UAE's New Crypto Law Regulates DeFi and Expands Web3 Scope

UAE's New Crypto Law Regulates DeFi and Expands Web3 Scope

A new financial law in the United Arab Emirates is poised to integrate decentralized finance (DeFi) and the broader Web3 ecosystem into established regulatory frameworks, marking a pivotal evolution for the digital asset industry.

The UAE’s recent central bank law, formally known as Federal Decree Law No. 6 of 2025, represents “one of the most consequential regulatory shifts” for the cryptocurrency sector in the region, according to Irina Heaver, a prominent crypto lawyer and founder of NeosLegal.

“It brings protocols, DeFi platforms, middleware, and even infrastructure providers into scope if they enable activities such as payments, exchange, lending, custody, or investment services,” Heaver stated.

Heaver advises that industry participants operating within the UAE should view this development as a critical regulatory milestone and proactively align their systems to ensure compliance by the September 2026 deadline.

"We're Just Code" No Longer a Valid Defense

Federal Decree Law No. 6, published in the Official Gazette and legally enforceable since September 16, 2025, functions as a central bank law governing financial institutions, insurance operations, and activities related to digital assets.

Key provisions, specifically Article 61 and Article 62, delineate a list of activities necessitating a license from the Central Bank of the UAE (CBUAE), encompassing crypto payments and digital stored value services.

“Article 62 specifies that any entity engaging in, offering, issuing, or facilitating a licensed financial activity ‘through any means, medium, or technology’ falls under the CBUAE’s regulatory jurisdiction,” Heaver explained.

In practical terms, this signifies that DeFi projects can no longer circumvent regulation by asserting that they are “just code,” the lawyer clarified, further noting that the principle of “decentralization” does not automatically exempt a protocol from regulatory compliance.

Protocols supporting stablecoins, real-world assets (RWA), decentralized exchange (DEX) functionalities, bridges, or liquidity routing “may require a license,” Heaver cautioned. She added that enforcement is already underway, with penalties for operating without a license potentially reaching 1 billion dirhams ($272.3 million) and including possible criminal sanctions.

The Law Does Not Prohibit Self-Custody

Given that the UAE’s new central bank law directly pertains to the provision of “stored value services,” the legislation is likely to impact cryptocurrency wallet providers, according to Kokila Alagh, founder and managing partner of Karm Legal Consultants.

Alagh noted that there has been a “fair bit of confusion” regarding whether the law extends to self-custody, or non-custodial wallets, which are designed to empower users to maintain independent control over their assets without relying on a third party.

While some industry commentators, such as Trading Strategy’s Mikko Ohtamaa, have suggested that the law effectively constitutes a “de facto ban” on crypto and self-custodial wallet applications in the UAE, both Alagh and Heaver have refuted this interpretation.

“The law does not ban self-custody, nor does it restrict individuals from using their own wallets,” Alagh clarified, adding that it “simply expands” the regulatory scope for companies.

“If a wallet provider enables payments, transfers, or other regulated financial services for UAE users, licensing requirements may apply,” she pointed out.

Alagh mentioned that Karm Legal has received a significant number of inquiries regarding this matter, stating:

“Further clarification from the Central Bank is anticipated as the law progresses through implementation, but for now, individuals remain unaffected, while companies should assess whether their activities fall within regulated scope.”

Ironically, Ohtamaa’s post specifically criticized UAE lawyers, arguing that their business is “free of interest in the UAE.”

Karm Legal’s Alagh informed Cointelegraph that the firm is actively engaging with the CBUAE regarding the issue, although no firm date has been set for the authority to provide a clarification.