The crypto law alphabet soup of the UAE

Opinion by: Irina Heaver, crypto lawyer

Any crypto entrepreneur trying to navigate the United Arab Emirates’ crypto ecosystem inevitably encounters the myriad acronyms used in the country’s legal landscape. From the SCA and VARA to the DMCC, ADGM and DFSA, what do these mysterious combinations of letters stand for, and how does one navigate this complex maze?

Moreover, is this abundance of acronyms and jargon an efficient feature of a system that promotes itself as the number one global crypto hub? Does this complexity strengthen the ecosystem, or is it a fundamental flaw in this self-proclaimed global crypto hub?

What do all these acronyms stand for?

To make this more digestible, let’s divide the acronyms into three main categories: regulators, free zones and government initiatives.

Regulators

The UAE has multiple regulatory authorities, which may seem confusing at first, but this is not a bug. Instead, it is a feature that, if navigated correctly, can be highly advantageous.

Let’s begin with the primary federal regulator, the SCA (formerly known as ESCA). SCA stands for the Securities and Commodities Authority, established in 2000. This authority regulates and supervises the UAE’s financial markets, including the DFM (Dubai Financial Market) and the ADX (Abu Dhabi Securities Exchange). It also oversees virtual assets and cryptocurrencies across the UAE, except for the financial-free zones and the emirate of Dubai.

Another critical aspect of the crypto ecosystem — stablecoins — falls under the CBUAE’s (Central Bank of the UAE) jurisdiction, particularly stablecoins backed by dirhams. The CBUAE regulates payment token services and payment mechanisms in the UAE, encompassing fintech products.

Next is the world’s first dedicated virtual asset regulator, VARA (Virtual Asset Regulatory Authority), established in 2022. VARA regulates virtual asset activities in Dubai, including all economic free zones, excluding the DIFC (Dubai International Financial Center).

Two additional regulators, the DFSA and the FSRA, will be discussed later on in this article.

Free zones of the UAE

Another source of the UAE’s acronyms is its free zones. The UAE has a unique business environment with over 45 free zones catering to diverse industries. These zones cluster similar industries and companies to foster collaboration and growth.

The UAE’s first free zone, JAFZA (Jebel Ali Free Zone), was established in 1985. JAFZA’s primary goal was to attract foreign investment and create a business-friendly environment. Its immense success led to the creation of numerous other free zones across the world copying JAFZA.

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In 2002, the DMCC (Dubai Multi Commodities Centre) was established to position Dubai as a global commodity trading hub. Since then, the DMCC has become a critical economic driver, accounting for approximately 15% of all foreign direct investment in Dubai.

The DMCC has also led innovation with initiatives like the DMCC Crypto Centre, which supports crypto companies and develops the ecosystem. Its most recent additions include the DMCC Gaming Centre and DMCC AI Centre.

With the popularity of free zones rising, the DIFC (Dubai International Financial Centre) was launched in 2004 as the UAE’s first financial free zone. Unlike economic free zones, the DIFC has its own legal system and regulatory framework. Its financial regulator, the DFSA (Dubai Financial Services Authority), initially took a cautious approach toward crypto. The DIFC has since somewhat embraced the sector by introducing its Digital Assets Regime.

In 2013, Abu Dhabi followed suit with the creation of the ADGM (Abu Dhabi Global Market). This free zone now ranks among the world’s largest financial districts, spanning 14.38 million square meters. Like the DIFC, the ADGM has its own legal system and regulatory framework, overseen by the FSRA (Financial Services Regulatory Authority). 

The ADGM was ahead of its time in embracing crypto, introducing a comprehensive regulatory framework for virtual assets in 2018. The FSRA was the first regulator globally to oversee platforms trading cryptocurrencies and virtual assets.

In 2015, the DWTC (Dubai World Trade Centre) was converted into a free zone with the establishment of the DWTC Authority. The creation of this free zone aimed to leverage its role as a premier networking hub, hosting major international events and exhibitions. Since 2021, the DWTC has been working to attract and develop its own crypto ecosystem, having signed an agreement with the SCA before establishing VARA.

Another popular free zone in Dubai’s crypto ecosystem is the IFZA (International Free Zone Authority), established in Fujairah in 2018 and relocated to Dubai in 2020. The IFZA has built its reputation on its well-integrated ecosystem.

Across the road in Abu Dhabi, Twofour54 has become a popular hub for GameFi and Web3 projects, offering specialized support and resources. Similarly, Ras Al Khaimah’s RAKEZ (Ras Al Khaimah Economic Zone) is well-regarded for its streamlined freelance permits and business-friendly environment, making it an attractive option for independent professionals and startups.

Government initiatives

The UAE’s forward-looking approach is evident in government initiatives encouraging innovation and talent to be drawn into the crypto ecosystem.

Hub71 is a technology ecosystem based in Abu Dhabi, designed to support startups and entrepreneurs focused on sectors like blockchain, AI and fintech. Hub71 provides access to funding, mentorship and office spaces, making it an essential platform for innovative companies while facilitating connections with global investors. 

Another prominent initiative is the DFA (Dubai Future Accelerators), an ambitious program that will bring government entities and private sector innovators together to solve future challenges. Dubai has encouraged collaboration in blockchain and Web3 technologies through the DFA, supporting projects that address global and regional problems.

Navigating the UAE’s web of acronyms can be overwhelming. It’s important to recognize that this intricate system exists to cater to the diverse needs of businesses within the Web3 and crypto ecosystems. Each regulator and each free zone plays a specific role, ensuring that every type of Web3 entrepreneur or business can find its place in the UAE.

This intricate structure reflects strategic planning and highlights the UAE’s commitment toward becoming the world’s leading crypto hub.

Opinion by: Irina Heaver, crypto lawyer

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.