UAE Law and Practice Contributed by: Stefan Mrozinski, Gabrielle Margerison (nee Lowe) and Arnold Krutilins, White & Case LLP
2.4 Variations Between the Regulation of Fintech and Legacy Players Regulators in “onshore UAE” and “offshore UAE” do not differentiate between fintech participants and legacy participants per se. Differences in regulatory regimes are generally based on the risks associated with the activity being carried out. For example, a bank will attract higher lev - els of regulatory oversight and supervision than a payment services business offering payment initiation services and account information ser - vices. 2.5 Regulatory Sandbox In 2021, the CBUAE established a regulatory sandbox in “onshore UAE” for the insurance sector. In 2021, the CBUAE signed two sepa - rate memoranda of understanding with the ADGM and the DIFC to introduce a co-sandbox programme to permit fintechs to test innova - tive solutions under the existing sandbox pro - gramme. Most recently, in April 2024 the CBUAE pub - lished the Sandbox Conditions Regulation. As described in 1.1 Evolution of the Fintech Mar- ket , the Sandbox Conditions Regulation has been issued to permit participants enrolled in the Regulatory Sandbox to test their technologically innovative financial business models, products, services and solutions which may benefit con - sumers and/or the wider industry for a duration determined by the CBUAE, without having to obtain a full regulatory licence. The ADGM offers the ADGM RegLab. A regula - tory sandbox forms part of the ADGM RegLab’s offering that provides a controlled environment for fintech participants to test and develop their innovative fintech solutions. In the RegLab, regulatory requirements are applied based on a
In the ADGM, the Financial Services Regulatory Authority (the “FSRA” ) regulates virtual assets and virtual asset-related activities. The FSRA’s “Virtual Asset Framework” sets out provisions targeting a range of risks associated with virtual asset-related activities, including risks relating to money laundering and financial crime, consumer protection, technology governance, custody and exchange operations. The FSRA subsequently issued “Guidance – Regulation of Virtual Asset Activities in ADGM” to provide further support to persons when carrying out virtual asset-related activities in the ADGM to interpret its rules and regulations. Payment services are also regulated by various ADGM regulations and FSRA rules. In the DIFC, the Dubai Financial Services Author - ity (the “DFSA” ) regulates virtual assets and the provision of connected financial services. The DFSA’s regulatory framework is set out in the DFSA Rulebooks, which distinguish between investment tokens as either security tokens or derivative tokens, and crypto tokens. The provi - sion of payment services is also primarily regu - The compensation models vary depending on the nature of a fintech’s business and the reg - ulatory rules applicable to the fintech. Certain restrictions may apply depending on the sector in which a fintech operates. The authors are not aware of any specific regu - latory restrictions in “onshore UAE” or “offshore UAE” with respect to the compensation mod - els that industry participants may use to charge customers. However, where a fintech chooses to provide Islamic finance, it will be required to comply with the principles of Sharia in determin - ing its compensation model, including consider - ing matters such as the charging of interest. lated in the DFSA Rulebooks. 2.3 Compensation Models
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