Legal strategy matters more than ever for your crypto startup in the UAE

Opinion by: Irina Heaver, crypto lawyer.

Founders who treat regulatory structuring as a central part of their go-to-market strategy are the ones who thrive in the UAE. Unfortunately, many founders view licensing as an afterthought.

The UAE is not a place where you can cut corners. It is, however, a place where thoughtful, well-prepared founders are rewarded with speed, clarity and access to a highly supportive ecosystem.

Contrary to some founders’ beliefs, regulators are not the problem — confusion, poor planning and lack of readiness are.

The crypto licensing landscape in the United Arab Emirates can be hard to grasp, so much so that even experienced venture capitalists, serial entrepreneurs and global law firms often misunderstand the regime.

Let’s bring some clarity to the situation.

One country, two legal systems

The UAE is a federal country comprising seven emirates, operating under two distinct legal systems.

The mainland legal system, known as the “onshore” regime, covers the entire UAE territory and includes over 45 economic free zones. These jurisdictions fall under the UAE’s civil law and are governed by the UAE’s court system.

The financial free zones, Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC), operate independently under English common law. They also maintain their own regulatory bodies and court systems, separate from the mainland’s judicial system.

Understanding this bifurcation is crucial because the regulatory authority governing your crypto activities depends mainly on the legal framework under which you choose to operate.

One country, five crypto regulators

Five separate authorities regulate crypto and related activities, each with its own jurisdiction, mandate and licensing framework.

On the mainland side, the three relevant regulators are:

The Central Bank of the UAE (CBUAE): regulates activities involving AED-denominated stablecoins, crypto payments and remittances, and approves foreign stablecoins.
The Securities and Commodities Authority (SCA): regulates crypto exchanges, broker-dealers and token offerings that resemble securities or commodity contracts.
The Dubai Virtual Assets Regulatory Authority (VARA): regulates most virtual asset service providers (VASPs) operating in Dubai, excluding those in the DIFC.

In the financial free zones, there are two separate regulators:

The Financial Services Regulatory Authority (FSRA): the financial watchdog for ADGM, which developed one of the most advanced regulatory frameworks for digital assets back in 2018.
The Dubai Financial Services Authority (DFSA): the regulator for DIFC, with a cautious but evolving approach to crypto assets.

This unique framework can be both a blessing and a challenge. Choosing the wrong regulator or failing to understand the scope of each authority can result in wasted time, missed opportunities or, in some cases, complete licensing failure.

Choose the right regulator

The right jurisdiction depends entirely on your specific business model. Here are a few common scenarios:

Launch a crypto exchange

Planning to become the next Binance? Be prepared to navigate a rigorous licensing path. VARA, SCA or ADGM are potential homes for you. Each has its own requirements, and none are for the faint-hearted.

Issue a stablecoin

If you’re thinking of rivaling Tether in AED, then welcome to the grown-up table. You’ll be dealing with the Central Bank of the UAE.

Build a tokenized RWA platform

Want to turn luxury real estate, fine art or a warehouse of whiskey into blockchain-based assets? VARA’s newly introduced regime for asset-backed tokens is a must-read. And no, slapping “utility token” on a white paper won’t cut it here.

Start a crypto fund

Got capital to deploy and a vision to back the next crypto unicorn? It’s time to become best friends with ADGM’s FSRA. It’s one of the most advanced digital asset frameworks out there, but make no mistake, they expect real compliance chops.

Launch a payment app

Are you looking to make big money moves? The Central Bank will be watching you closely. Don’t expect a light-touch approach when handling customer funds.

Trying to do it all

Don’t. Founders often want to build the entire offering in one go, which can be a recipe for regulatory burnout. It is much better to start narrow — get one license, create traction, then scale.

More best practices

Founders who prioritize regulatory structuring as a core element of their go-to-market strategy are the ones who succeed in the UAE.

Success demands a thorough regulatory assessment from the outset, alignment of a business model with the right jurisdiction and authority and collaboration with legal experts who truly understand the local landscape.

In the UAE, cutting corners is not tolerated. Founders who plan carefully and engage proactively with regulators are rewarded with speed, clarity and access to a highly supportive ecosystem.