On June 30, 2025, the Monetary Authority of Singapore (MAS) will officially implement new regulations for Digital Token Service Providers (DTSP). This regulation, referred to as "cliff-like regulation" in the industry, requires local companies providing crypto exchange services to be licensed, meaning thata large number of unlicensed institutions may be expelled from Singapore. Dubai and Abu Dhabi in the United Arab Emirates have become one of the havens for "Singapore refugees".
Benefiting from a clear regulatory framework and policies supporting innovation, the United Arab Emirates is becoming the "Wall Street of Cryptocurrency". International Web3 companies such as Binance, Crypto.com, OKX, Bybit, Kraken, and Ripple have already settled in, with Dubai alone hosting over 1,000 crypto-related enterprises.
Figure 1: Numerous Advantages of the United Arab Emirates as a Business and Investment Destination Source: AIYING
Meanwhile, as the UAE Dirham has long maintained a fixed exchange rate with the US dollar (approximately 1 USD to 3.67 Dirhams), it has attracted a large amount of international capital, especially from high-net-worth individuals from regions like Russia and Iran. According to Chainanalysis data, from July 2023 to June 2024, the UAE received over $30 billion in cryptocurrency inflows, making itthe third-largest crypto economy in the Middle East and North Africa (MENA) region (after Turkey and Morocco). The UAE's cryptocurrency ownership rate is even the highest globally. According to Triple A statistics,the UAE's cryptocurrency ownership rate exceeds 25% in 2024,while the global average is only 6.9%.
Figure 2: UAE Leads Global Cryptocurrency Ownership Rate
[The rest of the translation follows the same professional and precise approach, maintaining the specific terminology as instructed.]Brokerage services for virtual asset trading
Custody and management of virtual assets
Financial services related to virtual asset issuance
SCA provides specific licenses and related capital requirements for the following activities:
Virtual asset platform operators: Only operating virtual asset platforms, with paid-in capital of 1 million dirhams; providing other virtual asset services, with paid-in capital of 5 million dirhams. Both require maintaining 6 months of operating funds.
Virtual asset custodians: Paid-in capital of 4 million dirhams, requiring maintenance of 6 months of operating funds.
Virtual asset financial advisors: Paid-in capital of 500,000 dirhams, requiring maintenance of 6 months of operating funds.
Virtual asset portfolio managers: Paid-in capital of 3 million dirhams.
Virtual asset brokers: Paid-in capital of 2 million dirhams.
Virtual asset distributors: Paid-in capital of 30 million dirhams.
Additionally, virtual assistant trading platforms are considered equivalent to multilateral trading facilities (MTF) platforms used in traditional financial markets, meaning they are subject to similar regulatory standards.
2. CBUAE Regulates Payment Tokens and Stablecoins with Reference to Payment Instruments
In June 2024, the Central Bank of the UAE (CBUAE) issued the Payment Token Services Regulation (PTSR), regulating stablecoins as payment instruments, and only accepting stablecoins pegged to the dirham.This means that stablecoins pegged to foreign currencies (such as USDT, USDC) are not recognized in the payment domain.
The regulation applies to the entire UAE, including various free trade zones, but excluding DIFC and ADGM. The regulation covers major activities of payment tokens, collectively referred to as "payment token services".
According to the regulation, any individual or entity providing payment token services within the UAE, or targeting individuals within the UAE, must obtain a license from CBUAE (dirham payment token services) or register (foreign payment token services). Licenses are only issued to companies registered in the UAE (excluding those in financial free zones), while entities not registered in the UAE but located in the UAE (including DIFC and ADGM) can apply for foreign payment token issuer registration.
The regulation imposes strict licensing and compliance requirements on stablecoin issuers, including capital requirements, transparency provisions, and obligations related to anti-money laundering (AML) and countering the financing of terrorism (CFT). The capital requirements are as follows:
Payment token issuers:Initial and ongoing capital of 15 million dirhams; additional ongoing capital of at least 0.5% of the legal tender face value of outstanding payment tokens. Issuers must ensure full asset collateralization and undergo periodic third-party audits.
Payment token custodians, transferors, and payment token conversion service providers:Regulatory requirements of 3 million dirhams and 1.5 million dirhams are set based on whether their monthly average payment token transfer value is greater or less than 10 million dirhams.
Progress on Dirham-Pegged Stablecoins:
In August 2023, Tether, the issuer of USDT, announced a collaboration with Abu Dhabi-listed company Phoenix Group (PHX) to launch a dirham-pegged stablecoin.
In October 2024, CBUAE approved the dirham-backed stablecoin AE Coin by local enterprise AED Stablecoin LLC.
In May 2025, ADQ (Abu Dhabi's sovereign wealth fund), First Abu Dhabi Bank (FAB), and International Holding Company (IHC), the second-largest market cap company in the Gulf, announced a collaboration to launch a dirham-pegged stablecoin, awaiting CBUAE approval.
