Dubai Regulator Bans Privacy Tokens in DIFC Introducing Tighter Crypto Rules

Dubai’s financial regulator has moved to ban privacy-focused cryptocurrencies across the Dubai International Financial Centre (DIFC), citing heightened risks related to anti-money laundering and sanctions compliance.

The decision is part of a broader overhaul of the emirate’s crypto framework that also narrows the definition of stablecoins and shifts greater responsibility for token approval onto licensed firms.

Dubai Shifts Crypto Oversight From Token Approval to Firm Accountability

The updated Crypto Token Regulatory Framework, which takes effect on January 12, reflects a change in approach by the Dubai Financial Services Authority.

Rather than maintaining a centralized list of approved crypto assets, the regulator will focus on enforcing global compliance standards and holding firms accountable for the tokens they choose to offer.

Under the new rules, privacy tokens are prohibited across trading, promotion, fund activity and derivatives conducted in or from the DIFC.

The ban arrives at a time when some privacy-focused assets have seen renewed market attention, but the DFSA said compliance concerns leave little room for flexibility.

In addition to banning privacy coins, the framework also prohibits regulated firms from using or offering tools designed to mask transaction data, including mixers, tumblers and other obfuscation services.

The move places Dubai closer to the European Union’s stance under MiCA, which has effectively pushed anonymous crypto activity out of regulated markets, while contrasting with jurisdictions such as Hong Kong that still allow privacy tokens in theory under strict licensing conditions.

Stablecoins are another major focus of the revised rules.

The DFSA has tightened its definition of what it calls “fiat crypto tokens,” limiting the category to assets pegged to fiat currencies and backed by high-quality, liquid reserves capable of meeting redemptions during periods of stress.

Algorithmic stablecoins, which rely on trading mechanisms rather than direct asset backing, fall outside that definition.

While algorithmic tokens would not be banned outright, they would be treated as standard crypto assets rather than stablecoins within the DIFC framework.

Perhaps the most significant shift is procedural. Instead of approving individual tokens, the DFSA will now require licensed firms to assess, document and continuously review the suitability of the crypto assets they list.

The regulator said the change was shaped by industry feedback and recognizes the growing maturity of firms operating in the DIFC.

UAE Continues to Attract Crypto Firms

The move comes as the UAE continues to position itself as a regional hub for blockchain innovation and crypto finance, with regulatory clarity attracting major global players.

As reported, a state-backed investment firm in Abu Dhabi is set to make a $2 billion investment into crypto exchange Binance using USD1, a stablecoin developed by World Liberty Financial — a crypto venture closely tied to the Trump family.

Experts claim the UAE is poised to become a key destination for crypto and stablecoin ventures seeking refuge from the European Union’s (EU) newly implemented Markets in Crypto-Assets (MiCA) regulation.

The regulatory framework, which took full effect on December 30, is creating significant challenges for crypto firms within the 27-member bloc, prompting many to consider relocating, according to industry experts.

Among its stringent requirements, small stablecoin issuers must hold 30% of their reserves in low-risk EU-based commercial banks, while major players like Tether face a mandate to maintain 60% or more in similar institutions.

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