Regulations governing crypto assets at the Dubai International Financial Centre (DIFC), Dubai's financial free zone, have been significantly updated. The new Crypto Token Regulatory Framework, implemented by the Dubai Financial Services Authority (DFSA), came into effect on January 12th. The updated framework clearly defines privacy-focused crypto assets, narrows the definition of stablecoins, and directly assigns responsibility for token compliance to licensed companies. The most notable aspect of the new regulations concerns privacy tokens. The DFSA has banned the use of crypto assets designed to conceal transaction history or wallet holders across the DIFC. This ban covers not only trading but also marketing activities, exposure to funds, and derivative products based on these assets. Thus, all financial activities associated with privacy tokens are inaccessible to institutions under the DIFC umbrella. This decision comes at a time of increased market interest in privacy-focused cryptocurrencies. Recently, Monero (XMR) has seen new highs, while Zcash (ZEC) has also experienced a significant increase in trading volume. However, the DFSA believes that such assets are incompatible with global compliance obligations. The institution's approach is based on the Financial Action Task Force (FATF) standards, which mandate the identification of sender and receiver information in crypto transactions. The nature of privacy tokens, which makes this transparency difficult, is considered an unacceptable risk by the regulator.
The ban is not limited to tokens alone. Licensed institutions under the DIFC are also no longer allowed to use or offer mixers, tumblers, or other tools that conceal transaction details. This step brings Dubai closer to the centers adopting the strictest stance against privacy-enhancing technologies. While the MiCA framework and upcoming AML restrictions on anonymous crypto activities in the European Union are moving in a similar direction, some centers, such as Hong Kong, theoretically allow privacy tokens but practically impose serious restrictions.
Stablecoins are also on the agenda
Another critical aspect of the regulation was the changes made to the definition of stablecoins. The DFSA limited the stablecoin category, which it calls "Fiat Crypto Token," only tokens that are pegged one-to-one to fiat currency and backed by high-quality, liquid assets. It is stipulated that reserves must be sufficient to meet repayment demands even during periods of high market stress. In this context, algorithmic stablecoins were excluded from the definition of stablecoins. Projects like Ethena, which have attracted attention with their rapid growth, are not banned; however, within the DIFC, they are now considered standard crypto tokens, not stablecoins. One of the structural changes made within the framework was leaving the assessment of token suitability directly to the sector. The DFSA will no longer maintain a list of approved crypto assets. Instead, licensed companies operating in the DIFC will assess the suitability of the tokens they offer themselves, be obliged to document these assessments, and review them regularly. Charlotte Robins, DFSA's director of policy and legal affairs, notes that this approach represents a shift towards a more flexible and principles-based model. Across Dubai, however, the picture remains fragmented. The Dubai Virtual Assets Regulatory Authority (VARA), which operates outside the DIFC, imposed an explicit ban on privacy-enhanced cryptocurrencies in 2023. In Abu Dhabi, the Abu Dhabi Global Market (ADGM) is taking a more cautious, risk-based approach.
