Key Highlights:

• The UAE offers 0% personal income tax and 0% corporate tax on profits up to AED 375,000 annually for Web3 businesses.
• The recent SCA-VARA unification framework creates the world’s first integrated national virtual asset regulatory system.
• RAK DAO provides the lowest-cost entry point, with total first-year costs starting from AED 115,000 for Web3 startups.
• Dubai’s Web3 Vision 2033 aims to contribute $4 billion to UAE GDP by 2030 and create 30,000 new jobs in the gaming sector.

The UAE has rapidly established itself as the premier destination for Web3 entrepreneurs seeking regulatory clarity and business-friendly policies. With zero personal income tax and progressive virtual asset regulations, the Emirates offers a compelling proposition for blockchain innovators.

The government’s commitment runs deep through comprehensive strategies. The Emirates Blockchain Strategy 2021 aims to transform 50% of government transactions onto blockchain platforms, while Dubai’s blockchain initiatives target making the emirate the world’s first blockchain-powered government. 

This forward-thinking approach has attracted thousands of crypto organizations to operate within the UAE.

If you want to set up your Web3 startup in the UAE, continue reading this article. 

Federal-Level Regulations

1. Emirates Blockchain Strategy 2021

The UAE government launched the Emirates Blockchain Strategy 2021 in April 2018, marking a pivotal moment in the nation’s digital transformation journey. This comprehensive strategy aims to capitalize on blockchain technology to transform 50% of government transactions onto the blockchain platform.

Key objectives include:

• Saving AED 11 billion ($3 billion) annually in transaction processing costs
• Reducing document processing time and eliminating paper-based procedures
• Creating a secure, immutable ledger for government transactions
• Enhancing citizen happiness through streamlined digital services

The strategy operates on four main themes: happiness of citizens and residents, elevating government efficiency, advanced legislation, and international leadership. By 2021, the government had successfully digitized significant portions of its transaction processes, setting a global benchmark for blockchain adoption in public administration.

Expected Savings:

• AED 11 billion annually in transaction and document processing costs
• 77 million work hours saved annually
• 389 million government documents reduced
• 1.6 billion kilometers of travel eliminated

2. Cabinet Decisions No. 111/2022 and 112/2022

The foundation of the UAE’s virtual asset regulation lies in two key Cabinet Decisions enacted in December 2022. Cabinet Decision No. 111/2022 provides the overarching framework for regulating virtual assets and their service providers across the UAE.

This comprehensive regulation establishes that no person may engage in virtual asset activities within the UAE without obtaining proper licensing from either the Securities and Commodities Authority (SCA) or relevant local authorities. The regulation covers activities including:

• Operating and managing virtual asset platforms
• Providing exchange services between virtual assets
• Virtual asset transfer and settlement services
• Brokerage services in virtual asset trading
• Custody and management of virtual assets
• Financial services related to virtual asset offerings

Cabinet Decision No. 112/2022 specifically delegates certain regulatory powers to Dubai’s Virtual Assets Regulatory Authority (VARA), establishing its jurisdiction over virtual asset activities within Dubai while maintaining federal oversight.

3. Central Bank of UAE Jurisdiction

The Central Bank of UAE (CBUAE) maintains regulatory authority over payment-purpose virtual assets, distinguishing between payment tokens and investment-focused virtual assets. The Central Bank issued comprehensive guidance in February 2023 for licensed financial institutions on managing risks related to virtual assets and VASPs.

Financial institutions must implement enhanced due diligence procedures, customer verification requirements, and robust AML/CFT controls when dealing with virtual asset service providers. The Central Bank’s approach emphasizes risk-based supervision and compliance with international standards.

Securities and Commodities Authority (SCA)—Federal UAE Mainland Regulations

The Securities and Commodities Authority (SCA) serves as the primary federal regulator for virtual asset activities in the UAE mainland, outside of financial free zones. The SCA operates under Cabinet Decision No. 111/2022 and has established comprehensive licensing requirements for virtual asset service providers.

