The United Arab Emirates (UAE) presents a thrilling opportunity for crypto startups. Entrepreneurs need to be aware of and tread lightly within its complicated regulatory landscape. The UAE is made up of seven emirates and functions under a dual legal system. This complex federal structure requires an intentional, regulatory-focused gauntlet. The UAE is deeply committed to fostering a culture of innovation while ensuring safety and financial stability. To prosper, founders must prioritize regulatory structuring as an essential element of their go-to-market strategy. For any crypto venture, it’s important to know the difference between the details of mainland and free zone regulations. This understanding is key to finding an early beachhead in this developing market.

Understanding the UAE's Legal Landscape

The “onshore” territory, or the mainland, includes more than 45 economic free zones. These zones provide a variety of investment incentives and function within the judicial and legal structure of the mainland.

The UAE’s crypto licensing landscape can be daunting. Even experienced venture capitalists, serial entrepreneurs, and large, reputable global law firms have trouble navigating it. Every jurisdiction has their own unique specificities that founders need to be aware of to stay compliant and avoid costly mistakes.

Regulatory Bodies and Their Roles

This new Regulation presents an opportunity for the Central Bank of the UAE (CBUAE) to take a leading role in regulating certain crypto activities. These activities extend to the use of AED-denominated stablecoins, crypto payments in general, and remittances. The CBUAE further clears foreign stablecoins as long as these cryptos are compliant with the regulatory framework of the country.

Moving further into the financial free zones, there are two key regulators that govern the financial activities. Abu Dhabi Global Market’s (ADGM) Financial Services Regulatory Authority (FSRA) is the independent financial regulator for ADGM and is the financial watchdog for its jurisdiction. In 2018, the FSRA developed one of the most advanced regulatory frameworks for digital assets. This historic accomplishment established a new standard of excellence for the rest of the industry to follow.

The FSRA and ADGM operate under the UAE's civil law and are governed by the UAE's court system, providing a clear legal framework for businesses within these zones. On the mainland side, businesses need to be aware of the CBUAE. Finally, there are two other important regulators to focus on depending on their distinct actions.

Strategies for Success in the UAE

Regulatory structuring ought to be more of a founders’ guiding principle and central element to their go-to-market strategy. This proactive approach is required in order to successfully navigate the UAE’s unique regulatory landscape and thrive. The UAE will not accept short-cuts, and attention to detail in following the rules to the letter is critical.

A recommended approach is to start narrow. Limited to just the UAE market, get one license, gain some momentum, then scale across the UAE. This approach balances a startup’s need to lay the groundwork to scale while ensuring they grow in a thoughtful manner. In addition, Dubai’s regulator recently approved Ripple’s RLUSD stablecoin, emphasizing the area’s forward-facing approach to digital assets.