Telephone Numbers
Telephone Numbers
FinTech Banking in Dubai, UAE
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The financial services sector in UAE Dubai consists of entities operating "onshore" in UAE Dubai and entities operating in the financial free zones in UAE Dubai, the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). The DIFC and ADGM are often referred to as "offshore" because they have common law legal systems that are independent of the onshore civil law system.
UAE Dubai is the leading financial services hub in the Middle East. Both DIFC and ADGM are award-winning local, regional, and international centers for financial services institutions and new entrants to the FinTech sector. UAE Dubai has an increasingly developed financial services sector offering a wide range of financial services, and FinTech is a growth area within this sector. Both traditional financial services entities and other types of entities offering innovative financial products and services in the FinTech space are regulated in this sector.
The onshore financial services sector in UAE Dubai includes traditional and Islamic commercial and investment banks, money exchangers, finance companies, financial and monetary intermediaries, representative offices of foreign banks, and entities operating clearing and settlement systems and retail payment systems. Entities must be appropriately licensed to provide or market financial services and/or products in UAE Dubai, and the legal framework is relatively restrictive. Entities authorized and licensed to provide financial services are called "Licensed Financial Institutions". National ownership requirements apply to Licensed Financial Institutions.
Entities, including banks, investment firms, and finance companies, can offer a range of regulated financial services in or from the DIFC, including asset and wealth management, banking and credit services, securities, funds, custody and trust services, commodity futures trading, and Islamic finance. Insurance, fintech, and others. Start-up or retail banks cannot operate in the DIFC, and financial services entities in the DIFC cannot transact in UAE Dubai dirhams.
Entities must be authorized and licensed to provide financial services and are referred to as "Authorised Firms". Entities authorized and licensed to provide exchange or clearing house services are called "Authorised Market Institutions". A lighter regulatory regime is available for fintech start-ups.
Entities, including banks, investment firms, and finance companies, can offer a range of regulated services within or from ADGM, including banking and credit services, asset and wealth management, money service businesses, digital banking, brokerage, market infrastructure, funds, and virtual assets. Activities, securities, fintech, and others. Start-up or retail banks cannot operate in ADGM, and financial services entities in ADGM cannot transact in UAE Dubai dirhams.
Entities must be authorized and licensed to provide financial services and are referred to as "Financial Services Entities". Technology-focused start-ups can apply for a Tech Start-up License.
Several regulatory authorities are responsible for the financial services industry in UAE Dubai.
UAE Dubai has the following two main financial services regulators:
The Dubai Financial Services Authority (DFSA) regulates and licenses financial services conducted within or from the DIFC. The DFSA administers certain laws in the DIFC, including the Regulatory Law 2004, Markets Law 2012, Collective Investment Law 2010, Investment Trust Law 2006, and the Law Regulating Islamic Finance Business 2004.
The DFSA's regulatory framework is based on the best practices and laws of the world's leading financial jurisdictions.
The ADGM Financial Services Regulatory Authority (FSRA) regulates and licenses financial services conducted within or from ADGM. The FSRA regime is regulated by the Financial Services and Markets Regulations 2015 (FSMR). This is supported by the FSMR Rulebook.
The FSMR is broadly modeled on the UK's Financial Services and Markets Act 2000 (FSMA). The legal and regulatory regime in ADGM adopts many aspects of international best practice in major global financial centers.
The financial services sector has seen significant changes in the last few years due to FinTech. Key areas where FinTech has had a significant impact include:
FinTech activities are rapidly gaining momentum in UAE Dubai. This is due to government support for FinTech, a conducive environment for collaboration and innovation (e.g., with regulatory sandboxes and flexible licensing rules for FinTech start-ups), and flexible regulatory regimes that are evolving in an effort to keep pace with rapid technological developments in the FinTech industry.
UAE Dubai has emerged as a Middle East regional hub and a leader in the development of FinTech solutions.
Most of the larger banks and financial services firms in UAE Dubai, ADGM, and DIFC are actively engaging with FinTech. Many banks and financial institutions in UAE Dubai are engaged in the following:
UAE Dubai is undergoing economic diversification transformations as part of its 2021 Vision and National Agenda. Transitioning to a competitive, knowledge-based economy and supporting entrepreneurship are key objectives of Vision 2021. The fintech ecosystem is rapidly developing across UAE Dubai, supported by Government strategies and initiatives that provide a favorable environment for fintech initiatives and drive collaboration between the public and private sectors. The UAE Dubai Government is using emerging technological innovations to improve government performance and efficiency.
