Senior Partner - Financial Markets and Digital Assets
Founder and Managing Partner - Financial Markets and Digital Assets
Principal Advocate - Litigation (UAE)
Structuring a crypto or fintech business in the UAE requires careful upfront planning to align with the country’s regulatory framework. The first step is choosing where to incorporate and license the business. The UAE offers multiple jurisdictions: the mainland (onshore UAE under federal law) and various free zones like ADGM in Abu Dhabi, DIFC in Dubai, DMCC in Dubai, and others. Each has its own regulations for fintech and crypto. A key legal consideration is that operating any crypto-related business without a license is illegal in the UAE Federal law (via the SCA and Central Bank) as well as emirate-level regulators have made it clear that activities such as crypto trading, exchange services, or even crypto brokerage cannot be done in an unregulated manner. Therefore, the foundational step is to determine under which regulator your business model falls and obtain the necessary approval.
For example, if you plan to run a crypto exchange targeting retail customers in Dubai, you would likely incorporate a company in Dubai and apply for a license from VARA (the Virtual Assets Regulatory Authority). This involves preparing incorporation documents, renting an office (as required by Dubai’s commercial laws), and drafting a detailed business plan and compliance policies to submit with the license application. VARA will review the shareholders, directors, and the business model for fitness and propriety. On the other hand, if your business is more of a fintech (like a payments app or a crypto wallet service) that doesn’t involve onshore Dubai customers, you might consider ADGM or DIFC, which have comprehensive fintech regimes. In ADGM, for instance, you’d register an ADGM company (which can be 100% foreign-owned) and then go through the Financial Services Regulatory Authority (FSRA) to get an appropriate license (such as providing custody or operating a multilateral trading facility). Free zones like ADGM and DIFC operate under English common law principles and often simplify corporate formation – you can set up a company relatively quickly with share capital that meets the regulator’s minimum requirements. They also allow flexibility in ownership structuring, which is helpful if you have foreign investors or plan to allocate shares to venture capital funds.
Another part of structuring is choosing the legal entity form and corporate structure. Traditional choices are a private limited company (Ltd) in free zones or a mainland LLC. In free zones, you typically don’t need a local Emirati partner (unlike some mainland entities in the past), so you can maintain full control.
Corporate structuring may also involve setting up a holding company vs an operating company. Some crypto entrepreneurs set up an offshore holding (in a jurisdiction like the BVI or Cayman Islands) to hold intellectual property or tokens, and then an onshore UAE entity to conduct operations. This can be for tax optimization or to cater to international investors who prefer offshore vehicles. However, one must be mindful that the UAE now has economic substance regulations and a new corporate tax for mainland companies, so where value is created might attract taxes if not structured properly (though most free zone financial entities remain tax-free on local income as of now).
Legal services during this structuring phase will include drafting the Memorandum of Association (MoA) or Articles of the company to ensure it has the objects to conduct crypto business, preparing shareholder agreements if there are multiple founders or investors, and ensuring compliance with any ownership restrictions.
Notably, free zones like DIFC and ADGM have no nationality restrictions on ownership (you can have 100% foreign ownership easily ), and no restrictions on capital repatriation or hiring foreign talent , which greatly simplifies structuring for a crypto startup – you can bring in expatriate experts and send profits abroad without government approvals. These advantages mean many crypto and fintech startups opt for free zones to incorporate.
Finally, when structuring a crypto business, one must address how the crypto- specific operations fit into the legal entity. If the company plans to issue a token, for example, lawyers might advise creating a separate entity (like a foundation) for the token issuance to ring-fence liabilities. If the business involves both fiat and crypto handling, sometimes two entities are created – one to get a traditional payment license from the Central Bank (for fiat money services) and another to get the crypto license (from VARA/SCA). The two then sign service agreements between them. This kind of structure can ensure that each entity is compliant within its domain. In summary, the legal steps include: selecting the right jurisdiction and license, incorporating the company with appropriate constitutional documents, obtaining regulatory approval, and structuring any additional entities or contractual arrangements needed for the business model. Engaging a law firm with UAE fintech experience is crucial at this stage – they will help prepare the license applications, interface with regulators, draft all needed documents, and basically project-manage the establishment of the business so that from day one, the company is on solid legal footing.
Running a crypto or fintech business in the UAE comes with strict corporate governance requirements, especially once you are licensed. Regulators like VARA (Dubai) and FSRA (ADGM) expect a high level of governance akin to that of a bank or traditional financial institution. One fundamental requirement is having a clear company ownership and management structure. VARA’s rulebook, for instance, requires that a crypto company’s structure be transparent with an identifiable chain of owners and “Ultimate Beneficial Owners” (UBOs) to facilitate effective oversight.
In practice, this means you must disclose all significant shareholders (often anyone owning 25% or more) and any parent companies up the chain, and you can’t obscure control through complex nominee arrangements without informing VARA.
