The UAE's new law puts DeFi protocols, Web3 infrastructure under mandatory licensing, with fines increasing from $55 million to $272 million for violations.
The United Arab Emirates has enacted a new Central Bank of the UAE law, replacing Federal Law Decree No. 14 of 2018 and No. 48 of 2023, marking a major shift in how fintech and digital asset businesses are regulated. The legal document consolidates regulation of banking, insurance, digital assets and fintech services, and brings blockchain technology, decentralized applications and decentralized financial infrastructure under a strict regulatory framework.
The new legal framework significantly expands the list of financial activities that require licensing. Under the regulation, any individual or entity that conducts, offers, issues or facilitates financial activities using any technology will be subject to supervision by the Central Bank of the UAE. This includes platforms, protocols, decentralized applications and Web3 infrastructure.
This approach means that DeFi protocols, chain bridges, wallet operators, and API integrators must apply for a license if they serve UAE users or are accessible to residents of the country. However, the law does not prohibit the storage of assets in non-custodial wallets. The restrictions only apply to intermediaries that provide payment, remittance, or other financial services through their platforms.
Fines increased fivefold, possibly imprisonment
One of the most notable features of the law is the sharp increase in penalties for non-compliance. The maximum administrative fine is raised from 200 million dirhams, or about $55 million, to 1 billion dirhams, or about $272 million. In addition, the text establishes criminal liability for operating without a license, with fines of up to 500 million dirhams, or $135 million, plus prison sentences.
Businesses are given a transition period to comply with the new requirements until September 16, 2026. This allows companies time to adjust their operating models and complete licensing procedures under the new regulations.
Notably, the bill only partially affects the UAE's financial free zones. The Dubai International Financial Centre and Abu Dhabi Global Market will remain regulated by the Dubai Financial Services Authority and Abu Dhabi Financial Services Authority, respectively. However, if the business's activities are directed towards residents of the mainland UAE, federal regulations will still apply.
The move comes after the Dubai Virtual Assets Authority and the UAE Securities and Commodities Authority agreed last year to implement a unified licensing system for virtual asset service providers, reflecting the UAE's efforts to build a comprehensive regulatory framework for the digital asset industry.