UAE Dubai has established government agencies at the Federal and Emirate level to support technological innovation in the financial services sector, including the Federal Ministry of Artificial Intelligence (AI), Smart Dubai, the Abu Dhabi Digital Authority, and the Dubai Future Foundation.
Strategies have been implemented at the national level to facilitate technology innovation and grow the fintech sector. These strategies include the Emirates Blockchain Strategy, the National Artificial Intelligence Program, and the National Payment Systems Strategy. As part of Smart Dubai, Dubai is embracing emerging technologies under its Blockchain Strategy and AI Roadmap.
Federal regulators, the Central Bank, and the SCA have adopted policies and regulations that support the sector. The Central Bank has a dedicated fintech office to develop national regulations for fintech firms. The Central Bank's FinTech Office, along with regulators in DIFC and ADGM, is progressing various initiatives, from regulating digital payment systems (including regulations issued for stored value facilities) in collaboration with the Saudi Central Bank, to developing a common digital currency and crowdfunding.
The SCA is becoming increasingly active in regulating the FinTech sector, including recently issuing a new regime to regulate crypto-asset activities, including initial coin offerings (ICOs). The SCA also approved the FinTech Regulatory Framework, establishing sandbox guidelines that allow entities to test innovative products, services, solutions, and business models in a more relaxed regulatory environment.
More generally, the relaxation of foreign investment restrictions for onshore UAE Dubai companies should facilitate fundraising from global investors and help attract international talent to local fintech companies operating onshore in UAE Dubai.
In a joint UAE-wide initiative with the DFSA and FSRA, the Central Bank of the UAE is working to develop a common regulatory framework for FinTech across the entire UAE. The proposed "Guidelines for Financial Institutions Adopting Enabling Technologies" are expected to come into effect in late 2021 following a consultation in June 2021. The Guidelines will apply to all financial institutions licensed and supervised by any of the regulators in UAE Dubai, ADGM, or DIFC that use enabling technologies (e.g., APIs and DLTs, Big Data Analytics, and Artificial Intelligence) for the development or delivery of innovative products and services.
The regulatory and licensing environment in the DIFC supports the FinTech sector.
Start-ups can apply for a DIFC Innovation License in the DIFC. The DFSA offers a simplified regulatory framework for FinTech businesses. The DFSA runs a sandbox known as the DFSA Innovation Testing Licence (ITL) Programme, which allows ITL holders to test their products or services if they meet the eligibility criteria in accordance with the General Module of the DFSA Rulebook (GEN 13 Facilitating FinTech Innovation).
The DIFC is home to FinTech Hive, a leading acceleration program for the FinTech sector, and the FinTech Fund, designed to invest in and grow start-ups. The DIFC FinTech Hive offers programs such as the FinTech Hive Accelerator, Startupbootcamp, and FinTech Hive Scale Up, allowing start-ups to establish, grow, and scale their innovative businesses with a DIFC Innovation License. Area 2071 in the DIFC offers a co-working space and an ecosystem to support collaboration in designing and testing innovations.
The DIFC Courts and Smart Dubai are working together to create a new "Blockchain Court," which aims to help resolve disputes related to smart contracts and address blockchain-specific dispute resolution issues.
Other regulations supporting the FinTech sector include the DIFC's Intellectual Property Law 2019, which supports companies in protecting and enforcing their intellectual property rights, and the DIFC Electronic Transactions Law, which ensures the validity, legal effect, and enforceability of contracts formed by electronic signatures, electronic records, and electronic documents.
The ADGM FinTech RegLab is a leading sandbox located in ADGM and is reportedly the second most active FinTech sandbox in the world after London. The ADGM FinTech Digital Lab is a virtual environment created to connect FinTech market participants and enable the testing of innovative and disruptive technologies. The FinTech Digital Lab supports the creation of APIs, System Virtual Machines, data, and applications that connect the legacy systems of financial institutions to FinTechs and other relevant parties.
ADGM and the Abu Dhabi Investment Office have partnered with Plug and Play, a Silicon Valley accelerator, to offer a Plug and Play ADGM accelerator with programs focused on supporting the MENA FinTech sector.