Additionally, VARA mandates that the crypto business be a UAE legal entity (incorporated in Dubai) – you cannot operate a Dubai crypto venture as an overseas company branch or a DAO without a legal entity. Even novel structures like DAOs (Decentralized Autonomous Organizations) are addressed: if a company’s governance involves a DAO or similar, VARA will require explanation of how decisions are made and compliance ensured in such a setup.
Governance also extends to board and management appointments. Typically, crypto companies must have certain mandated officers. For example, ADGM’s FSRA and the DFSA in DIFC require an Senior Executive Officer (SEO), who is essentially the CEO responsible for daily operations and must be resident in the UAE. They also require a Compliance Officer and a Money Laundering Reporting Officer (MLRO) – these roles can sometimes be the same person or outsourced, but the individuals must be approved by the regulator and usually need to be UAE-based. These officers are responsible for ensuring the firm follows all rules and for reporting to regulators. The Senior Executive Officer often has to have a certain number of years of relevant experience (ADGM, for instance, looks for ~10 years of financial or crypto industry experience for the SEO role). Corporate governance guidelines also insist on segregation of duties – the person trading or managing funds shouldn’t be the same person reconciling accounts, for example. Regulators may require an independent director or at least a non-executive director on the board to provide oversight (ADGM encourages a non-executive chairman for instance ).
Operationally, one challenge is meeting the continuous compliance and reporting obligations that come with the license. UAE regulators require regular reports – VARA might ask for quarterly compliance reports, and the Central Bank (if applicable) for monthly transaction reports. Audits are frequent: financial audits yearly, and often specialized audits like IT security audits. For example, ADGM mandates annual IT system audits by independent experts for exchanges to ensure cybersecurity and continuity plans are solid. From a governance perspective, this means the company must maintain proper records and internal controls. Crypto firms have to implement internal policies covering everything from employee trading (to prevent conflicts of interest) to disclosure of wallet addresses used for company funds.
Another operational challenge in the crypto space is keeping up with evolving regulations. The UAE is proactive in updating its rules as the industry changes. A crypto company’s board and legal counsel must stay on top of new VARA rulebook updates or Central Bank notices. For instance, if VARA issues a new rule prohibiting a certain high-risk token or a new marketing guideline (like the content of crypto ads) , the company needs to quickly adapt its operations and policies. Corporate governance bodies (the board or a compliance committee) need to incorporate these changes into strategy promptly. This requires that governance is not just a check- box, but an active process – many firms hold quarterly board meetings specifically to review compliance updates.
Additionally, governance in a crypto firm includes risk management for assets. Crypto is volatile, so if the company holds customers’ assets, it must have robust custodial arrangements, insurance if possible, and clear rules on segregation of client assets vs the company’s own funds. Regulators like the DFSA require that custody of crypto assets is handled with specific safeguards and that client assets are not commingled. Implementing this operationally might involve using third-party custodians or multi-signature wallets with board oversight on withdrawals.
Finally, there’s the challenge of human capital and culture. Governance is only as effective as the people running the company. In the UAE crypto sector, there’s competition for qualified compliance officers and knowledgeable directors who understand both finance and crypto. Companies often need to invest in training for their staff about UAE regulations and foster a culture where compliance is everyone’s responsibility. Unlike some other industries, a lapse in a crypto company (say, processing a transaction for a sanctioned person or a big AML failure) can lead not only to fines but potentially loss of license or even criminal liability for senior managers. So, from day one, setting a tone at the top that prioritizes good governance is critical.
In summary, corporate governance requirements for UAE crypto/fintech firms include establishing a transparent company structure, appointing approved and qualified individuals in key roles, instituting rigorous internal controls and policies, and actively managing compliance and risks. The operational challenges revolve around implementing these governance practices daily and keeping pace with regulatory changes – all while running a fast-moving crypto business. Strong legal counsel and experienced compliance professionals are invaluable to meet these challenges.
Navigate the complexities of UAE crypto and fintech regulations with our experienced legal team. Contact us today!
Key UAE crypto regulators include the national Securities and Commodities Authority (SCA), Abu Dhabi’s FSRA (ADGM), Dubai’s VARA, and the DIFC’s DFSA.
The UAE’s crypto regulatory landscape is multi-layered, and the approach to licensing/compliance can vary significantly by jurisdiction:
In summary, VARA offers a broad, crypto-specific regime (great for exchanges,
lending platforms, etc., but with significant compliance overhead and cost), ADGM (FSRA) offers a comprehensive but more traditional financial licensing approach (with possibly more institutional focus and high standards), DIFC (DFSA) provides a very controlled environment mainly for institutional-oriented crypto services (limited token scope), and DMCC/other free zones provide launch pads under SCA oversight primarily for less sensitive crypto activities or as interim solutions.
