part of their go-to-market approach are those who developed the UAE. Unfortunately, many founders view licensing as a thought.
UAE is not a place where you can cute the corners. However, this is a place where thoughtful, well-founders will be rewarded with speed, clarity and access to a great support of the ecosystem.
Contrary to the beliefs of some founders, regulators are not the problem – confusion, poor planning and lack of readiness.
The crypto licensing landscape in the United Arab Emirates can be difficult to understand, so even experienced capitalists of adventure, entrepreneurs and global law companies often do not understand the regime.
Let’s bring clarity to the situation.
One country, two legal systems
The UAE is a federal country consisting of seven Emirates, which operates under two unique legal systems.
The mainland legal system, known as the “onshore” regime, occupies the entire UAE territory and includes more than 45 free economic zones. These covers are falling under the UAE civil law and are managed by the UAE court system.
Financial free zones, Abu Dhabi Global Market (ADGM) and Dubai International Financial Center (DIFC), operate independently under the common English law. They also maintain their own regulatory bodies and court systems, separate from the mainland judicial system.
Understanding this bifurcation is important because the regulatory authority governing your crypto activities depends on the main framework you choose to operate.
One country, five crypto regulators
Five separate authorities regulated crypto and related activities, each with its own scope, mandate and licensing framework.
On the mainland side, the three relevant Regulators are:
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The central bank of the UAE (CBUAE): controls activities involving AED-denominated stablecoins, payment of crypto and remittance, and approved foreign stablecoins.
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The Securities and Commodities Authority (SCA): Controls Crypto exchanges, broker-dealers and token offerings resembling security or commodity contracts.
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The Dubai Virtual Assets Regulatory Authority (VARA): Controls most of the Virtual Asset Service Provider (Vasps) operating in Dubai, excluding those in the DIFC.
Related: Dubai Regulator Greenlight Ripple’s Rlusd Stablecoin
In free financial zones, there are two separate regulators:
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The Financial Services Regulatory Authority (FSRA): The financial guardian for ADGM, developed one of the most advanced regulation of frameworks for digital assets back in 2018.
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The Dubai Financial Services Authority (DFSA): the regulator for the DIFC, with a careful but emerging approach to crypto assets.
This unique framework can be a blessing and a challenge. Choosing a wrong regulator or failing to understand the scope of each authority may result in wasted time, missed chances or, in some cases, complete licensing failure.
Choose the correct regulator
The right scope depends entirely on your specific business model. Here are some common situations:
Launch a crypto exchange
Planning to be the next Binance? Be prepared to navigate a strict licensing path. Vara, SCA or ADGM are potential homes for you. Each has its own requirements, and nothing for the faint heart.
Issue a stablecoin
If you are thinking of competing with Tether with AED, then welcome to the old table. You will talk to the central bank of the UAE.
Form a tokenized RWA platform
Want to make real estate, fine art or a whiskey warehouse on blockchain -based assets? Vara’s newly introduced regime for tokens supported by asset is a must read. And no, slapping the “utility token” on a white paper does not cut it here.
Start a crypto fund
Got a capital to deploy and a vision to back the next crypto unicorn? It’s time to be a close friend in ADGM’s FSRA FSRA. This is one of the most advanced digital assets frameworks there, but make no mistake, they expect real compliance with chops.
Launch a payment app
Are you looking to make big money movements? The middle bank will watch you well. Do not expect a light-touch approach when holding customer funds.
Trying to do everything
Don’t. Founders often want to build the whole offer on a go, which can be a recipe for regulation burnout. It is best to start narrowly – get a license, create traction, then size.
More skill
The founders who appreciate the structure of regulation as a key element of their go-to-market approach are the success of the UAE.
Success is required by a thorough regulatory assessment from the beginning, aligning a business model with the right scope and authority and cooperation with legal experts who truly understand the local scene.
In the UAE, cutting corners are not allowed. Founders who are planning well and engaged in active regulators will be rewarded with speed, clarity and access to a fully supportive ecosystem.
Opinion by: Irina Heaver, crypto attorney.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
