The United Arab Emirates (UAE) has enacted a new financial law that integrates decentralized finance (DeFi) and the broader Web3 ecosystem into its regulatory framework, which symbolizes a transformative move for the sector.

The central bank legislation, known as Federal Decree Law No. 6 of 2025, signifies a substantial regulatory evolution for the regional cryptocurrency market, according to Irina Heaver, a prominent crypto attorney and founder of NeosLegal. She stated, “It encompasses protocols, DeFi platforms, middleware, and even infrastructure providers if they facilitate functions like payments, exchanges, lending, custody, or investment services.”

Industry stakeholders operating in the UAE must perceive this as a crucial regulatory milestone and prepare their systems before the pivotal transition deadline in September 2026.

No More “We’re Just Code” Defense

The law, which became effective from September 16, 2025, regulates financial institutions, insurance operations, and all activities related to digital assets. Core components of the law, particularly Articles 61 and 62, mandate licensing from the Central Bank of the UAE (CBUAE) for activities involving crypto payments and digital stored values.

Heaver pointed out that “Article 62 specifies that any individual or entity engaged in licensed financial activities through any means, medium, or technology falls under the CBUAE’s jurisdiction.”

This effectively means that DeFi projects can no longer evade regulatory scrutiny by insisting they are solely “just code,” as the notion of decentralization doesn’t exempt compliance requirements.

Projects that deal with stablecoins, real-world assets, decentralized exchanges (DEX), bridges, or liquidity routing may need to acquire licenses. Enforcement is already underway, with penalties for non-compliance that could reach up to 1 billion dirhams (approximately $272 million) and potential criminal repercussions.

Self-Custody Continues

Given that the law pertains to “stored value services,” it will likely impact cryptocurrency wallet providers, according to Kokila Alagh, founder and managing partner of Karm Legal Consultants. She noted there’s been some misunderstanding regarding whether the law impacts self-custodial wallets, enabling users to manage their assets independently.

Although some experts have argued this law amounts to a “de facto ban” on self-custodial wallets in the UAE, both Alagh and Heaver contend that this isn’t accurate. Alagh reassured that “The law does not prohibit self-custody or limit individuals from utilizing their wallets; it merely broadens the regulatory scope for businesses.”

“If a wallet provider engages in payments, transfers, or other financial services for UAE customers, they may need to comply with licensing standards,” she added.

Alagh has reported a surge in inquiries regarding this matter, noting that “Further clarifications from the Central Bank are anticipated during the law’s implementation phase, but for now, individuals are not impacted, while businesses must evaluate their operations to determine if they fall within the regulatory framework.”

Unfortunately, Mikko Ohtamaa’s comment criticized UAE lawyers for allegedly lacking interests in the country, arguing that the law’s implications could hinder its attractiveness for crypto ventures.

Karm Legal’s Alagh indicated that her firm is actively engaging with the CBUAE on these matters, although there is currently no established timeline for when clarifications will be released.