ADGM offers technology start-up licenses for entrepreneurs. Hub71 in ADGM offers a co-working space and technology ecosystem for entrepreneurs, investors, and accelerators.
The FSRA is a progressive regulator and has issued guidance and/or regulations on a range of fintech activities, including Virtual Asset Activities, Digital Securities, and APIs. Other regulations supporting the FinTech sector include the Electronic Transactions Regulations issued in 2021, which confirm the validity and enforceability of electronic signatures, contracts, records, and documents.
The approach to regulating alternative finance (in the form of crowdfunding, peer-to-peer lending platforms, and online lending platforms) in UAE Dubai, ADGM, and DIFC is evolving. Regulators are grappling with the application of existing financial regulations to an increasingly diverse range of payment models and whether clarification or amendments to existing regulations are needed. Regulatory oversight is expected to increase.
The Central Bank of the UAE licenses and regulates loan-based crowdfunding (also known as peer-to-peer lending) as of October 2020. The Central Bank of the UAE's Regulation for Loan-Based Crowdfunding Activities regulates entities conducting crowdfunding activities in UAE Dubai (even if not based in UAE Dubai), imposing certain requirements and obligations on the crowdfunding company, including anti-money laundering, risk assessment, and minimum capital requirements. Other crowdfunding platforms, such as equity- and donation-based crowdfunding, are not regulated.
Other types of alternative finance are still typically not regulated by the Central Bank of the UAE and the SCA.
Depending on the specific activities undertaken (e.g., if the platform is actively establishing a fund or offering securities), some other activities may fall within the remit of the Central Bank and/or the SCA.
Crowdfunding and lending platforms are regulated by the DFSA. The DFSA regulates loan-based crowdfunding (like peer-to-peer lending) and investment-based crowdfunding platforms as part of its financial services framework under the Markets Law 2012 and applicable Rulebook modules. The framework, established in 2017, was the first of its kind in the Middle East region.
Comprehensive rules impose specific requirements on P2P lending and crowdfunding operators, including detailed provisions on the requirements to make detailed disclosures of risks, such as expected failure rates, pre- and post-fundraising monitoring for significant changes in the business, and disclosure requirements for fundraising companies. An example of a regulated entity is Beehive, the first regulated fintech in UAE Dubai, which has been operating a debt-side crowdfunding platform since 2015.
Other specific activities may fall within the remit of the DFSA depending on the specific activities undertaken.
The FSRA regulates Private Financing Platforms (PFPs) that enable peer-to-peer lending. The FSRA's Regulatory Framework for Private Financing Platforms came into effect in September 2018.
Other types of alternative finance are still typically not regulated by the FSRA.
Certain other activities may fall within the remit of the FSRA depending on the specific activities undertaken.
Globally, the regulation of payment services is evolving, and UAE Dubai is no exception. The regimes in UAE Dubai are becoming more lenient (though still cautious) and aim to keep up with developing technologies in this area.
Government support for the FinTech sector is influencing consumer behavior. Digital initiatives like the government's Mobile Wallet and NOL Cards are being used more and more. In addition to e-wallets like Etisalat Wallet, Apple Pay, and Samsung Pay entering the UAE Dubai market, there has been rapid growth in mobile payments and real-time transfers through initiatives like Emirates NBD, which enables open banking collaborations. New payment system entrants like PayTabs, Telr, and PayFort are expanding their reach. The increasing adoption of digital payment services by consumers can also be attributed to the demographics of UAE Dubai - the country has a young population and high per capita GDP, high internet penetration, and consumer attitudes open to the adoption of FinTech solutions. As a result,
The Central Bank of the UAE regulates payment services. The regime was modernized in 2020 with the entry into force of the Central Bank of the UAE's Stored Value Facilities Regulation (Central Bank of the UAE Circular No.6 of 2020), which repealed the previous regulatory framework for stored values and electronic payment systems that came into effect in 2017.
The Stored Value Regulation applies to all entities that issue or operate stored value facilities (SVFs) in UAE Dubai. It provides for a licensing regime for digital payment businesses (other than licensed banks conducting SVF business) and obliges them to implement governance and accountability measures, including corporate governance requirements, information and accounting systems, and general risk management and internal control systems. The Central Bank of the UAE has increased its supervisory powers and discretion to exempt SVFs from certain requirements based on a risk assessment. The revised regime supports the Central Bank's regulatory oversight of digital payment businesses and aligns the UAE Dubai digital payment regulatory framework with international standards.
