Digital finance is a proliferating area, and the momentum has fast-tracked the United Arab Emirates (UAE) to prominence in the global cryptocurrency market.

As a result of its progressive economic vision and accommodative regulatory stance, the UAE proactively adopts blockchain technology and virtual assets in order to fortify the status of the country as a financial hub.

While the UAE crypto market is expanding, growing businesses and individuals have to thread their way through an increasingly complicated legal regime. Otherwise, they could be exposing themselves to criminal responsibility.

When Can Cryptocurrency Trading Lead to Criminal Charges?

As for whether crypto trading can be done by an individual in the UAE, the answer is yes, however, unlicensed crypto activities and scam schemes could lead to severe legal punishments.

The UAE has stringent rules to fight financial crimes, and all businesses engaged in crypto trading and financial intermediation are required to obtain a license. Practicing without the proper permission — that is to say, operating an unlicensed exchange or making over-the-counter trades — can result in fines and jail time.

Moreover, there are also crypto scams (such as Ponzi schemes, pump-and-dump, and fake trading platforms) that seriously threaten all investors. It is a punishable offence in the UAE, and the authorities here don’t take lightly to people cheating the system.

As the crypto landscape evolves in the UAE, it is important for individuals and corporates to stay on the right side of the law and keep up with the pace of government progress, in order to avoid potential criminal charges.

Understanding the Regulatory Framework for UAE Crypto

The UAE has made great strides toward developing a full legal regime to regulate virtual assets. Crypto in UAE is regulated by the Securities and Commodities Authority (SCA), the Dubai Virtual Assets Regulatory Authority (VARA), and the Central Bank of the UAE (CBUAE).

These bodies collaborate to ensure compliance and protect investors from fraudulent financial activities, such as cryptocurrency. For starters, the SCA has released Decision No. (23/R.M) of 2020 on the regulation of digital assets (the Rules), which covers rules for the offering, issuance, listing, and trading of such assets.

The new law made it mandatory for any company working within the cryptocurrency industry to be licensed by the SCA if it wants to conduct business freely. In December 2022, this framework was reinforced by a decision from the Cabinet in Resolution No. (111) that all crypto activities are required to be regulated, and corporations should be controlled by the relevant regulations.

Meanwhile, Federal Decree-Law No. 34 of 2021 concerning cybercrime is also vital in this regard since it directly penalizes the promotion of unlicensed crypto investments and Ponzi schemes. Under Article 48, the Act prohibits the advertisement or promotion of unregistered VA trading, with a series of strict sanctions being applied to violations.

In addition, AML and CTF regulations in the UAE are strong. These laws will require anyone participating in crypto transactions to adhere to strict due diligence and reporting requirements to help tackle financial crime and cut down on scams in cryptocurrency.

UAE Crypto: Judicial Precedents and Legal Clarifications

Recent judicial decisions have shed some light on the legal status of trading in cryptocurrency in the United Arab Emirates. In a precedent-setting judgment in November 2024, the Dubai Court of Cassation ruled that people dealing in cryptocurrencies at a personal level, buying and selling, do not require a license.

But the court made it clear that commercial activities, including running a trading platform or providing financial services using virtual assets, will have to follow relevant rules. As a result, this decision highlights the importance of strict adherence to compliance regulations and the difference between personal trading and company crypto transactions.

In addition, in 2023, the Dubai Appeals Court set the scene with a further landmark ruling, which again robustly underlined the UAE’s commitment to financial security.

In a decision upholding punitive damages in a cryptocurrency embezzlement case, the court issued a strong reminder as to the significance of due diligence and regulation compliance in the context of transactions involving digital assets.

These case law lessons also strongly warn investors to be on the lookout against crypto investment scams, which still pose serious risks in the cyber financial space.

Conclusion

While the UAE solidifies its position as a leading global player in digital finance, the country has also been firming up its regulatory approach to cryptocurrency technology.

And while you can still buy and trade crypto for yourself without a license, any type of commercial or unlicensed activity can bring about serious criminal penalties.

Court decisions and regulatory actions highlight key AML, compliance, and due diligence considerations, particularly in light of increased risks of crypto investment scams. To safely traverse this changing landscape, individuals and companies need to remain abreast of and fully compliant with the UAE’s robust regulatory regime.

Having said that, contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

*Disclaimer: our blogs, law updates, and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.

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