Why Dubai Leads the World in Crypto Regulation: Sculpting a Global Benchmark

June 13, 2025

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Regulation as the New Battleground for Crypto Dominance

Crypto regulation has become the new frontier in the race for global leadership in digital finance. And there is a clear winner.

According to Atlantic Council's Cryptocurrency Regulation Tracker, among 75 countries surveyed, cryptocurrency is legal in 45, partially banned in 20, and generally banned in 10. Within the G20—representing over 57% of the world's GDP—every member is actively exploring regulation, but progress remains uneven. Only 28 of the 75 countries studied have comprehensive regulatory frameworks covering taxation, AML/CFT, consumer protection, and licencing. Of these, just six emerging markets meet all four criteria.

These figures highlight an important reality: the global conversation around crypto is no longer about adoption alone. As digital assets gain legitimacy, the focus has shifted to how well jurisdictions regulate them. Countries are now measured not by whether they permit crypto, but by how effectively they manage its risks and harness its potential.

At the forefront of this transformation is Dubai. Inspired by the UAE's ambition to be a digital-first economy, Dubai has designed the most agile, transparent, and future-ready regulatory regime for virtual assets. This article explores how Dubai's regulatory framework has positioned it at the forefront of the global crypto landscape.

A Purpose-Built Regulator: The Rise of VARA

While many countries attempt to retrofit existing financial laws to govern crypto and other virtual assets, Dubai has taken a radically different route. It established VARA—the world's first dedicated virtual asset regulator—under Dubai Law No. 4 of 2022. Rather than positioning crypto within the margins of conventional finance, Dubai created an entirely new regulatory institution with the mandate, tools, and structure built specifically for the virtual asset ecosystem. VARA operates with the agility and domain expertise required to address decentralised systems, smart contracts, and token economies, crafting rules that are not only technologically aware but also purpose-built for the risks and complexities of this emerging sector.

In December 2022, Cabinet Decisions 111 and 112 assigned national VA oversight to the Securities and Commodities Authority (SCA), while carving out a unique mandate for VARA in the Emirate of Dubai (excluding DIFC). VARA's structure enables fast decision-making, constant dialogue with the industry, and rules crafted for the technology at hand.

While Dubai leads the crypto space with regulatory clarity and purpose-built oversight, comparisons with entire countries or regions, like the U.S. or the EU, may seem imbalanced, given that Dubai is a single city. However, VARA's jurisdiction covers nearly 90% of the UAE's crypto market, and includes most major players operating in the country. In practice, this makes VARA the central authority shaping the national virtual asset landscape, despite Dubai's geographic scale.

Global Comparison: Why Dubai Stands Apart

In the United States, the regulatory landscape governing crypto is pretty complex. The SEC views most tokens as securities, the CFTC treats them as commodities, and the IRS classifies them as property. These differing interpretations result in overlapping obligations and a fragmented web of federal and state laws. Although the U.S. in 2025 has begun to pivot toward a more crypto-friendly stance—moving away from "regulation by enforcement"—lawmakers are still working to clarify the jurisdictional boundaries between the SEC and CFTC and establish coherent regulatory guardrails.

However, the pace and direction of crypto regulation in such environments are often shaped by political considerations. That is perhaps the single most defining contrast: in Dubai, innovation is at the centre of regulatory thinking. The focus is on enabling adoption and responsible growth, irrespective of political ideology. This consistency and long-term vision give Dubai a distinct advantage in attracting talent, capital, and forward-looking businesses.

Europe has also made significant regulatory progress. The MiCAR regime, fully applicable since December 2024, aims to unify crypto rules across the EU. However, it remains in a transitional "grandfathering" period until mid-2026. The broader EU Digital Finance package—including AMLR and DORA—marks a major step toward market resilience, but it also imposes higher compliance burdens and longer onboarding timelines for new entrants. Similarly, the UK's FSMA 2023, enacted in June 2023, grants the government powers to define cryptoasset activities under the Regulated Activities Order (RAO) and the Designated Activities Regime. This legislative framework aims to bring certain cryptoasset activities within the scope of financial regulation. However, the full implementation of detailed rules by the Financial Conduct Authority (FCA) covering areas such as custody, trading, disclosures, and staking is anticipated to be completed by 2026. The FCA has outlined a roadmap that includes consultations and policy statements throughout 2025, with the final rules expected to be published in 2026.