Unfortunately, the SVF Regulation creates some uncertainty regarding the regulation of SVFs incorporated in UAE Dubai's financial free zones. While the SVF Regulation states that financial institutions regulated by the DFSA or FSRA must obtain a Central Bank license, it also excludes financial free zones from the definition of companies that can apply for a license. The use of the Central Bank's authority to consent to alternative regulation will clarify its position on this matter over time.
The DFSA now regulates payment services (referred to as money services) in the DIFC by introducing a comprehensive framework for money services businesses in 2020. The Payment Service Provider (PSP) regime is set out in the DIFC Regulation Law 2004 and the DFSA's Rulebook.
The DFSA regulates "Providing Money Services" and "Arranging and Advising on Money Services" as a new type of financial service. Prior to the regime revisions in 2020, "Providing Money Services" was a prohibited activity under the DFSA regime. In light of federal restrictions, firms can only carry out these activities in relation to electronic currencies, and all dirham transactions must be made through the accounts of a financial institution licensed by the Central Bank of the UAE to accept deposits. The DIFC has stated its intention to adopt a prudent approach to the licensing and supervision of firms operating in this area (such as restricting the nature, volume, or size of transactions or the types of clients with which firms can do business). The new regime came into effect on April 1, 2020. In December 2020,
The FSRA regulates payment services in ADGM. The Providing Money Services (PMS) regime is set out in the FSMR and the FSRA's Rulebook. The regime was revised in 2020 to bring it up to date with emerging technologies and the emergence of new business models and fund transfer methods. The new specified activities of "Money Remittance" and "Payment Services" expand the scope of the regulated activity (including activities of providing payment accounts and the issuance of stored value).
The FSRA also, in 2019, to enable different systems to securely connect and share data and "open banking"
The retail investment and wealth management sector has seen a steady increase in assets under management by digital investment managers, known as "robo-advisors," who use algorithms, artificial intelligence, and data analytics to provide automated investment management services, including suitability assessments, portfolio modeling, and account rebalancing. Robo-advisor providers are emerging as key enablers for banks and financial institutions. These innovative technologies offer asset managers a cost-effective and scalable way to provide customized investment management services to clients.
In response to the demand from UAE Dubai residents for agile and simplified investment options, wealth advisory start-ups like Sarwa, baraka, Investra, and Finerd are developing in UAE Dubai.
In general, robo-advisory is regulated in the same way as investment advice provided through any other medium, and there is no separate regulatory regime for it in UAE Dubai, DIFC, or ADGM.
The Central Bank of the UAE has not issued any specific guidance on digital investment management activities in UAE Dubai. Where a digital investment manager operating in UAE Dubai undertakes any regulated activity as part of its business model, a license and appropriate authorization from the Central Bank of the UAE/SCA will be required.
The DFSA has not issued any specific guidance on digital investment management activities in the DIFC. If a digital investment manager operating in the DIFC undertakes any regulated activity as part of its business model (such as investment advice, arranging investment deals, or asset management), it will require a license and appropriate authorization from the DFSA.
The FSRA published Guidance on the Authorisation of Digital Investment Management ("Robo-advisory") Activities in ADGM in 2019, which sets out the necessary regulatory permissions for robo-advisors operating in or from ADGM.
Where a digital investment manager operating in ADGM undertakes any regulated activity as part of its business model (such as investment advice, arranging investment deals, or asset management), a license and appropriate financial services permission from the FSRA will be required, and the business must be conducted in accordance with the applicable rules under the FSMR.
Firms that operate solely as technology providers are not considered robo-advisors and are therefore eligible for an ADGM Tech Start-up License.