SCA Licensing Categories and Requirements:

The SCA has created six distinct license categories for virtual asset activities:

1. Virtual Asset Platform Operator

• Minimum paid-up capital: AED 30 million
• Operates trading platforms for virtual assets
• Must register virtual assets on SCA’s official list before trading

2. Safe Custody of Virtual Assets

• Minimum paid-up capital: AED 4 million
• Additional operating capital for 6 months of expenses required
• Responsible for secure storage and management of client virtual assets

3. Financial Consulting in Virtual Assets

• Minimum paid-up capital: AED 500,000
• Provides advisory services on virtual asset investments
• Must have qualified compliance consultants

4. Managing Portfolio of Virtual Assets

• Minimum paid-up capital: AED 3 million
• Manages virtual asset investments on behalf of clients
• Subject to portfolio management regulations

5. Virtual Asset Broker

• Minimum paid-up capital: AED 2 million
• Facilitates virtual asset transactions between parties
• Must maintain detailed transaction records

6. Virtual Asset Dealer

• Minimum paid-up capital: AED 30 million
• Trades virtual assets for own account
• Highest capital requirement reflecting market-making role

Dubai-Specific Regulations

Virtual Assets Regulatory Authority (VARA)

Dubai established VARA in March 2022 as the world’s first specialized virtual asset regulator under Law No. 4 of 2022. VARA operates with jurisdiction over all virtual asset activities within Dubai, excluding the Dubai International Financial Centre (DIFC).

VARA’s 2025 Enhanced Framework introduces stricter compliance requirements focusing on:

• Enhanced cybersecurity and operational resilience
• Strengthened consumer protection measures
• Mandatory appointment of Chief Information Security Officers
• Enhanced proof of reserve requirements for custodial services
• Comprehensive business continuity planning
• Regular third-party security audits

VARA’s Four-Stage Licensing Process:

1. Approval to Incorporate – Initial permission to establish business entity
2. Minimum Viable Product (MVP) License – Limited scope testing operations
3. Operational License – Full authorization for virtual asset activities
4. Full Market Product License – Complete regulatory approval

Dubai’s Web3 Vision 2033 and Gaming Strategy

Dubai has established an ambitious Web3 Vision 2033 that encompasses gaming, metaverse, and digital asset innovations. The Dubai Program for Gaming 2033 (DPG33), launched by Crown Prince Sheikh Hamdan in May 2024, aims to:

Economic Targets:

•       Contribute $4 billion to UAE GDP by 2030
•       Create 30,000 new jobs in the gaming sector
•       Train 100,000 programmers, developers, and creators by 2025
•       Generate $1 billion in gaming sector GDP in the short term

Core Focus Areas:

1. Metaverse Alliance – Collaboration network with government bodies and international corporations
2. Metaverse Guidelines –Technical framework for developers
3. Web3 Gaming Integration – Blockchain gaming platforms and NFT marketplaces

Strategic Advantages for Web3 Startups:

•       Access to the $200 billion global gaming market
•       Government support through Dubai Gaming Visa program
•       World-class gaming infrastructure and facilities
•       Regulatory clarity for blockchain gaming operations

Financial Free Zones

1. Abu Dhabi Global Market (ADGM)

ADGM operates under the Financial Services Regulatory Authority (FSRA) and provides a comprehensive framework for virtual asset activities. ADGM was among the first jurisdictions globally to establish dedicated virtual asset regulations, making it particularly attractive for institutional players.

Updated 2025 FSRA Framework Features:

•   Processing Time: 5-8 weeks for standard applications
•   Target Market: Traditional financial institutions and institutional investors
•   Regulatory Approach: Common law jurisdiction with established financial ecosystem
•   Revised Capital Requirements: Recently reduced to improve accessibility
•   Enhanced Digital Asset Framework: Streamlined approval processes introduced June 2025

ADGM Licensing Categories:

•       Accepting Deposits in Virtual Assets
•       Providing Credit in Virtual Assets
•       Arranging Virtual Asset Transactions
•       Managing Virtual Assets
•       Advising on Virtual Assets
•       Operating a Virtual Asset Exchange

2. Dubai International Financial Centre (DIFC)

The DIFC operates under the Dubai Financial Services Authority (DFSA) and implemented its comprehensive crypto token regime in 2024. The framework focuses on recognized crypto tokens and provides clear pathways for digital asset businesses.

DIFC Key Offerings:

•       Digital asset trading platforms
•       Custody services for crypto tokens
•       Investment management involving virtual assets
•       Token issuance platforms
•       Tokenisation Regulatory Sandbox (launched March 2025)

The DFSA’s approach emphasizes institutional-grade compliance while maintaining innovation-friendly policies for emerging technologies.

3. RAK Digital Assets Oasis (RAK DAO)

RAK DAO represents the UAE’s first dedicated Web3 free zone, established in Ras Al Khaimah with a specific focus on early-stage Web3 startups.