Businesses often decide based on their needs: if you want to be a major retail exchange in UAE – VARA or ADGM; if you are a proprietary trading desk or blockchain project – DMCC might suffice; if you manage a crypto fund – DIFC or ADGM for the common law and reputation; and so on. Each comes with slightly different compliance nuances, but all require solid AML controls and governance as discussed. The good news is that between these options, almost every crypto business model can find a suitable legal home in the UAE, provided they are willing to comply with the relevant regulator’s framework.
Access to banking is a pivotal aspect of operating a fintech or crypto business, and in the UAE it requires strategy and persistence. Traditional banks in the UAE have been cautious with crypto firms, but the environment is improving as regulations mature. For a crypto/fintech firm, the first step is usually to present itself as a well-regulated, transparent business. Banks will typically ask: are you licensed by VARA, SCA, ADGM, or DFSA? A firm that can answer “yes, here’s a copy of our license” is already miles ahead in the banking game. Being regulated gives banks confidence that the business is accountable to a government authority and following AML/KYC rules. For instance, after obtaining a VARA license, several crypto companies reported smoother interactions with banks, as the license serves as a green light that the company isn’t a fly-by-night operation.
That said, even licensed companies need to pick their banking partners carefully. Not all banks in the UAE are open to holding accounts for crypto-related funds. Firms often start with banks known for fintech friendliness. Emirates NBD and Commercial Bank of Dubai (CBD) are two large banks that have publicly shown interest in digital assets. Some crypto businesses have also had success with Mashreq Bank and RAKBANK, especially fintech startups, as these banks have divisions focusing on innovation. In fact, RAKBANK has partnered with RAK Digital Assets Oasis to support companies in that free zone , indicating a willingness to bank crypto businesses that are vetted by the free zone. Another avenue is international banks present in UAE – e.g., Standard Chartered (with its crypto custody services) or HSBC – though they tend to cater only to very well-established, higher-capital companies in the sector.
When approaching a bank, a crypto/fintech firm should be prepared to explain its business model in plain terms and outline risk mitigation. This often involves educating the bank’s compliance team: explaining how the company screens customers, how it prevents illicit crypto transactions, and how it complies with UAE law (like adhering to the travel rule and sanctions screening). It’s common for banks to request organizational charts, details on any foreign entities in the group, source of funds for initial capital, and projected volumes of transactions. Essentially, the bank wants to ensure that by banking the company, it’s not inadvertently facilitating money laundering or facing undue regulatory risk. Law firms often assist at this juncture by preparing letters or documentation for the client that describe the legal and regulatory status of the business in a way that addresses bank concerns.
Some fintech startups in the UAE bypass traditional banks at the start by using payment institutions or wallets. For example, there are licensed payment service providers in the UAE that can hold client money and provide IBANs for customers without being a full bank (these operate under the Central Bank’s Stored Value Facilities regulations). A crypto brokerage could use such a provider to handle customer fiat flows – the customers pay the provider, which then API-connects to the crypto platform. Companies like YAP or MAGNATI in the UAE provide fintech banking-as-a-service that some startups leverage. However, ultimately most serious businesses will want their own bank account for operational funds and revenue.
It’s also worth noting that building a relationship with the bank is crucial. This might mean regular communication and even inviting the bank’s compliance officers to your office to see how operations work. Demonstrating surplus compliance – e.g., sharing your independent audit reports or introducing your compliance officer to the bank – can alleviate fears. Some crypto firms have had to start with restricted accounts initially (for example, an account that only receives funds but can’t send international transfers until a track record is built) and gradually earn full privileges.
Another strategy is to use the fact that free zone authorities can mediate. ADGM and DIFC, for instance, have their own networks and sometimes can facilitate introductions to banks for their member companies. If you are ADGM-licensed, the FSRA and ADGM authority can endorse that you are a reputable company, which helps. The DMCC has also worked with banks to smooth account opening for Crypto Centre companies by verifying to the bank that the company is operating under SCA- approved conditions. Thus, leveraging the reputation of your licensing authority can help in securing banking.
Finally, consider multi-jurisdictional banking. Some UAE crypto companies keep an account in the UAE for local transactions and payroll, but use an account in a crypto-friendly jurisdiction (like Switzerland, Bahrain, or offshore) for larger transactions or crypto liquidity management. As long as this is done transparently and doesn’t violate any UAE laws (and the company reports cross-border transfers properly), this can be a way to ensure redundancy. However, any cross-border movement must respect the UAE’s transfer rules – for instance, reporting to the Central Bank if money flows exceed certain thresholds, and ensuring such accounts abroad are only used for legitimate, declared purposes.
