Untangling the regulatory web in Dubai and Abu Dhabi

10 April 2025 | Dubai | Articles

As more financial services firms look East to establish a footprint and build their global brand, we are noticing a growing number considering the Middle East as their primary option. Fund managers and capital market firms in particular are seeking to establish in the Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM), currently the leading financial service hubs in the Middle East. So, what do you need to know to get started?

The most common issues firms face when considering the region as a growth option, is navigating the regulatory environment and understanding the purpose of the multiple regulators.

The UAE is a federal elective monarchy made up of seven emirates, with Abu Dhabi serving as its capital. The main financial centres in UAE are in Dubai and Abu Dhabi, which have financial freezones where most financial firms are concentrated. Financial regulations in the UAE are split between federal regulators, who regulate business outside the financial freezones and specific financial service regulators within the financial freezone. Between Dubai and Abu Dhabi, there are five primary regulators that are relevant to Fund Managers, and Capital Markets firms.

The role of the Regulators

CBUAE

The CBUAE is the supervisory and regulatory authority of the banking and insurance sector. This includes supervising firms such as: banks, insurance firms, payment services providers, rep offices, exchanges, loan-based crowdfunding, stored value facilities, retail payment services, and payment token services. They are a state institution, and their policies align with that of the Ministry of Finance and Ministry of Economy.

Securities and Commodities Authority (SCA)

The UAE SCA operates as the primary regulatory body for the securities and commodities markets in the UAE. The rules and regulations are derived from and in line with Federal laws. SCA deals with licensing and supervising financial intermediaries, including brokerage firms and investment companies. Including financial stability and promoting a fair and transparent market, one of SCA’s core aims is to protect investors (including retail).

There is an open data portal where the public can view all SCA licensed firms, their board of directors, latest financial statements, licensed activities and accredited employees.

Virtual Assets Regulatory Authority (VARA)

Dubai’s VARA is the first independent regulator for virtual assets. It offers eight license types to Virtual Asset Service Providers (VASPs) looking to operate in Dubai mainland or Dubai freezone jurisdictions (with the exception of the DIFC).

VARA offers eight license types:

1. VASP
2. VA broker-dealer services
3. VA custody services
4. VA exchange services
5. VA lending and borrowing services
6. VA management and investment services
7. VA transfer and settlement services
8. VA issuance category 1 (FIAT-referenced VAs)

There is a public register where you can view VARA authorised firms and the financial services and endorsements / restrictions they have been authorised to carry out.

Dubai Financial Services Authority (DFSA)

The DFSA is the independent regulator of financial services conducted in or from the DIFC, a purpose-built financial free zone in Dubai, UAE. The DFSA’s regulatory mandate includes asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange, and an international commodities derivatives exchange.

In addition to regulating financial and ancillary services, the DFSA is tasked with supervising and enforcing anti-money laundering (AML) and counter-terrorist financing (CTF) requirements applicable in the DIFC. The rules and regulations are based on UK Common Law and International standards.

There is a public register where you can view authorised firms and the financial services and endorsements/ restrictions they have been authorised to carry out by the DFSA.

Financial Services Regulatory Authority (FSRA)

The FSRA is the independent regulator of financial services conducted in or from the ADGM. Within the ADGM legal framework there is FSRA legislation that details all of the regulation and rules related to Financial Services Firms set up in ADGM. The Financial Services and Markets Regulations (“FSMR”) sets out the legislative and regulatory framework for financial services in ADGM. FSMR has been broadly modelled on the UK’s Financial Services and Markets Act 2000 (FSMA).

The FSRA has regulatory powers, functions and objectives in areas of authorisation, recognition, market infrastructure bodies, enforcement and information gathering powers, accounting/auditing, listing and prospectuses, collective investment funds, settlement finality, disclosure of information, financial services transfers, etc.

ADGM is fast becoming the home to several digital assets platform providers and has a healthy competition with DIFC. There is a public register where you can view FSRA authorised firms and the financial services and endorsements/ restrictions they have been authorised to carry out.

Why are firms choosing the UAE?

We are seeing firms globally flock to the UAE, outside of the attractive fiscal oasis and sunshine, there is a long list of reasons why financial services firms are choosing the UAE as their new homes or growth hubs for the region.

Strategic positioning and future growth

The UAE’s strategic geographical location makes it an ideal gateway for traditional financial services and crypto firms to access markets in the Middle East, Africa, and South Asia. The UAE is recognised as a bridge between the East and the West from a commercial, financial, and logistical perspective.

Leading innovation and regulatory clarity in virtual assets

Dubai and Abu Dhabi have set out clear regulatory frameworks for virtual assets. They have demonstrated to firms seeking authorisation in this area that they are aware the world is evolving, and they are embracing it. Providing regulatory sandbox environments for firms to test new products and services in a controlled environment is an example of this.

Regulatory agility and streamlined operations

The DIFC and ADGM stand out for their streamlined licensing process and flexibility in fund structures, less bureaucracy than what we would typically see in more established financial hubs. This regulatory agility is a huge contrast with the more traditional financial centres.

Setting up: Mainland vs Freezone

To understand the role of each regulator, you need to understand the lay of the land.

There are “Mainland Regulators” – CBUAE, VARA and SCA, who have oversight of and authorise firms to conduct licensed financial services activities specifically on mainland territory only. There are also Financial Freezones (FFZ), Dubai International Financial Centre (DIFC) where the DFSA is based and ADGM where the FSRA is based.

Why are most fund managers and capital markets firms choosing to set up in ADGM or DIFC rather than mainland?

The freezones have been set up to allow firms to have 100% foreign ownership with no local ownership required unlike a mainland entity. This suits financial services firms who have more of a global client base rather than local UAE customers. Of course, the big attraction to freezones is that entities are exempt from corporate taxes.

The FSRA and DFSA are continuing their trajectory of integrity and international standards of regulation which remains incredibly attractive for regulated financial services firms wanting to explore global growth opportunities.

Regulator priorities and examples of collaborations

The UAE, generally, is very protective of its brand identity and how this is perceived by the rest of the world. There is healthy economic competition between the regulatory bodies, but at the same time recognition of when there needs to be synergies and collaboration.

We’ve seen examples of this with UAE passporting for Funds (SCA, DIFC and ADGM collaboration) and the continued focus on maintaining the FATF rating e.g. regular AML reporting required by firms.

There is a significant focus on ensuring the financial centres (DIFC and ADGM) are operating at and perceived to be in line with global standards of regulation. The regulators are engaging authorised firms on a regular basis in the relevant regions with outreach sessions (these can be sectoral or a specific regulatory topic) and consultation papers to finesse and clarify rules and regulatory guidance.

We are particularly noticing a ramp up in consultation concerning digital assets and FIAT referenced tokenisation (a category of stable coin). As we progress in the year, we expect to see further consultation from the regulators in the crypto space and the Funds regime. Looking as far as 2026, we expect to see the changes in the Client Asset rules and Authorised Individuals regime finalised and implemented.

How can Bovill Newgate help you navigate regulation in Dubai?

We can help you balance regulatory and commercial pressures using our knowledge of the regulatory challenges you face. Our team of industry specialists can sift through complexity and offer tailored solutions.

Get in touch if you’d like to discuss any of the topics mentioned above or are thinking of setting up a business or becoming authorised in the UAE.