The United Arab Emirates is taking a significant step towards regulating the decentralized finance (DeFi) sector and the broader Web3 industry, marking a pivotal shift for the region’s crypto landscape. Driven by a new central bank law, Federal Decree Law No. 6 of 2025, the UAE is establishing regulatory parameters for protocols, DeFi platforms, and even infrastructure providers if they facilitate activities like payments, exchanges, lending, custody, or investment services. Irina Heaver, a local crypto lawyer and founder of NeosLegal, emphasized the law’s “consequential regulatory shift,” highlighting the expansive scope it brings to the crypto industry. The deadline for alignment, set for September 2026, underscores the urgency for industry projects operating within the UAE to adapt their systems proactively.
A core element of this new legislation, Articles 61 and 62, define specific activities requiring a license from the Central Bank of the UAE (CBUAE), notably encompassing crypto payments and digital stored value. Article 62 establishes that any individual engaging in, offering, issuing, or facilitating a licensed financial activity – regardless of the means, medium, or technology – falls under the regulatory purview of the CBUAE. This signifies a fundamental change, effectively ending the argument that “just code” constitutes a defense against regulation, as protocols supporting stablecoins, real-world assets (RWAs), decentralized exchange (DEX) functions, bridges, and liquidity routing may necessitate licensing. The potential for enforcement is already active, with penalties including fines up to 1 billion dirhams ($272.3 million) and the possibility of criminal sanctions.
The law’s impact extends to cryptocurrency wallet providers, particularly concerning self-custody or non-custodial wallets. Kokila Alagh, founder and managing partner of Karm Legal Consultants, noted a “fair bit of confusion” surrounding this issue. While some observers, such as Trading Strategy’s Mikko Ohtamaa, have suggested a “de facto ban” on crypto and self-custodial wallet apps, Alagh and Heaver clarified that the legislation does not prohibit self-custody or restrict individuals from using their own wallets. Instead, the law expands the regulatory perimeter for companies. If a wallet provider enables payments, transfers, or other regulated financial services for UAE users, licensing requirements would apply. Karm Legal Consultants has reported a surge in queries regarding this aspect of the law, anticipating further clarification from the Central Bank as implementation progresses.
Despite these changes, the legal landscape remains nuanced. Mikko Ohtamaa, a prominent voice in the crypto community, has been critical of the UAE lawyers involved, asserting that their business is “free of interest in the UAE” and dismissing regulatory efforts as driven by the pursuit of yearly bonuses. While the Central Bank holds the power to provide further detailed clarification, the key takeaway is that the law fundamentally shifts responsibility from individuals to companies involved in facilitating financial activities within the UAE. The expansion of the regulatory perimeter aims to provide a more secure and transparent ecosystem for the industry to flourish, though it also presents considerable compliance challenges for firms operating within the country.