RAK DAO Advantages:

•   Lowest Cost Entry: Significantly reduced setup and operational expenses
•   100% Foreign Ownership: Complete ownership rights for international investors
•     Zero Corporate Tax: Tax exemptions for qualifying businesses
•   Crypto Payment Acceptance: Direct cryptocurrency transactions for business operations
•   Startup-Friendly Licenses: Tailored licensing for non-custodial activities
•     Royal Family Connections: Direct access to RAK leadership for strategic partnerships

RAK DAO is optimal for:

•       Early-stage Web3 startups with limited capital
•       Non-custodial service providers
•       DeFi protocol developers
•       NFT marketplace operators
•       Blockchain gaming companies

RAK DAO Detailed Setup Process:

RAK Digital Assets Oasis (RAK DAO) offers a streamlined three-step process for Web3 company establishment:

Step 1: Choose Business Type

•   Freelance Permit: Individual practitioners and consultants
•   Startup Package: Early-stage ventures with limited capital
•   Standard Company: Established businesses with comprehensive requirements

Step 2: Application and Documentation
Select license type and business activities from approved categories:

•   Submit required documents (business plan, passport copies, corporate documents)
•   Provide shareholder and director information
•   Disclose beneficial ownership details
•   Complete compliance questionnaires
•     Pay application fees

Step 3: License Approval and Operations

•       Regulatory review and processing (typically 2-4 weeks)
•       License issuance upon approval
•       Access to RAK DAO facilities and services
•       Visa and permit assistance for employees
•       Ongoing compliance support

Mandatory AML/CFT Requirements

All virtual asset service providers in the UAE must implement comprehensive Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) programs.

1. Enhanced Due Diligence Requirements

Customer Due Diligence (CDD) Standards:

•       Identity verification using UAE-approved methods
•       Enhanced due diligence for Politically Exposed Persons (PEPs)
•       Beneficial ownership identification and verification
•       Source of funds and wealth documentation
•       Risk-based customer categorization
•       Ongoing monitoring and profile updates

Transaction Monitoring Systems:

•       Real-time transaction surveillance technology
•       Automated alert generation for suspicious activities
•       FATF Travel Rule compliance for transactions exceeding AED 3,500
•       Cross-border transaction reporting protocols
•       Comprehensive audit trails for all transactions

2. Reporting and Record-Keeping Obligations

Mandatory Reporting Requirements:

•   Suspicious Transaction Reports (STRs) to UAE Financial Intelligence Unit
•     Large Cash Transaction Reports for amounts exceeding AED 55,000
•     Cross-border movement reports for virtual assets
•     Quarterly compliance reports to regulatory authorities
•     Annual AML risk assessment submissions

Record Maintenance Standards:

•       Minimum 8-year retention period for all transaction records
•       Customer identification documents preservation
•       AML training records and compliance documentation
•       Board meeting minutes addressing AML matters
•       Independent audit reports and remediation actions

3. Governance and Organizational Requirements

Key Personnel Requirements:

•       Money Laundering Reporting Officer (MLRO) appointment
•       Deputy MLRO designation for operational continuity
•       Board-level AML oversight and accountability
•       Independent compliance function establishment
•       Regular staff training and certification programs

Step-by-Step Licensing Process

Phase 1: Pre-Application Preparation

Jurisdiction Selection Criteria:

1. Business Model Assessment: Determine which regulatory framework best suits your operations
2. Market Strategy: Evaluate target customer base and geographic coverage needs
3. Capital Requirements: Review minimum capital obligations across jurisdictions
4. Operational Complexity: Assess regulatory compliance burden and operational requirements

Essential Preparation Steps:

1. Comprehensive Business Plan Development:

o   Executive summary with clear value proposition

o   Market analysis and competitive positioning

o   Revenue projections and financial modeling

o   Technology architecture and security framework

o   Compliance and risk management procedures

2. Corporate Structure Establishment:

o   Free zone company incorporation

o   Shareholding structure optimization

o   Board of directors appointment

o   Key personnel recruitment and UAE residency planning

3. Compliance Framework Development:

o   AML/CFT policies and procedures

o   Risk management framework

o   Customer onboarding procedures

o   Transaction monitoring systems design

o   Cybersecurity and data protection protocols

Phase 2: Application Submission and Initial Review

Required Documentation Package:

1. Corporate Documents:

o   Certificate of incorporation and memorandum of association

o   Shareholder structure and beneficial ownership details

o   Board resolutions and management appointments

o   Audited financial statements or financial projections

2. Operational Documentation:

o   Business plan and operational procedures

o   Technology systems specifications

o   Cybersecurity framework and incident response plans

o   Customer terms and conditions

o   Fee structure and pricing schedules

3. Compliance Framework:

o   AML/CFT manual and procedures

o   Risk assessment and management framework

o   Staff training programs and qualifications

o   Business continuity and disaster recovery plans

o   External audit arrangements

4. Personnel Information:

o   Curriculum vitae for key management personnel

o   Professional qualifications and certifications

o   Criminal background checks and regulatory clearances

o   UAE residency status and visa arrangements

Phase 3: Regulatory Assessment and Engagement

Regulatory Review Process:

1. Initial Assessment Phase:

o   Completeness review of submitted documentation

o   Preliminary assessment of business model viability

o   Capital adequacy evaluation

o   Management fitness and propriety assessment

2. Detailed Examination Phase:

o   In-depth technical review of systems and procedures

o   AML/CFT compliance assessment

o   Risk management framework evaluation

o   Operational readiness verification

3. Stakeholder Engagement:

o   Management presentations to regulatory authorities

o   Technical demonstrations of systems and controls

o   Clarification meetings and additional information requests

o   Site visits and operational assessments

Phase 4: Final Approval and Operational Launch

License Issuance Process:

1. Conditional Approval: Initial regulatory approval with specific conditions
2. Operational Testing: Supervised testing period with limited scope
3. Full License Grant: Complete authorization following successful testing
4. Ongoing Supervision: Regular reporting and compliance monitoring

Post-License Requirements:

•       Quarterly regulatory reporting submissions
•       Annual compliance audits and assessments
•       Continuous staff training and development
•       Technology system updates and security enhancements
•       Regular management meetings with regulators

Updated Cost Analysis 

VARA License Fees (Current 2025 Rates):

•       Application fees: AED 40,000 – 100,000 depending on activity
•       Annual supervision fees: AED 80,000 – 200,000
•       Professional services: AED 500,000 – 600,000
•       Total first-year cost: AED 620,000 – 900,000

ADGM/FSRA Fees:

•       Application fees: $20,000 – 125,000
•       Annual fees: Variable based on activity scope
•       Professional services: $200,000 – 400,000
•       Total first-year cost: $220,000 – 525,000

DIFC/DFSA Fees:

•       Innovation Testing License: $15,000 – 25,000
•       Full license: $50,000 – 100,000
•       Professional services: $150,000 – 300,000
•       Total first-year cost: $165,000 – 400,000

RAK DAO Fees:

•       Freelance permit: AED 15,000 – 20,000
•       Standard company: AED 50,000 – 75,000
•       Professional services: AED 100,000 – 200,000
•       Total first-year cost: AED 115,000 – 275,000

Please note that costs are subject to change, and applicants should verify current fees with official UAE government sources before making business decisions.

Banking and Financial Infrastructure

Establishing robust banking relationships remains critical for Web3 startups in the UAE. Licensed VASPs generally enjoy better access to traditional banking services, though relationships require ongoing maintenance and compliance demonstrations.

1. Banking Relationship Strategies

Primary Banking Requirements:

•       UAE-based licensed bank relationship for operational accounts
•       Segregated client money accounts for custodial activities
•       Multi-currency account capabilities for international operations
•       Real-time payment and settlement capabilities
•       Enhanced due diligence documentation and ongoing reporting

Recommended Banking Partners:

•       Emirates NBD with dedicated digital assets division
•       Abu Dhabi Commercial Bank (ADCB) blockchain initiatives
•       Dubai Islamic Bank (DIB) Sharia-compliant digital solutions
•       First Abu Dhabi Bank (FAB) institutional crypto services

2. Payment Infrastructure Development

Essential Payment Capabilities:

•       Fiat-to-crypto conversion services
•       Multi-currency support and settlement
•       Real-time payment processing
•       Cross-border transfer capabilities
•       Automated reconciliation and reporting systems

Tax Implications and Optimization

The UAE offers attractive tax advantages for Web3 businesses while maintaining compliance with international standards.

1. UAE Tax Framework for Virtual Assets

Corporate Tax Structure (Effective June 2023):

•       0% corporate tax on profits up to AED 375,000 annually
•       9% corporate tax on profits exceeding AED 375,000
•       Free zone exemptions available for qualifying companies
•       0% personal income tax for UAE residents

VAT Treatment of Virtual Assets:

•       0% VAT on virtual asset transactions (effective November 2024)
•       5% VAT on associated services (custody, advisory, management)
•       Input VAT recovery available for business expenses
•       Simplified VAT registration for qualifying entities

2. Tax Optimization Strategies

Free Zone Optimization:

•       Maintain qualifying business substance in chosen free zone
•       Demonstrate genuine economic activity and value creation
•       Ensure compliance with OECD Base Erosion and Profit Shifting (BEPS) standards
•       Regular review of tax residency and permanent establishment risks

International Tax Planning:

•       Double taxation treaty network utilization
•       Transfer pricing documentation for intercompany transactions
•       Economic Substance Regulations (ESR) compliance
•       Common Reporting Standard (CRS) obligations

Operational Excellence and Compliance

1. Enhanced Technology and Infrastructure Requirements

Mandatory Technology Standards:

•       Enterprise-grade cybersecurity systems with 24/7 monitoring
•       Multi-signature wallet implementations for custodial services
•       Real-time transaction monitoring and reporting capabilities
•       Disaster recovery and business continuity systems
•       Regular third-party security audits and penetration testing

Data Protection and Privacy:

•       Compliance with UAE Data Protection Law
•       Implementation of privacy-by-design principles
•       Secure data storage and transmission protocols
•       Customer data segregation and access controls
•       Regular data protection impact assessments

Operational Infrastructure:

•       UAE-based data centers for critical operations
•       Redundant internet connectivity and power systems
•       Professional office space meeting regulatory requirements
•       Qualified technical staff with UAE residency
•       24/7 operational support capabilities

2. Human Resources and Talent Management

Key Personnel Requirements:

•       Chief Executive Officer (UAE resident)
•       Chief Technology Officer with blockchain expertise
•       Money Laundering Reporting Officer (MLRO)
•       Head of Compliance with UAE regulatory experience
•       Chief Information Security Officer

Ongoing Development Programs:

•       Regular training on regulatory updates and requirements
•       Professional certification maintenance and renewal
•       Cross-functional skill development initiatives
•       Performance management and career progression planning
•       Industry conference participation and networking

3. Continuous Compliance Monitoring

Regulatory Reporting Schedule:

•       Monthly transaction reports to regulators
•       Quarterly financial statements and capital adequacy reports
•       Semi-annual AML/CFT compliance assessments
•       Annual external audits and management certifications
•       Ad-hoc reporting for significant incidents or changes

Best Practices Implementation:

•       Regular internal compliance reviews and testing
•       External legal counsel consultation on regulatory matters
•       Industry association participation and best practice sharing
•       Regulatory relationship management and proactive communication
•       Continuous improvement culture and feedback mechanisms

Risk Management and Mitigation Strategies

3. Regulatory Risk Management

Regulatory Change Management:

•       Dedicated regulatory affairs function monitoring changes
•       Legal counsel network across multiple UAE jurisdictions
•       Industry association membership and participation
•       Regular regulatory training and awareness programs
•       Proactive engagement with regulatory authorities

Compliance Risk Mitigation:

•       Robust internal control frameworks
•       Regular independent compliance audits
•       Employee training and certification programs
•       Whistleblower policies and incident reporting systems
•       Management oversight and accountability structures

4. Operational Risk Frameworks

Technology Risk Management:

•       Comprehensive cybersecurity policies and procedures
•       Regular system testing and vulnerability assessments
•       Business continuity and disaster recovery planning
•       Third-party vendor risk management
•       Incident response and crisis management protocols

Financial Risk Controls:

•       Daily reconciliation and position monitoring
•       Credit risk assessment and management
•       Liquidity risk monitoring and stress testing
•       Market risk measurement and hedging strategies
•       Capital adequacy monitoring and planning

5. Market and Strategic Risk Assessment

Market Risk Considerations:

•       Cryptocurrency volatility and price risk exposure
•       Liquidity risk in virtual asset markets
•       Counterparty credit risk assessment
•       Operational risk from technology failures
•       Reputational risk from regulatory or security incidents

Strategic Risk Planning:

•       Scenario planning and stress testing exercises
•       Competitive analysis and market positioning reviews
•       Regulatory landscape monitoring and adaptation planning
•       Technology evolution planning and investment strategies
•       Business model sustainability and diversification planning

Final Words 

The UAE’s comprehensive regulatory framework, combined with its strategic advantages and business-friendly environment, positions it as the optimal jurisdiction for launching and scaling virtual asset businesses. Success requires meticulous planning, robust compliance frameworks, and ongoing commitment to regulatory excellence.

The recent SCA-VARA unification framework represents a watershed moment, creating the world’s first integrated national virtual asset regulatory system. This development, combined with Dubai’s Web3 Vision 2033 and the UAE’s broader blockchain strategy, demonstrates the government’s unwavering commitment to digital asset innovation.

However, costs and regulations continue evolving, so always verify current requirements with official UAE government sources before making business decisions. The investment in proper legal and regulatory setup, while substantial, provides the foundation for long-term success in the dynamic Web3 ecosystem.

Book your Free Consultation call today with the expert of JSB Incorporation to learn more about setting up your web3 in the UAE.