✨ Starlabs Consulting Note: According to Chainalysis data, 93% of stablecoin transfer volume in the UAE is at the retail level.
3. Tax Incentive Policy: VAT Exemption
Individual Investors:0 capital gains tax and 0 income tax on cryptocurrency investments.
Corporate Taxation:Since 2023, the UAE has introduced a 9% corporate income tax (exempting companies with taxable income below 375,000 dirhams), which also applies to cryptocurrency-related businesses.
VAT Exemption:From November 15, 2024, cryptocurrency transactions (including exchanges and ownership transfers) will be exempt from Value Added Tax (VAT), retroactive to January 1, 2018.
Dubai Regulatory Framework: VARA + DIFC
1. Dubai International Financial Centre (DIFC): Regulated by Dubai Financial Services Authority (DFSA)
DIFC is an economic free zone in the UAE with an independent tax policy and regulatory framework.
The DIFC Digital Assets Law issued in March 2024 recognizes digital assets as property under British common law principles. DFSA is responsible for regulating crypto activities within DIFC, and crypto-related entities operating in DIFC must obtain a DFSA license.Starlabs Consulting understands that Standard Chartered Bank, Ripple, and others have successfully obtained DFSA licenses.
In March 2025, DFSA launched a tokenization regulatory sandbox for companies providing tokenized investment products and services, including eligible services such as tokenized stocks, bonds, Islamic bonds, and collective investment fund units.
DIFC's regulation is achieved through two key policies:
i. Investment Token Regime
In October 2021, DFSA's Investment Token Regime provided an initial regulatory framework for investment tokens (such as security tokens or derivative tokens). The framework applies to institutions participating in marketing, issuing, trading, or holding investment tokens within DIFC, and authorized companies engaged in investment token business, such as facilitating transactions, using tokens for payments, and providing consulting.
ii. Crypto Token Regime
In November 2022, DFSA issued comprehensive legislation implementing the Crypto Token Regime. The regime covers not only anti-money laundering (AML) and counter-terrorist financing (CFT) risks associated with trading, clearing, holding, or transferring crypto tokens, but also risks related to consumer protection, market integrity, custody, and service provider financial resources.
Under this regime, only Accepted Crypto Tokens can be included in regulation and circulated within DIFC.Currently, DFSA recognizes five tokens: BTC, ETH, LTC, TON, and XRP, as well asCircle's stablecoins USDC and EURC. Other types of crypto assets, such as utility tokens and Non-Fungible Tokens, are explicitly excluded from the regulatory scope.
2. Outside DIFC: Virtual Asset Regulatory Authority (VARA) Regulation
Dubai's virtual asset regulatory framework is established based on the Virtual Asset Regulation Law that took effect in March 2022. This law established a dedicated regulatory body - the Virtual Asset Regulatory Authority (VARA), responsible for regulating virtual asset activities in various Dubai regions, including free zones and special development zones (excluding DIFC), and establishing connections with the Dubai World Trade Centre Authority (DWTCA). Thus, Dubai became the first and only jurisdiction to specifically establish a virtual asset regulatory authority.
VARA, as an autonomous regulatory body, coordinates with federal-level SCA and CBUAE virtual asset regulations, overseeing virtual asset service providers outside DIFC (including exchanges, venture capital funds, Non-Fungible Token platforms, etc.), and establishing an approval and licensing system for virtual asset businesses.
VARA and DFSA have some similarities but no overlapping jurisdictions. VARA clearly defined 8 categories of regulated virtual asset (VA) activities, and any VASPs wishing to provide these services must apply for a license before operation:
- VA Advisory Services
- VA Broker Services
- VA Custody Services
- VA Trading Services
- VA Lending Services
- VA Management and Investment Services
- VA Transfer and Settlement Services
- VA Issuance Category 1 (primarily involving stablecoin issuance pegged to fiat currency)
According to VARA's public registry, 35 enterprises have currently obtained VASP licenses, including Binance, OKX, Crypto.com, Deribit, HashKey, Gate, etc.
In October 2024, VARA announced fines and cease orders for 7 unlicensed crypto entities, with fines ranging from $13,000 to $27,000.
In September 2024, VARA signed a cooperation framework with the UAE Securities and Commodities Authority (SCA), clarifying their respective regulatory scopes. They agreed that VASPs planning to operate in Dubai only need VARA's license to be automatically registered with SCA, to serve the broader UAE market.
Additionally, VARA requires all companies promoting digital asset investments to include prominent risk warnings in their marketing language starting September 26, 2024.
VARA's "Virtual Asset Marketing and Related Activities Management Regulations" effective October 2024 further strengthen regulation, covering marketing, consulting services, decentralized finance (DeFi), and custody services, while introducing a graduated penalty system to address improper marketing and exaggerated promotions.
On May 19, 2025, VARA updated regulatory rules, formally incorporating RWA tokenization into regulation, allowing free trading on secondary markets. In the same month, Dubai officially launched the first licensed real estate tokenization project in the MENA region.
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