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The United Arab Emirates has been quick to embrace new technologies. Nowhere is this clearer than in the rapidly expanding virtual asset sector. From blockchain-based platforms to tokenised fund offerings, the UAE has positioned itself at the forefront of digital finance in the Middle East. Firms that engage in these activities are commonly referred to as virtual assets service providers (VASPs). Under the country’s evolving legal and regulatory framework, these providers now find a clearer path to establishment and oversight.
In this article, we examine all those who qualify as virtual assets service providers in the UAE. We will also go over which regulators oversee virtual asset activities, what the licensing processes involve, and why many businesses are drawn to setting up in the region. Whether you are a small fintech firm offering digital wallets or a major exchange facilitating large-scale token trading, understanding the local ecosystem is crucial. By the end, you will have a broad picture of how the UAE’s financial centres, along with federal authorities, support an environment in which virtual assets can thrive.
What are virtual assets and virtual assets service providers in the UAE
Virtual assets (VAs) refer to digital representations of value that people can trade, transfer, or use for payment. Users often do this through distributed ledgers like blockchain. When a business provides such services for or on behalf of others, like facilitating token exchanges, providing custody, or enabling fiat-crypto conversions, that entity becomes a virtual assets service provider (VASP). In some jurisdictions, terms like crypto asset entities, digital asset entities, or DAC (digital asset customers) may be used. But, the concept is broadly similar: regulated intermediaries that handle digital assets for third parties.
The UAE’s approach to defining a VASP has common threads:
- Exchange or trading platforms that enable buying, selling, or swapping
- Custodians or wallet providers that store clients’ private keys
- Advisers and fund managers who guide clients on crypto investments
- Brokers who arrange or solicit orders in virtual assets
Key regulators in the UAE
Although the federal government has overarching power in many areas, virtual asset rules in the UAE can come from several bodies, each with its own domain:
Emirates Securities and Commodities Authority (SCA)
The Emirates Securities and Commodities Authority oversees onshore UAE and certain free zones outside the two main financial free zones. The SCA’s crypto-asset activities regulation (CAAR) is expected to finalise soon, covering tasks such as issuance, promotion, and running exchanges.
Dubai International Financial Centre (DIFC)
Overseen by the Dubai Financial Services Authority (DFSA). DIFC is a financial free zone in Dubai with a strong emphasis on global finance. The DFSA’s digital assets framework addresses security tokens, with more rules on utility, exchange, and stablecoins being finalised.
Abu Dhabi Global Market (ADGM)
Regulated by the Financial Services Regulatory Authority (FSRA). ADGM’s virtual assets framework is well established, covering all manner of digital currencies, digital securities, stablecoins, and derivatives.
Although these regulators differ in scope, their objectives, protecting investors, mitigating money-laundering risks, and fostering responsible innovation, remain broadly aligned. A VASP must pick which zone or authority suits its model best, or operate across multiple zones if the relevant permissions are granted.
How ADGM defines VASPs
ADGM led the way by introducing clear rules for virtual asset activities, treating non-fiat virtual currencies (like Bitcoin) as commodities rather than specified investments. Security tokens that convey rights similar to shares or debentures are categorised as digital securities, subject to standard securities regulation. Conversely, utility tokens remain unregulated if they do not qualify as “accepted virtual assets.” Some highlights of ADGM’s approach:
- Virtual assets, in ADGM terms, represent mediums of exchange, units of account, or stores of value that do not hold legal tender status in any jurisdiction.
- Digital securities are tokens that behave like equities or bonds, thus regulated as actual securities.
- Utility tokens are typically outside regulatory scope unless they overlap with investment features.
- Accepted virtual assets must meet stringent criteria, covering market capitalisation, technology, AML controls, and more.
Examples of VASP activities in ADGM include exchange operations, custody services, fund management, or advising on crypto investments. The FSRA has processes for evaluating each token or project, ensuring it meets transparency, stability, and security standards.
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DIFC’s digital assets regime for virtual assets providers
DIFC’s approach centres on a definition of tokens as digital representations of value, rights, or obligations using DLT. Within this framework:
- Security tokens function as equities, futures, or other conventional investments, requiring full compliance with DFSA securities rules.
- Part 2 of the digital assets regime, once finalised, will cover exchange tokens, stablecoins, and utility tokens that become “crypto tokens” in the DIFC digital assets regime.