In contrast, Dubai's framework is already live, fully functional, and tailored for immediacy. VARA's activity-based licencing, modular rulebooks, and dedicated oversight body allow firms to enter the market with clarity, structure, and speed.

Activity-Based, Product-Agnostic Licencing: The Gold Standard

One of the most revolutionary aspects of Dubai's regulatory regime is its activity-based licencing model. Rather than classifying companies by token type, VARA licences them based on their core business functions, such as custody, brokerage, lending, exchange, and more. This approach allows for tailored regulation according to specific risk profiles, while still leaving room for innovation.

To support this framework, VARA has issued four Compulsory Rulebooks that all VASPs must follow—Company, Compliance and Risk Management, Technology and Information, and Market Conduct—alongside eight activity-specific and other rulebooks.

The Company Rulebook sets the foundation for VASP operations, covering governance, corporate structure, fit and proper criteria, ESG duties, outsourcing, and wind-down planning. It also mandates capital adequacy, liquidity, insurance, and reserves to ensure financial stability.

The Compliance and Risk Management Rulebook outlines core compliance systems aligned with FATF AML/CFT standards. It mandates MLRO appointments, client due diligence, suspicious transaction reporting, audit readiness, and internal governance—ensuring firms remain resilient and transparent.

The Technology and Information Rulebook establishes cybersecurity, data protection, and technology controls. Rulebooks 2.0 adds Schedule 1, introducing a structured tech risk framework across five domains, including digital operational resilience and secure virtual asset handling.

The Market Conduct Rulebook governs ethical standards, disclosures, and client interactions. It covers marketing practices, complaint handling, investor classifications, insider list obligations, and bans on proprietary trading to maintain market integrity and investor trust.

The eight activity-specific and other Rulebooks include:

Advisory Services Rulebook
Broker-Dealer Services Rulebook

Custody Services Rulebook
Exchange Services Rulebook
Lending and Borrowing Services Rulebook

VA Management and Investment Services Rulebook
VA Transfer and Settlement Services Rulebook
Virtual Asset Issuance Rulebook

In a major advancement, VARA has recently released Rulebooks Version 2.0, a comprehensive update to Dubai's virtual asset regulatory framework, with exciting updates related to Asset Referenced Virtual Assets (ARVA). The revised rulebooks introduce clearer standards, enhanced technology risk controls, and harmonised compliance requirements across all licenced activities. All Virtual Asset Service Providers (VASPs) operating under VARA's jurisdiction are required to fully comply with these updated regulations by June 19, 2025.

VARA Licencing

VARA's two-stage licensing framework offers a clear, transparent pathway for crypto firms to enter the Dubai market in a structured and compliant manner.

Stage 1 – Approval to Incorporate (ATI): Firms submit an Initial Disclosure Questionnaire (IDQ) to DET or a Free Zone, along with ownership details and a business plan. After paying 50% of the licence fee, eligible firms receive an ATI to complete the legal setup. No crypto activity is allowed at this stage.

Stage 2 – VASP Licence: With an ATI, firms apply for a full VASP licence by submitting required documents, attending reviews, and paying the remaining fees. A licence may be granted with conditions. VARA may reject applications that fall outside its scope.

Legacy Operating Permit (LOP): For firms active before Feb 2023, VARA offers a 12-month LOP with reduced fees and capital requirements. This allows a gradual transition to full compliance. Applications are submitted via DET or the relevant Free Zone.

VARA has been increasing enforcement actions against firms that continue to operate without a valid licence, and this marks a significant step in ensuring regulatory compliance and market integrity.

Dialogue and Cooperation: A New Model in Regulating Technology

The licencing process in many jurisdictions can feel uncertain and enforcement-driven, leaving applicants to navigate vague expectations. VARA takes a different approach. It sets clear requirements and expects transparency and collaboration from applicants. While reviews are thorough, the process is built on open dialogue, not confrontation. VARA conducts regular engagements and maintains ongoing communication with firms under its jurisdiction, aiming to understand their business models and support responsible compliance. Rather than viewing the regulator as an obstacle, firms in Dubai see VARA as a strategic partner in their long-term growth.