The SCA regulates FinTech entities conducting a regulated "Financial Activity" in relation to crypto assets that are considered a type of "security" regulated by the SCA (SCA Board of Directors' Decision No. 23 of 2020 Concerning the Crypto Asset Activities Regulation, supplemented by an Explanatory Guide for the Crypto Asset Activities Regulation (Administrative Decision No. 11 of 2021)). In such cases, the crypto assets will be treated as a Security subject to the applicable SCA regulations for that Security, in addition to the provisions of SCA Board of Directors' Decision No. 23 of 2020. In certain circumstances, limited regulatory requirements will apply for crypto assets not considered securities. This represents a change in the SCA's approach,
There is no specific regime applicable to FinTech entities conducting other activities in the wholesale securities market in UAE Dubai. Where an activity conducted by a FinTech entity falls under the regulatory regime of the SCA (which regulates UAE Dubai financial markets, brokers, entities listed in UAE Dubai, investment funds) or the Central Bank of the UAE (which regulates foreign financial products and investments sold, offered, or authorized for sale in UAE Dubai), they will be subject to licensing requirements and the applicable regulatory regime. The conduct of "licensed financial activities" requires a license from the Central Bank of the UAE unless an exemption applies under the UAE Banking Law (Federal Decree-Law No. 14 of 2018 Concerning the Central Bank & Organization of Financial Institutions and Activities). The promotion of financial products to investors in UAE Dubai requires, unless an exemption applies, compliance with the SCA Chairman's Promotion and Introduction Regulation (3/RM) and Introductions (PIRs). There are no specific exemptions available for FinTech entities.
Currently, there is no specific regime in the DIFC applicable to FinTech entities operating in the wholesale market. Unless a general exemption applies, activities in the FinTech space that are considered a financial service under the DIFC Regulatory Law 2004 will be subject to the DFSA's licensing requirements and the regulation of the DIFC Regulatory Law 2004 and the DFSA Rulebook.
Under the DIFC Regulatory Law 2004, there is a general prohibition on conducting a prescribed "financial service" in or from the DIFC without a license from the DFSA. Furthermore, there is a prohibition on making a "financial promotion" in or from the DIFC without a license from the DFSA, except in circumstances specified in the DFSA Rulebook. The DFSA, following a consultation in March 2021, plans to regulate "security tokens" (along with the platforms that trade and/or clear them) in the DIFC, including crypto assets or tokens using DLT or similar technology. Anything that is the same as or sufficiently similar to a type of "investment" regulated by the DFSA will be regulated under the DFSA's existing regime.
The FSRA regulates certain activities related to "virtual assets" conducted within or from ADGM in accordance with the Financial Services and Markets Regulations 2015 (FSMR) and the FSRA's relevant Rulebooks. Following a change in approach in early 2021, virtual assets are no longer regulated as a separate category of activity, and certain activities related to virtual assets are regulated within existing categories of activity (such as providing custody, operating a multilateral trading facility, dealing in investments, and so on).
The FSRS has also published guidance on the Regulation of Virtual Asset Activities, including those related to market infrastructure such as offerings, listings, and exchanges in ADGM, and on the Regulation of Digital Security Activities in ADGM. The guidance, issued under the Financial Services and Markets Regulations 2015, complements the crypto asset regulatory regime and the FSRA's Guidance on Initial Coin/Token Offerings and Crypto Assets.
Where virtual assets are offered for sale in an ICO as a method of raising money, and the virtual assets are assessed by the FSRA to exhibit the characteristics of a "security" regulated by the FSRA (referred to as "digital securities"), the ICO will be regulated under the FSMR. Whether an ICO is regulated under the FSMR will be assessed by the FSRA on a case-by-case basis.
There is no specific regime applicable for FinTech entities conducting other activities in the wholesale securities market in ADGM. Where an activity conducted by a FinTech entity falls under the FSRA's regulatory regime, they will be subject to licensing requirements and the applicable regulatory regime.
While new entrants like Aqeed, Souqalmal, Demoncrance, and Compareit4me are creating a thriving InsurTech market in UAE Dubai, InsurTech has been perceived as a slow-growing company in UAE Dubai compared to other FinTech market entrants.
The electronic activities and marketing of insurance policies by insurance companies, brokers, and insurance professionals licensed to operate onshore in UAE Dubai are regulated by the Electronic Insurance Regulations 2020 (Insurance Authority Board of Directors Decision No. 18 of 2020), issued by the former UAE Insurance Authority. The licensing and supervision of insurance activities are now carried out by the Central Bank of the UAE following the transfer of all powers of the Insurance Authority to the Central Bank of the UAE in 2021 (Federal Law No. 2 of 2021 Amending Certain Provisions of Federal Decree-Law No. 14 of 2018).