- Privacy tokens and algorithmic stablecoins may be banned, similar to how the DFSA deals with them.
- MTFs (multilateral trading facilities) or OTFs (organised trading facilities) can register to handle these tokens, subject to robust AML, technology, and governance checks.
Any firm wanting to offer custody, trading, arranging, or advising on such tokens must apply for an authorisation from the DFSA. Existing financial services entities can vary their licence to accommodate these new asset classes, providing they prove adequate controls and resources.
VASPs in onshore UAE under SCA
Outside of DIFC and ADGM, the SCA has authority over virtual assets in the rest of the UAE, including some free zones like DWTC and DMCC. The SCA’s incoming regulations (often referred to as crypto-asset activities regulation, or CAAR) set the stage for licensing or registering:
- Exchange operations dealing in crypto
- Promotion, issuance, or distribution of virtual assets
- Advisory, brokerage, and custody solutions
Major players such as Binance have already sought licensure under these developing frameworks.
"The SCA emphasises robust AML/CTF checks, along with consumer protection and technology governance. Although final details remain fluid, SCA-led processes will likely mirror ADGM and DIFC in key compliance areas."
What is driving interest in the UAE as a VASPs hub
The UAE’s appetite for fintech goes hand in hand with its strategic location, bridging time zones between Asia, Europe, and Africa. By combining a pro-innovation stance with rigorous oversight, the UAE appeals to both up-and-coming ventures and established global exchanges. Additional drivers include:
- Infrastructure: Modern data centres, advanced telecommunications, and a stable power supply ease the rollout of digital asset solutions.
- Human capital: Companies can recruit a diverse, highly skilled workforce, with the government offering attractive residence permits for specialised talents.
- Network effect: Over time, with big names setting up in Abu Dhabi or Dubai, new participants find it easier to join an ecosystem that already includes investors, service providers, and regulators familiar with cutting-edge technology.
- Government commitment: The UAE’s leadership consistently invests in blockchain pilot projects, e-government solutions, and fosters partnerships that normalise digital transactions.
Key VASP activities addressed in the UAE
Across the different regulators, the following are frequently outlined as core service areas for virtual assets:
Dealing as principal or agent
Firms buy, sell, or trade virtual assets on their own books or on behalf of clients.
Managing client assets
Similar to conventional fund management, but focusing on digital assets like Bitcoin, Ether, or stablecoins.
Arranging or brokering deals
Introducing parties to trades, handling order solicitations, or matching orders in an exchange-like setting.
Marketing
Promoting tokens to potential investors, subject to disclaimers and restrictions if such tokens function as securities.
Providing custody
Securely storing private keys, verifying transactions, and ensuring robust cybersecurity for clients’ holdings.
Advising
Offering recommendations on which tokens to buy, how to structure tokenised instruments, or how to comply with AML and technology requirements.
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Setting up an exchange or multilateral trading facility
Many firms see the UAE as ripe for launching digital exchanges, sometimes structured as MTFs or OTFs. Regulators typically require these platforms to:
- Have objective, non-discriminatory rules around listing and trading.
- Employ robust technology that prevents hacking, front-running, or market manipulation.
- Integrate KYC/AML processes, ensuring no anonymity or untraceable tokens.
- Provide necessary pre-trade and post-trade transparency, along with clearing and settlement solutions (potentially via a licensed clearinghouse).
Privacy-focused or completely anonymous tokens remain off-limits, and MTF operators are subject to annual independent IT audits to confirm system integrity and resilience.
Digital wallets and custody solutions
Wallet providers store the keys enabling clients to interact with blockchains, either via “hot wallets” (online) or “cold wallets” (secure offline devices). Within the UAE, any firm offering custody typically needs a licence to provide “custody” or “arranging custody” services, either from ADGM’s FSRA, DIFC’s DFSA, or the SCA for onshore. They must also meet strict security and governance standards. Meanwhile, a user who self-custodies tokens in a personal wallet does so at their own risk, bypassing direct regulatory coverage (though separate obligations apply if that user runs a commercial service).