Ecosystem Readiness

Just five years ago, Dubai's crypto ecosystem was nascent. Today, it is home to leading crypto companies and top-tier talent—including innovators, technologists, compliance officers, blockchain developers, DeFi specialists, and risk analysts—drawn by the city's regulatory clarity and forward-looking infrastructure.

The DMCC Crypto Centre now houses over 650 Web3 and blockchain firms. The Dubai International Financial Centre (DIFC) has launched a Tokenisation Regulatory Sandbox, attracting a strong industry response, with 96 firms expressing their interest in participating in the initiative. In comparison, the EU and UK are still in the pilot phase of integrating distributed ledger technology (DLT) into capital markets. The EU's DLT Pilot Regime, which began in April 2023, is currently under review for potential reforms, including possible extensions beyond its initial scope. Similarly, the UK's Digital Securities Sandbox, operational since late 2024, is set to run until January 2029, providing a controlled environment for testing blockchain-based issuance and settlement of digital securities.

Singapore has finalised its stablecoin framework and maintains a rigorous licensing regime aimed at attracting high-quality firms while safeguarding consumer interests. In terms of adoption, Singapore ranks relatively high, supported by strong institutional involvement. However, the Monetary Authority of Singapore (MAS)—which regulates the sector—is a general financial regulator, not a dedicated virtual asset authority. Unlike Dubai's VARA, MAS oversees crypto alongside its broader responsibilities for banking, securities, and payments.

Countries such as Bahrain and South Africa are introducing licencing rules for exchanges and token issuers. However, in contrast, Dubai has built a fully integrated digital asset ecosystem, combining legal clarity, infrastructure readiness, and investor-friendly policies.

Consumer Adoption and Public Integration

Crypto adoption in the UAE is not confined to institutions. As of 2025, 25.3% of residents own crypto, and Dubai holds a global-leading "crypto obsession" score of 98.4, making it both a consumer and regulatory hub. This consumer-centric vision is also being embedded into the country's financial infrastructure. On 27 March 2025, the UAE Central Bank introduced an official symbol for the Dirham and announced the upcoming retail launch of the Digital Dirham (CBDC) by Q4 2025. The CBDC will be accessible through licenced banks, exchanges, and fintechs—aligning national monetary policy with global digital currency trends.

Further integrating digital assets into everyday finance, Dubai launched the region's first licenced tokenised real estate platform—Prypco Mint—on 25th May 2025. The platform allows UAE residents to invest in fractional property ownership from just AED 2,000. Developed in partnership with the Central Bank, VARA, and the Dubai Land Department, the initiative ensures legally binding ownership, transparent pricing, and secure custody via CMA accounts.

Investors receive legally documented ownership certificates, benefit from rental income and capital appreciation, and enjoy full transparency through features such as property details, pricing, and risk disclosures. Funds are secured via the Client Money Account (CMA) system, where investor money is held until transactions are completed. Currently limited to two licensed firms—Prypco and Ctrl Alt—the platform will gradually open to other qualified players and international investors. The initiative is set to scale globally and is projected to drive AED 60 billion in tokenised property transactions by 2033.

DIFC's Complementary Regime: Precision Meets Innovation

While VARA governs the broader Dubai area, DIFC has its own digital asset regime regulated by DFSA. It allows approved crypto tokens (Bitcoin, Ethereum, stablecoins) under strict transparency and AML conditions. Derivative and security tokens must be DLT-based and prospectus-backed. Privacy coins and algorithmic tokens are prohibited. The DIFC also launched its own Tokenisation Regulatory Sandbox, as mentioned earlier, and enacted the Digital Assets Law.

Dubai Isn't Catching Up—It's Leading the Way

As of 2025, most jurisdictions are still updating their crypto policies. The U.S. is phasing out enforcement-led regulation. The UK is still consulting. MiCAR is in transition.

In comparison, Dubai already has what others aspire to: