UAE Law and Practice Contributed by: Irina Heaver and Zainab Kamran, NeosLegal
under Federal Decree-Law No 6 of 2025 is broader, covering digital representations of value or rights that can be transferred and stored electronically using distributed ledger technology. VARA’s definition is the widest, expressly including virtual tokens and any digital representation used as a means of exchange or payment. Within the financial free zones, the FSRA in ADGM focuses on the functional characteristics of virtual assets as a medium of exchange, unit of account or store of value, while the DFSA in DIFC operates with a dual framework, namely a broad definition of Digital Assets under the Digital Assets Law No 2 of 2024, and a narrower definition of Crypto Tokens in its rulebook covering tokens used as a medium of exchange or for payment or investment purposes. Prohibited Activities Privacy tokens and algorithmic stablecoins are pro- hibited across all UAE jurisdictions. Retail and Professional Client Distinction Both the CMA and VARA frameworks establish tiered client classifications. Under the CMA framework, clients are classified as retail investors, professional investors or counterpar- ties. Professional investors fall into three sub-cate- gories: professional by nature, covering institutions, governments, central banks, regulated entities, listed companies and similar bodies; professional by ser- vice, covering credit facility providers and arrangers of structured financing transactions; and professional by assessment, which includes natural persons with net assets of at least AED4 million excluding primary residence, certified or appropriately experienced indi- viduals, and qualifying undertakings meeting speci- fied financial thresholds. Counterparties are licensed entities that also qualify as professional investors by nature. The default classification is retail unless a cli- ent meets the criteria for a higher category, and clas- sifications must be reviewed every three years. Under the VARA framework, three investor catego- ries apply: retail investors; qualified investors, namely individuals meeting a net asset threshold of AED3.5 million or an annual income of at least AED700,000,
with virtual assets capped at 50% of the net asset calculation; and institutional investors, namely enti- ties regulated by competent financial authorities. Enhanced consumer protection and suitability require- ments apply to retail clients under both regimes. The financial free zones apply their own professional client classifications, broadly aligned with their conventional financial services frameworks. Upcoming Regulations The most significant near-term development is the transitional period under Federal Decree-Law No 6 of 2025, which extended CBUAE oversight to virtual asset payment services and DeFi-related activities, with existing operators required to comply or cease in-scope activities by September 2026. The CMA and VARA formalised a mutual recognition framework in August 2025, enabling VASP licences issued by either authority to be recognised by the other, with joint supervisory protocols being imple- mented on an ongoing basis. At the international level, the UAE’s CARF reporting obligations take effect from 2027. 2.3 Regulated Firms and Legal Wrappers The use of a fund or other legal wrapper does not materially alter the analysis set out above. Regulated activities involving virtual assets require authorisation from the relevant regulator regardless of the vehicle through which they are conducted, and the interposi- tion of a fund structure does not affect the licensing, prudential or conduct obligations applicable to the underlying activity. 2.4 Token Issuance Onshore UAE VARA operates the most developed token issuance regime in the UAE. Under the Virtual Asset Issuance Rulebook, virtual assets are classified into three cat- egories. Category 1 VAs, namely fiat-referenced virtual assets and asset-referenced virtual assets, require the issuer to hold a VARA licence. Category 2 VAs, namely all other non-exempt virtual assets, do not require the issuer to obtain a licence but may only be offered to persons in the UAE through a VARA-licensed distribu- tor. Exempt VAs may be issued without prior registra- tion or approval.
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