Token issuances and the question of securities
Initial public offerings (IPOs) of security tokens face the same rules as other IPOs: a prospectus, required disclosures, and possible compliance with public listing thresholds. An issuance can be exempt if targeting institutional clients or meeting certain minimum subscription sizes (for instance, above 100,000 US dollars), although fractional sales below that amount could lose the exemption. Utility tokens, stablecoins, or other tokens might avoid these rules if they do not share equity or debt-like features. Nonetheless, regulators emphasise that the factual function of the token, rather than marketing spin, determines whether it is a security.
Tokenised funds and broader investment structures
The same principle holds for funds. Some future developments may see tokenised real estate, structured notes, or pegged instruments offered to local investors. These expansions hinge on the capacity of local law to handle token-based ownership, along with the readiness of regulators to extend rules for investor safeguarding and transparent custody.
"If a token represents a share in a collective investment scheme, the fund’s manager must secure the appropriate licence."
Regulatory approvals and processes
Each financial centre or regulator has a multi-step application process. In ADGM or DIFC, the VASP must incorporate an entity in that centre, then apply for authorisation. Onshore, the SCA or other specialised free zones can provide a path to licensure. At a high level, the process involves:
- Submitting a detailed business plan, including token classification, AML frameworks, and technology architecture.
- Undergoing the regulator’s due diligence, which may include interviews, demonstrations, and a requirement to prove stakeholder experience.
- Paying fees for applications, supervision, and, if applicable, extension or varied licences.
- Satisfying capital requirements, especially for exchanges or principal trading.
- Securing an office lease in the relevant zone. For DIFC or ADGM, the VASP must physically locate its staff in that free zone; for SCA licences, location in the mainland or certain designated free zones is possible.
Staffing expectations for VASPs
Regulators in the UAE usually expect the following roles, proportionate to the scale of operations:
CEO or senior manager
A seasoned executive with at least 10 years of experience, residing in the UAE.
Finance officer
In charge of financial reporting; can be outsourced or based at the parent entity in some cases.
Risk officer
Often outsourced, focusing on credit, market, and operational risks.
Compliance officer
A senior figure with 10 years of compliance experience, usually living in the UAE.
MLRO
Overseeing anti-money laundering protocols; can be the same person as the compliance officer if appropriately qualified.
Chief technology officer
Overseeing the IT architecture, especially crucial for crypto businesses.
Auditors (internal and external)
The external auditor is typically from an approved list of local or international firms, while internal auditing may be done via an outsourced specialist.
Independent IT auditor
Conducting annual reviews of system integrity, blockchain integration, and cybersecurity.
- ADGM treats non-fiat crypto assets as commodities and defines “accepted virtual assets” based on liquidity, security, and market demand
- Token issuances can be treated as securities or exempt offers if they meet minimum thresholds or target institutions
- Growth in the UAE’s VASP scene aligns with the nation’s broader aims to develop as a global blockchain and fintech hub
Technology and governance demands
VASPs must:
- Maintain a robust IT architecture for digital assets, detailing how they record transfers, manage private keys, handle potential forks, and guard against vulnerabilities.
- Ensure that decision-making is transparent, especially if the service uses smart contracts or decentralised protocols.
- Address possible changes to protocols, as blockchains can experience upgrades, forks, or network-driven events.
- Undergo regular audits, both financially and technologically, to confirm system reliability.
- Integrate real-time monitoring for suspicious or fraudulent transactions, fulfilling AML or CTF obligations.
In many cases, regulators demand an annual IT audit by an independent third party, verifying everything from code repositories to user authentication measures. Large institutional clients also expect robust governance, pushing VASPs to incorporate multi-signature controls, advanced encryption, and thorough system documentation.
Conclusion
As major fintech innovators and crypto exchanges anchor themselves in Dubai or Abu Dhabi, the market is likely to expand, generating more user-friendly wallets, trading platforms, tokenised investment products, and custody solutions. The region’s thriving environment for capital, combined with a rising user base, can further fuel interest in advanced products like derivatives or central bank digital currencies (CBDCs). The regulators’ approach, emphasising technology-specific guidelines and vigilant AML measures, helps keep the ecosystem stable.
One potential outcome is that new free zones or local partnerships may emerge, each aiming to draw foreign crypto investment by promising clarity and supportive business conditions. The continuing developments at the SCA, along with expansions of frameworks in DIFC or ADGM, point to an increasingly competitive environment that encourages global players to establish a presence.