Under the Electronic Insurance Regulations, licensed insurance companies, brokers, and other firms such as actuaries and loss adjusters must obtain prior approval from the Central Bank of the UAE to conduct electronic or online insurance business. The Central Bank of the UAE has broad supervisory and enforcement powers, including the authority to block any website conducting unlicensed insurance business in UAE Dubai.
The DFSA regulates insurance activities in the DIFC. There is currently no specific regime applicable to FinTech entities conducting electronic insurance activities in the DIFC. Unless a general exemption applies, InsurTech activities considered a financial service under the DIFC Regulatory Law 2004 will be subject to DFSA licensing requirements and the regulation of the DIFC Regulatory Law 2004 and the DFSA Rulebook.
The FSRA regulates insurance activities in ADGM. There is currently no specific regime applicable to FinTech entities conducting electronic insurance activities in ADGM. Unless a general exemption applies, InsurTech activities considered to constitute a financial service under the FSMR will be subject to FSRA licensing requirements and the regulation of the FSMR and the FSRA Rulebook.
In UAE Dubai, regulations issued by the SCA and the Central Bank in 2020 recognize crypto-assets and, for the first time, provide regulatory clarity on financial activities related to crypto-assets in UAE Dubai. The Central Bank has not recognized crypto-assets or virtual assets as legal tender in UAE Dubai.
The Central Bank of the UAE and the Saudi Central Bank are collaborating on a proposal for a joint digital currency and cross-border payments initiative, announced in January 2019. In a recent joint report, the Aber Project: Joint Digital Currency and Distributed Ledger Project final report, the two Central Banks concluded that distributed ledger technology could facilitate cross-border payments between the two countries, including the use of a new, dually-issued digital currency as a unit of payment.
To date, the DIFC has not regulated crypto-assets.
The FSRA was the first jurisdiction in the Middle East region to regulate crypto-assets. In ADGM, the FSRA regulates virtual asset activities conducted within or from ADGM and has issued guidance on digital securities.
The SCA has introduced a new framework to regulate onshore crypto-asset activities in UAE Dubai. The SCA Board of Directors' Decision on the Crypto Asset Activities Regulation of 2020 applies to "Financial Activities" generally regulated by the SCA in relation to crypto-assets in UAE Dubai, including promotion and marketing, issuance and distribution, advice, brokerage, custody, and safekeeping. Where a crypto-asset is considered a security regulated by the SCA, additional SCA regulations will apply as relevant. There are also additional requirements specific to crypto-assets specified in the regulations, including disclosure standards, technology governance, and security standards. The SCA has also issued an explanatory guide for the crypto-asset regime in Administrative Decision No. 12.
The new regime appears to represent a change in the SCA's approach, which had previously warned investors against the potentially high-risk nature of investments in crypto-assets.
It regulates stored value facilities (SVFs) involving crypto-assets, which are explicitly subject to the new Stored Value Facilities Regulation issued by the Central Bank in 2020. To include crypto-assets and virtual assets used for payment purposes.
Crypto-assets will be regulated in the DIFC under a new regime proposed by the DFSA, which it consulted on in 2021.
The DFSA, following a consultation in March 2021, plans to regulate "security tokens" (along with the platforms that trade and/or clear them) in the DIFC, including crypto-assets or tokens using distributed ledger technology or similar technology. Anything that is the same as or sufficiently similar to a type of "Investment" regulated by the DFSA will be regulated under the DFSA's existing regime. The new regime will be set out in the Markets Law and the DFSA's Rulebook.
In January 2020, the DIFC and DFSA signed a memorandum of understanding with the UAE Centre for the Fourth Industrial Revolution (C4IR UAE) (a joint initiative of the Dubai Future Foundation (DFF) and the World Economic Forum (WEF)). A test environment for fintech companies to develop and test the tokenization of digital assets using blockchain technology. The MoU will reportedly facilitate a controlled regulatory forum in UAE Dubai for testing digital assets and tokenization using blockchain technology, and ultimately support the DFSA in addressing regulatory issues related to crypto-assets.
ADGM was the first jurisdiction in the Middle East region to launch a framework in 2018 to regulate virtual asset activities conducted within or from ADGM, including those carried out by multilateral trading facilities, brokers, custodians, asset managers, and other intermediaries. The FSRA revised its crypto-asset regime in 2020 and now uses the term "virtual assets" instead of crypto-assets, and regulates specific activities related to virtual assets within existing regulated activity categories, rather than activities related to virtual assets being regulated as a separate category of activity.
The regime is set out in the Financial Services and Markets Regulations 2015 and the FSRA's Rulebook. The FSRA has also published guidance on the regime.
The FSRA was also the first regulator in the region to introduce guidance on digital securities. The Guidance for Digital Securities Activity in ADGM sets out the FSRA's approach to the regulation of digital securities in ADGM for both primary and secondary markets, including market infrastructure such as offerings, listings, and exchanges.
Regulators in UAE Dubai, ADGM, and DIFC recognize that a comprehensive anti-money laundering regime is necessary to address the financial crime risks associated with anonymous fund transfers on non-transparent, cross-border trading platforms and to develop a robust regulatory framework for crypto-assets. Federal anti-money laundering and counter-terrorist financing laws are applicable in all Emirates, including the DIFC and ADGM. ADGM and DIFC also have anti-money laundering regimes applicable to the free zones.
Federal Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and UAE Cabinet Decision No. 10 of 2019 concerning the Implementing Regulation of Federal Law No. 20 of 2018.
The SCA Board of Directors' Decision No. 23 of 2020 on Crypto Asset Activities includes certain anti-money laundering requirements; for example, the operator of a Crypto Fundraising Platform must apply all applicable controls against money laundering and financing of terrorism crimes to persons wishing to invest.
The sanctions regime specified in UAE Cabinet Decision No. 20 of 2019 on the procedures for dealing with those listed under the UN sanctions list and the UAE/local terrorist lists published by the Cabinet of Ministers also applies to cryptocurrency activities.
The DFSA requires those licensed to provide financial services in or from the DIFC to comply with the Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module of the DFSA Rulebook and the DIFC Regulatory Law 2004.
In its Consultation Paper No. 138 of 2020 on the Regulation of Security Tokens, the DFSA noted the risks associated with security tokens and the measures taken to mitigate these risks. The DFSA acknowledges the need for its regulations to focus on anti-money laundering, and the measures and procedures that can be adopted by the operator of the facility on which the security tokens and related service providers are located.
Persons authorized to conduct activities related to virtual assets regulated under the FSRA's virtual asset regime must comply with the ADGM Anti-Money Laundering and Sanctions Rules and Guidance, Federal anti-money laundering and counter-terrorist financing laws, and the sanctions regime applicable in UAE Dubai, as well as international best practices on anti-money laundering (including the FATF Recommendations). Authorized persons must appoint a Money Laundering Reporting Officer who will be responsible for the implementation of the anti-money laundering regime and for overseeing the authorized person's compliance.
UAE Dubai is emerging as a regional leader in the application of distributed ledger technology (DLT), including blockchain. The UAE Government's Blockchain Strategy 2021, launched in 2018, along with the Dubai Blockchain Strategy, promotes the application of DLT in various sectors.
The Emirates Blockchain Strategy 2021 aims to convert 50 percent of government transactions to a blockchain platform by the end of 2021. Dubai, both through the Dubai Blockchain Strategy and the Global Blockchain Council. These strategies aim to increase government efficiency. This top-down approach to the use of DLT facilitates innovation in the FinTech sector.
In the financial sector, the use of DLT in the trading of crypto-assets is regulated by the SCA in UAE Dubai and by the FSRA in ADGM.
Other examples of DLT use include Emirates NBD, a major bank in UAE Dubai, which launched "cheque chain" in 2017, integrating blockchain into issued cheques to strengthen authenticity and minimize potential fraud.
Smart Dubai, in collaboration with IBM, launched the Dubai Blockchain Platform 2018, the first government-endorsed blockchain platform as a service in UAE Dubai. Smart Dubai's DubaiPay, the payment gateway for most Dubai Government entities, uses the Dubai Blockchain Platform.
In recent years, FinTech businesses have emerged as financial infrastructure providers to traditional banks and financial institutions in UAE Dubai, using technology to access, process, and transfer information by providing services to help manage funds held in financial institutions.
Collaboration between FinTech businesses and traditional banks and financial institutions can enable banks and financial institutions to offer digital financial solutions to their customers and enhance their functionality, for example by outsourcing payment services to a FinTech payment service provider or using API platforms to white-label FinTech infrastructure.
Digital banking is largely regulated in the same way as normal banking activities in UAE Dubai. Therefore, financial services infrastructure is broadly regulated by the Central Bank of the UAE in UAE Dubai, the FSRA in ADGM, and the DFSA in the DIFC. The regulation depends on the entity and the type of infrastructure activity undertaken.
In ADGM, FinTech firms that work in collaboration with other financial institutions are regulated as "third-party service providers" under a new regulatory framework introduced in 2021.
All regulated FinTechs based in UAE Dubai must demonstrate strict compliance with UAE Dubai's anti-money laundering and counter-terrorist financing laws, cybersecurity compliance standards, and data protection regulations.
Financial services policies and legislation are evolving to meet the needs of the FinTech ecosystem in UAE Dubai.
Many FinTech activities are regulated under existing regimes in UAE Dubai, DIFC, and ADGM; these regimes are either flexible enough to accommodate many aspects of FinTech or have been modernized with new rules for specific types of FinTech activities. Other FinTech activities fall outside the scope of traditional financial services regulation. In line with the global trend towards greater regulation of FinTech sector activities, FinTech businesses in UAE Dubai face increased exposure to regulatory requirements and also sanctions for non-compliance.
The nature of the legal compliance issues faced by a FinTech business depends on the activities it undertakes and whether it conducts its business in UAE Dubai, ADGM, or DIFC.
FinTech entities should consider the following key legal compliance issues:
It is becoming increasingly common for FinTech firms to enter into collaboration agreements with traditional banks, financial institutions, and financial services firms. These arrangements can take a number of different forms, such as partnerships, acquisitions, joint ventures, and/or outsourcing or licensing-style arrangements. In general, the regulation of such arrangements remains the same regardless of whether the firm is a FinTech entity or another entity providing similar traditional services. Similarly, the key legal, regulatory, and practical issues will be largely the same, regardless of whether the firm is a FinTech entity or another entity providing similar traditional services.
In general, the key legal, regulatory, and practical issues that parties should consider are:
The importance given to these issues will depend on the nature of the arrangement and the activities, and will need to be assessed on a case-by-case basis.
Following the introduction of open banking in the form of e-wallets, mobile payments, and real-time transfers in UAE Dubai, the sharing of banking and investment information has become easier. This should continue to encourage information service providers to enter into partnerships and similar arrangements with banks and other traditional financial service providers.
If the financial products or services provided by foreign FinTech businesses in UAE Dubai, DIFC, or ADGM fall within the scope of the existing regime regulating the provision of financial products or services, then the relevant regulatory regime will apply as is the case.
From a policy perspective, the aim of the UAE Dubai Government is to strongly encourage foreign FinTech firms to establish operational bases in UAE Dubai, ADGM, or DIFC and to enter into local regulation. Foreign FinTech firms may find it practically challenging to gain material traction without being subject to regulation and/or moving their operations to UAE Dubai.
Intellectual property law in UAE Dubai continues to evolve. Certain types of FinTech innovations and inventions can be protected, including the following:
The DIFC Intellectual Property Law (DIFC Law No. 4 of 2019) regulates the protection and enforcement of intellectual property rights in the DIFC. New regulations came into effect in July 2021 to strengthen the regime. The DIFC regime complements Federal intellectual property laws. Intellectual property rights protected by registrations onshore in UAE Dubai, such as patents, copyright, and trademarks, are considered valid and enforceable in the DIFC. The owners of these rights can take action to protect and enforce their rights in the DIFC. There are no intellectual property registries in the DIFC, and therefore IP rights cannot be registered directly in the DIFC. A Commissioner of Intellectual Property will oversee the operation of the new regime and enforce penalties for violations of intellectual property rights.
There are no independent intellectual property regulations in ADGM. There are no intellectual property registries in ADGM, and therefore IP rights cannot be registered directly in ADGM.
Intellectual property rights protected by onshore registrations in UAE Dubai, such as patents, copyrights, and trademarks, are valid and enforceable in ADGM
Organisations, including banks, investment firms and finance companies, may offer a range of regulated financial services in or from DIFC, including asset and wealth management, banking and credit services, securities, funds, custody and trust services, commodity futures trading, Islamic finance. Insurance, fintech and others. Start-up banks or retail banks may not operate in the DIFC and financial services organisations in the DIFC may not transact in UAE Dubai dirham.
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