In conclusion, while a few years ago getting banking in the UAE as a crypto firm was extremely difficult, it has become manageable with the right preparation: obtain the relevant license, maintain excellent compliance, approach receptive banks with full disclosure, and use free zone support and interim fintech solutions as needed.
Persistence is key – it might involve knocking on several banks’ doors, but success is increasingly likely now that UAE’s own regulators encourage banks to engage with the crypto sector under proper oversight.
Crypto and fintech businesses in the UAE rely on a variety of commercial contracts to operate smoothly and protect their interests. Key agreements include:
When it comes to investment structures, crypto and fintech businesses often have to choose between raising funds through equity or through token sales (or a combination). The UAE, through the SCA, has a framework for Security Token Offerings (STOs) and initial coin offerings, thanks to the SCA’s 2020 Virtual Asset regulations. If a project wants to issue a token to investors in the UAE, it must either do so in one of the free zones with the regulator’s nod or through SCA’s approval if targeting the mainland. Often, startups will raise equity from VCs for initial funding (governed by standard investment agreements under UAE or English law) and then perhaps do a token issuance for their platform’s utility or as a reward mechanism.
Each approach has legal implications: equity investment is pretty straightforward legally (shares in a UAE holding company or a convertible note that converts to shares), whereas a token issuance might trigger compliance needs – e.g., if the token is treated as a security, you’d need to file a prospectus or get an exemption, or if it’s a pure utility token, you still need to ensure it’s not crossing into regulated territory (VARA has an Issuance Rulebook that covers when and how tokens can be issued by licensed entities ).
Many fintechs in the UAE also consider setting up an investment holding structure in the DIFC or ADGM to tap into their venture capital ecosystems. DIFC and ADGM have specific Venture Capital Fund regimes that make it easier to set up a fund to raise money. For a startup, this could mean they accept investment from a fund that is set up in those zones. From the startup’s perspective, the investment structure may involve a Subscription Agreement and possibly a Share Purchase Agreement if issuing new shares, or a convertible instrument (like SAFE notes adapted to UAE law). If the company is part of an international group, sometimes the investment happens at an offshore parent level with a simple agreement for future tokens (SAFT) if investors are actually buying rights to future tokens.
One important contract to highlight is if the crypto business is customer-facing – user asset custody agreements. If users will deposit fiat or crypto, the terms need to clarify the relationship: is it a loan to the platform? Is the platform acting as agent or trustee? For instance, some exchanges state in their terms that crypto assets remain the property of the users and the company is just the custodian; others have terms where the user lends the crypto to the company (especially if offering yield). UAE law doesn’t have a lot of precedent for crypto custody, so using clear contractual language is the main way to define these relationships and responsibilities.
Finally, smart contract considerations: If a part of the business logic is in a smart contract (say a DeFi protocol or an automated escrow), the legal enforceability of that needs to be addressed. The UAE has e-commerce and electronic transactions laws which generally recognize electronic records and signatures as valid. In fact, smart contracts are acknowledged as binding under UAE law (like under the Electronic Transactions Law) provided they meet certain conditions.
Nonetheless, it’s wise to have traditional contracts that complement any smart contract usage – for example, a terms of use might say “transactions executed via our smart contract are deemed final and binding, and by using it you agree to the contract’s code outcomes,” etc. This ensures that there is legal backing to what the code does.
In summary, a UAE crypto/fintech business will juggle a variety of contracts: internal ones (shareholder agreements, employment contracts), external commercial ones (with service providers, banks, customers), and investment agreements for fundraising. Each should be drafted or reviewed by legal counsel to ensure compliance with UAE law and alignment with the unique aspects of crypto transactions. Solid contracts help prevent disputes and regulatory issues down the line – they define rights and obligations clearly in an industry where things can evolve quickly. As the company scales or enters new partnerships, these contracts may need updates or new ones (for example, entering a liquidity sharing agreement with another exchange, or a technology licensing deal if you use or license out a trading engine). Legal services thus remain a constant need – from drafting and negotiation to ensuring the contracts stay current with laws.
The UAE has seen several crypto and fintech firms successfully navigate its regulatory environment. Let’s look at a few scenarios that highlight legal and strategic best practices:
Lessons and Best Practices: These cases illustrate a few key points for crypto/fintech firms in the UAE:
In conclusion, crypto and fintech firms can absolutely establish and thrive in the UAE by leveraging the country’s progressive regulations, choosing their licensing jurisdiction wisely, maintaining strong compliance and governance, and forging the right partnerships. The UAE government actively wants to be a global crypto hub, so the door is open – it’s up to each firm to step through in a compliant, strategic manner. With the right legal advice and business strategy, the UAE offers a fertile ground for crypto exchanges, blockchain projects, payment startups, and more. For specific guidance on crypto-to-fiat transactional issues such as banking integration and compliance, see our related article Crypto-Fiat Transaction Legal Support in the UAE, which complements this discussion.
