Finance

Tighter Dubai rules tipped to drive crypto market expansion

May 26, 2025, 1:36 PM

With new rules from VARA, the UAE is aligning with global crypto standards and building its future as a global crypto hub

Regulator Vara sets June 19 deadline
Brings Dubai in line with global standards
‘Path to more complex crypto products’

Fresh digital asset regulations in the UAE may encourage further tokenisation and the rollout of more complex cryptocurrency products, analysts have said.

Tokenisation is the creation and trade of digital tokens that are backed by real-world assets – such as real estate, gold or art — on a blockchain. It enables direct and verifiable peer-to-peer transactions of these assets.

Dubai’s crypto regulator the Virtual Assets Regulatory Authority (Vara) has given virtual asset service providers (VASPs) until June 19 to comply with new rules that tighten security. They aim to open the market further and bring Dubai in line with global standards on money laundering.

“The amended rulebook offers VASPs a clear and regulated pathway to offer more complex crypto products like margin lending to retail investors,” Arushi Goel, head of policy for the Middle East and Africa at cryptocurrency researchers Chainalysis, told AGBI.

“This significantly expands the market.”

Among the new rules is further clarity on tokenisation, which “continues to be a grey area in most jurisdictions”, Goel said.

Companies across the UAE have been putting the technology in place to tokenise various assets, including real estate and race horses.

The Vara measures also bring the UAE in line with international sanctions screening and anti-money laundering rules. Every VASP now has to screen clients and transactions against both international and federal law specific lists.

The changes move Dubai’s regulations beyond baseline infrastructure towards accommodating a full spectrum of crypto financial services, such as retail-grade products and custody with regulatory clarity, Goel said.

The UAE and Dubai in particular has ambitions to become a centre for the emerging crypto industries. Vara, which was set up in 2022, provides regulations across Dubai’s free zones and legal mainland, excluding its International Financial Centre.

“Vara is proactively addressing systemic risks, especially around retail exposure, leverage and opaque token structures, before they become market-wide failures,” Johanna Cabildo, CEO of ethical AI training data supplier D-GN, told AGBI.

Incidents such as the Bybit hack in February – in which hackers stole $1.4 billion worth of the cryptocurrency ethereum from an exchange based in Dubai – have added urgency to the need for more regulatory guardrails, according to Cabildo.

With the new rules, Dubai moves closer in standards to places such as Bermuda, Switzerland and Singapore, she said.

Although the Bybit hack and other crypto-related incidents loom large in the Emirati crypto consciousness, Cabildo described Vara’s changes as “less a reaction and more a precondition for the next wave of compliant, cross-border capital to enter the space”.