Over the past five years, the United Arab Emirates (UAE) has emerged as one of the most popular destinations worldwide for cryptocurrency companies. Both the UAE’s government and its two largest Emirates - Abu Dhabi and Dubai - have proactively established a regulatory framework that not only encourages digital asset innovation, but also provides transparent compliance requirements for digital asset businesses — leading Coinbase CEO Brian Armstrong and other crypto leaders to consider operating in the region.
A unique feature of the UAE is its ‘free zone' model. These designated areas offer businesses an environment that differs from anything else in the region. Companies incorporating in these free zones benefit from expedited registration processes, generous tax exemptions, and foreign ownership rights, among other perks.
UAE’s crypto-friendly free zones offer regulatory certainty
Of the 46 free zones in the UAE, three have implemented regulations designed to accommodate digital asset activity. These free zones - Abu Dhabi Global Market (ADGM), Dubai International Financial Centre (DIFC), and Dubai Multi Commodities Centre (DMCC) - have each implemented their own unique regulatory frameworks to entice crypto business, Web3 firms and blockchain technology companies from around the world. Some of these free zones inherit the regulations and regulators of their Emirate; others have their own, separate regulations and regulators.
The Emirate of Abu Dhabi
Abu Dhabi, the UAE’s capital and largest Emirate, is currently diversifying its economy to include a vibrant technology and innovation sector. That diversification effort is being led in part through the creation of a tech ecosystem called Hub 71, which just launched the Hub 71+ Digital Assets with more than $2 billion in capital to create an ecosystem dedicated to developing Web3.0 businesses. Hub71 is located in Abu Dhabi’s free zone, the Abu Dhabi Global Market (ADGM), which is the emirate’s primary location for the digital asset industry.
Abu Dhabi Global Market (ADGM)
The ADGM is one of the first jurisdictions in the world to enact a comprehensive regulatory framework for the digital asset industry and has consistently published guidelines for digital asset entities to follow in order to stay compliant. Its regulator – the Financial Services Regulatory Authority (FSRA) – oversees ADGM’s Regulatory Laboratory (RegLab) sandbox, a program that provides a controlled environment for FinTech participants to develop and test innovative solutions in areas like DeFi. Notable crypto platforms registered or in the process of registering in ADGM include Binance, SEBA Bank, Securrency, M2, Burjx, FNS, Himalaya, BitOasis, Matrix, and Midchains.
Read our overview of crypto regulations in ADGM to learn more about the structure of the free zone.
The Emirate of Dubai
Dubai has actively courted digital asset firms to establish ties to the Emirate. Dubai established the Virtual Asset Regulatory Authority (VARA) in March 2022 to provide a comprehensive regulatory framework for the crypto industry, and in July that year also launched the Dubai Metaverse Strategy, with the goal of attracting more than 1,000 blockchain and metaverse-related companies. Notable crypto platforms registered in Dubai include Binance, BitOasis, Bybit, Crypto.com, Huobi, Komainu and OKX.
Dubai has two notable crypto-friendly free zones located within its borders: the DMCC, which is regulated by Dubai’s financial regulator VARA, and the DIFC, which has its own financial regulator, the Dubai Financial Services Authority (DFSA). Both of these free zones offer their own collection of incentives and benefits for digital asset businesses that register.
Dubai Multi Commodities Centre (DMCC)
With its friendly regulatory environment and stated objective to be a leader in the Web3 industry, the DMCC has wholly embraced the digital asset space.
In March 2021, DMCC signed an agreement with the UAE’s Securities and Commodities Authority (SCA) to establish a crypto regulatory framework in the free zone. The agreement outlined that the DMCC would operate under the regulations of the UAE, but still retain the ability to implement its own set of crypto rules. Shortly after, in May, the DMCC launched its Crypto Centre, an ecosystem for crypto businesses to help them develop crypto and blockchain technologies. By January 2023, more than 500 crypto-related businesses were located in its Crypto Centre, making it “the largest concentration of crypto and blockchain companies in the region.”
Dubai International Financial Centre (DIFC)
The DIFC has its own financial regulator - the Dubai Financial Services Authority (DFSA) - and established its own regulations for the digital asset industry through its crypto token regulatory regime.
In an effort to attract more blockchain and Web3.0 firms, the free zone launched its “DIFC Metaverse Platform” in alignment with the Dubai Metaverse Strategy, with the goal of becoming a global metaverse leader.
The emirate of Ras Al Khaimah
RAK became the latest Emirate in the UAE to offer a free zone for the digital asset industry to join. In February 2023, RAK’s government announced that it plans to launch RAK Digital Assets Oasis, the world’s first free zone dedicated to digital and virtual asset companies. The free zone will open for applications in the second quarter of 2023.
UAE’s enduring economic appeal now extends to crypto
UAE is considered by many to be a stand-out economic performer in the Middle East. Its commitment to diversify its economy away from hydrocarbons has led the country to invest heavily in new industries, especially technology. These efforts have led it to being called the “Tech Hub of the Arab World,” as it attracts new companies through its regulatory and development programs. Included in its pivot to technology has been a significant investment in digital assets development. Programs such as the ADGM’s regulatory sandbox RegLab, Dubai Metaverse Strategy, RAK’s Digital Asset Oasis, Abu Dhabi’s Hub 71 and the DMCC’s Crypto Centre all position the UAE to be a central digital asset industry hub for the foreseeable future.
In support of the UAE’s growing crypto ecosystem, Solidus Labs’ second Digital Asset Compliance and Market Integrity (DACOM) Summit of the year was held in Dubai on May 4th, 2023. The summit featured a keynote fireside chat with Dan Berkovitz, former U.S. SEC General Counsel and CFTC Commissioner, and conversations with many other crypto industry leaders and regulators, like:
- Henson Orser, CEO of Dubai’s Virtual Assets Regulatory Authority (VARA)
- Ian Johnston, CEO of the Dubai Financial Services Authority (DFSA)
- Simon O’Brien, Director of Markets at ADGM’s Financial Services Regulatory Authority (FSRA)
- Peter Smith, Managing Director and Head of Strategy, Policy, and Risk at DFSA - the financial regulator of the DIFC free zone
- And Patrick Campos, Chief Strategy Officer at Securrency