Four key considerations for digital asset firms eyeing the UAE

The UAE continues to experience momentum and innovation in digital assets. With the Central Bank’s recent regulation for payment tokens, the approval of the first UAE dirham-backed stablecoin and significant startup and investment activity, the region is actively shaping its role and the future of web3.

In April, Abu Dhabi’s sovereign wealth fund ADQ, First Abu Dhabi Bank and IHC announced plans to jointly launch a new dirham-backed stablecoin. This initiative adds momentum to the country’s efforts to become a global hub for digital assets and fintech innovation.

While the landscape expands with potential, it’s also layered with complexity. For years, FTI Consulting has worked closely with digital asset businesses navigating the global terrain. Throughout numerous engagements, the team has observed four core decisions that are integral to successful implementation and growth.

For digital assets businesses entering the UAE, these include:

Understand the regulatory landscape

The UAE isn’t a single regulatory body. At the federal level, the Securities and Commodities Authority is responsible for regulating virtual asset service providers across the country. In Dubai, most federal duties are delegated into Dubai’s Virtual Assets Regulatory Authority. Financial free zones operate separately, where the Dubai Financial Services Authority of Dubai Financial International Centre and the Financial Services Regulatory Authority of Abu Dhabi Global Market offer specialised frameworks.

In recent years, the UAE has created a mature digital assets policy environment. Initiatives like the CBUAE’s Payment Token Services Regulation and VARA’s clear licensing paths are ushering confidence in the sector.

Still, businesses must understand which regulator they need to work with, which licenses their activities fall under and whether their virtual assets fall under digital securities, virtual assets, or other classifications like NFTs or tokenised real-world assets. Lack of regulatory awareness can lead to delays, duplication or denials.

Choose the right jurisdiction

Digital asset firms must carefully consider which jurisdiction to set up in. Dubai and Abu Dhabi continue to lead with distinct propositions. Dubai’s VARA is a bespoke regulator established to support and oversee digital innovation in the space. ADGM in Abu Dhabi, meanwhile, offers English common law, a comprehensive framework under FSRA, and global recognition.

Ultimately, firms must weigh access to capital, legal comfort, sector-specific regulations and operational incentives when choosing a home base.

Select the best economic free zone

The UAE is home to more than 40 multidisciplinary free zones, many of which offer 100 per cent foreign ownership and simplified business setup processes. But in digital assets, only a handful offer the tailored infrastructure and licensing options that virtual asset firms require.

Emerging initiatives like RAK DAO in Ras Al Khaimah — the world’s first free zone dedicated entirely to digital and virtual asset companies — offer promising incentives. Still, the framework is yet to fully mature and gain market validation, particularly in comparison to other free zones.

Free zones like DMCC, DWTC and RAK DAO, or financial free zones like ADGM and DIFC, stand out due to their focused support for blockchain and web3 businesses, including access to sandboxes, advisory networks or tokenization frameworks. Hub71 in ADGM, for instance, houses over 300 startups and offers dedicated web3 incentives under its Hub71+ programme.

Choosing the right zone can mean the difference between navigating bureaucracy or accelerating growth.

Secure a banking partner and knowledgeable advisors

Many digital asset firms in the UAE face challenges opening corporate bank accounts and the options are still limited. This is gradually changing. The Central Bank’s 2023 guidance on how licensed financial institutions should assess and work with VASPs has helped banks better understand risk thresholds and compliance expectations.

Strong due diligence processes, clarity around business models and an understanding of local anti-money laundering and other anti-fraud requirements are essential to building trust with banking partners. Working with external advisors who are experts in the digital assets industry and understand the technical, operational and regulatory nuances across jurisdictions is essential to conducting adequate diligence and establishing a strong foundation for growth. Firms are recommended to engage with partners early to avoid struggles at a later stage.

The bottom line

The UAE is taking consistent and meaningful steps to underpin a growing digital assets market. The country continues to serve as an example of how to create policies that will enable and maintain an ecosystem over the long term.

Importantly, for businesses looking to make the move, success requires much more than enthusiasm. It demands strategy. By navigating regulation carefully, choosing the jurisdiction and free zone that fits the business’s unique needs and building strong banking relationships, firms can avoid common pitfalls. This is what can create a posture that will thrive in this evolving environment.

The writer is the MD, Blockchain and Digital Assets, Technology Advisory, FTI Consulting Middle East.