• UAE DeFi regulation under Federal Decree Law No. 6 now includes decentralized protocols and infrastructure providers in the regulatory scope.

• This law mandates licensing for financial activities conducted through any technology, eliminating loopholes based on decentralization claims.

• Penalties for non-compliance can reach 1 billion dirhams ($272.3 million), with enforcement already underway before the full transition in September 2026.

Explore UAE DeFi regulation via Federal Decree Law No. 6: licensing for crypto protocols, no self-custody bans, and penalties up to $272M. Align your project now for compliance—read the full impact on Web3 in the UAE.

What is the UAE Federal Decree Law No. 6 and How Does It Impact DeFi?

UAE DeFi regulation through Federal Decree Law No. 6 of 2025 represents a significant evolution in the country’s approach to digital assets and decentralized finance. Issued by the UAE government and effective since September 16, 2025, this central bank law regulates financial institutions, insurance, and digital asset activities, bringing DeFi platforms, middleware, and infrastructure providers under the Central Bank of the UAE’s (CBUAE) oversight. It ensures that activities like payments, exchanges, lending, custody, and investment services require proper licensing, regardless of the technology used.

How Does Federal Decree Law No. 6 Regulate DeFi Protocols and Infrastructure?

The law’s core provisions, particularly Articles 61 and 62, outline a broad range of licensable activities, including cryptocurrency payments and digital stored value services. Irina Heaver, a prominent crypto lawyer and founder of NeosLegal in the UAE, explains that this legislation captures any entity “through any means, medium, or technology” facilitating regulated financial activities. This explicitly includes DeFi protocols that support stablecoins, real-world assets (RWA), decentralized exchanges (DEX), bridges, or liquidity routing, which may now necessitate CBUAE licenses.

Previously, DeFi projects could argue they were merely “code” without centralized control, but this defense is no longer viable under the new framework. Heaver emphasizes that claims of decentralization do not exempt protocols from compliance obligations. Enforcement mechanisms are already in place, with violations potentially leading to fines of up to 1 billion dirhams—equivalent to approximately $272.3 million—and even criminal sanctions in severe cases. Industry stakeholders building or operating in the UAE are urged to review their operations ahead of the law’s full implementation transition in September 2026.

To illustrate the scope, consider how this applies in practice: A DeFi platform offering lending services to UAE users must obtain a license, as must infrastructure providers enabling such functions. Heaver advises that projects treat this as a pivotal milestone, conducting thorough audits to align with regulatory expectations. Data from the CBUAE indicates that over 200 financial licenses have been issued in recent years for traditional fintech, and this law extends similar scrutiny to the Web3 space, fostering a more structured environment for innovation while mitigating risks like money laundering and financial instability.

An excerpt from the UAE’s Federal Decree Law No. 6. Source: CBUAE

The UAE’s proactive stance aligns with global trends, where regulators like those in the European Union and Singapore are also tightening DeFi oversight. According to reports from the Financial Action Task Force (FATF), jurisdictions incorporating virtual assets into anti-money laundering frameworks see reduced illicit activity by up to 30%. In the UAE, this law supports the nation’s ambition to become a global crypto hub, as evidenced by the growth of free zones like Dubai’s DMCC, which host numerous blockchain firms.

Frequently Asked Questions

Does the UAE Federal Decree Law No. 6 Ban Self-Custody Wallets?

No, the law does not prohibit self-custody or non-custodial wallets, which allow users to manage their own digital assets without third-party involvement. It targets service providers offering regulated activities like payments or transfers, but individual users holding assets in personal wallets remain unaffected, as clarified by legal experts monitoring the implementation.

What Penalties Apply for Unlicensed DeFi Activities in the UAE?

Under Federal Decree Law No. 6, unlicensed financial activities can result in fines up to 1 billion dirhams ($272.3 million) and potential criminal charges. This applies to DeFi platforms and providers enabling exchanges, lending, or custody services, with the CBUAE enforcing compliance to protect the financial system’s integrity—sounding a clear warning for the crypto sector.

Key Takeaways

• Expanded Regulatory Reach: Federal Decree Law No. 6 brings DeFi protocols, including those for stablecoins and DEXs, under CBUAE licensing requirements, eliminating decentralization-based exemptions.
• No Impact on Personal Wallets: Self-custody remains permitted for individuals, focusing regulation on business entities providing financial services to UAE users.
• Urgent Compliance Action: Projects should assess operations and seek alignment by September 2026 to avoid hefty fines up to $272 million, positioning the UAE as a compliant crypto innovation leader.

Conclusion

The UAE’s Federal Decree Law No. 6 marks a transformative step in UAE DeFi regulation, integrating decentralized finance and Web3 into a robust central bank framework while preserving innovation. By requiring licenses for key activities and imposing strict penalties, it balances growth with security, as highlighted by experts like Irina Heaver and Kokila Alagh of Karm Legal Consultants. As the September 2026 deadline approaches, crypto projects in the region should prioritize compliance assessments. Looking ahead, this law could solidify the UAE’s role as a premier destination for regulated digital assets—stay informed and proactive to navigate these changes successfully.

An excerpt from the UAE’s Federal Decree Law No. 6. Source: CBUAE

The legislation clarifies that while companies face expanded oversight—particularly wallet providers enabling transfers or payments—individual self-custody is untouched. Alagh notes ongoing discussions with the CBUAE for further guidance, underscoring the need for vigilance. This regulatory clarity is expected to attract more institutional investment, with the UAE’s crypto market projected to grow by 25% annually through 2030, per industry analyses. Overall, Federal Decree Law No. 6 fosters a mature ecosystem where DeFi thrives under defined rules, benefiting users and innovators alike.