cabinet decision no. 111 of 2022 on virtual asset service providers

table of contents

1. legislative context
2. structural provisions
3. licensing architecture
4. sca coordination role
5. relationship with free zone regulators
6. aml/cft integration
7. implementation status
8. cross-authority implications
9. market impact assessment
10. forward outlook

legislative context

Cabinet Decision No. 111 of 2022 on the Regulation of Virtual Assets and Their Service Providers represents the UAE’s primary federal legislative instrument for virtual asset regulation. Issued under the authority of the UAE Cabinet and published in the Official Gazette, the decision establishes the overarching federal framework within which all UAE authorities — both onshore and free zone — operate their virtual asset regulatory programs.

The decision was issued against a backdrop of rapid regulatory development across the UAE. By 2022, VARA had been established in Dubai under Law No. 4 of 2022, ADGM FSRA had already been regulating digital assets under its existing Financial Services and Markets Regulations since 2018, and the DFSA had introduced its Crypto Token regime in 2021. The federal government recognized the need for a national coordination framework that would prevent regulatory fragmentation while respecting the autonomy of established free zone regulators.

The legislative hierarchy positions Cabinet Decision No. 111 within the broader constitutional framework of the UAE. The UAE Constitution of 1971 establishes the division of powers between the federal government and the emirates, with financial regulation occupying a complex position that touches both federal and emirate-level competencies. The Cabinet decision represents an assertion of federal regulatory interest in virtual assets without preempting the established free zone regulatory frameworks.

The decision must be read alongside Federal Decree-Law No. 32 of 2021 on Commercial Companies (which governs corporate structures for VASPs), Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism (which establishes the AML/CFT framework applicable to all VASPs), and the SCA’s existing securities regulatory framework under Federal Law No. 4 of 2000. Together, these instruments form the federal legislative architecture for virtual asset regulation.

structural provisions

Cabinet Decision No. 111 defines “virtual assets” broadly, adopting a definition aligned with the FATF definition established in Recommendation 15. Virtual assets are defined as digital representations of value that can be digitally traded, transferred, or used for payment or investment purposes, excluding digital representations of fiat currencies, securities, and other financial assets already regulated under existing frameworks. This definitional approach avoids creating regulatory gaps while preventing duplicate regulation of instruments already captured by existing regimes.

The decision establishes three categories of regulatory engagement. First, it designates the SCA as the federal authority responsible for licensing and supervising virtual asset service providers operating in onshore UAE — that is, outside the financial free zones of ADGM and DIFC. Second, it recognizes the regulatory authority of established free zone regulators over VASPs operating within their respective zones. Third, it creates a coordination mechanism requiring information sharing and regulatory cooperation between the SCA, the CBUAE, and the free zone regulators.

The three-tier structure reflects the UAE’s unique constitutional architecture. Unlike jurisdictions with a single national financial regulator, the UAE operates a multi-authority system where regulatory jurisdiction is determined by physical location (onshore vs. free zone), activity type (securities vs. banking vs. virtual assets), and the specific emirate in which the entity operates. Cabinet Decision No. 111 navigates this complexity by establishing federal primacy for coordination while preserving operational regulatory autonomy at the authority level.

licensing architecture

The decision establishes licensing requirements for virtual asset service providers operating in onshore UAE. VASPs must obtain a license from the SCA to conduct any of the following activities: exchange between virtual assets and fiat currencies, exchange between one or more forms of virtual assets, transfer of virtual assets, safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets, and participation in and provision of financial services related to the issuance or sale of virtual assets.

These activity categories mirror the FATF’s definition of VASP activities, ensuring alignment with international standards and facilitating the UAE’s compliance with FATF Recommendation 15. The alignment was strategic — the UAE was placed on the FATF grey list in March 2022 and needed to demonstrate comprehensive implementation of virtual asset regulatory standards across all jurisdictions. The subsequent removal from the grey list in February 2024 validated this approach.

The licensing process requires submission of detailed documentation including corporate structure information, beneficial ownership declarations, business plans demonstrating the viability and risk management approach of the proposed operations, technology architecture documentation, AML/CFT compliance framework descriptions, and evidence of adequate capital resources. The SCA assesses applications against fitness and propriety standards that evaluate the competence, integrity, and financial standing of directors, senior management, and significant shareholders.

Capital requirements under the federal framework are calibrated to the type and scale of virtual asset activity. While specific capital thresholds are established in the SCA’s implementing regulations rather than the Cabinet decision itself, the decision mandates that capital requirements must be sufficient to ensure the financial soundness of the VASP, protect client assets, and provide for orderly wind-down in the event of business failure.

sca coordination role

The SCA’s role under Cabinet Decision No. 111 extends beyond direct licensing of onshore VASPs. The decision positions the SCA as the federal coordination point for virtual asset regulation, responsible for maintaining a national register of licensed VASPs across all UAE jurisdictions, coordinating regulatory approaches with the CBUAE on matters involving payment tokens and monetary implications, liaising with free zone regulators to ensure consistency in regulatory standards, and representing the UAE at international forums including FATF and IOSCO working groups on virtual asset regulation.

The SCA has established dedicated teams within its FinTech division to manage virtual asset regulation and has invested in building institutional capacity through recruitment of specialists with virtual asset and blockchain technology expertise. The authority’s FinTech Regulatory Sandbox, identified in the scraped SCA data, provides a pathway for innovative virtual asset businesses to test regulatory compliance in a controlled environment before applying for full licensing.

The coordination role is critical because the UAE’s multi-authority model creates potential for regulatory arbitrage if standards diverge significantly across jurisdictions. Cabinet Decision No. 111 addresses this risk by establishing baseline standards that all authorities must meet while permitting authorities to impose additional requirements appropriate to their specific regulatory contexts.

relationship with free zone regulators

The decision explicitly recognizes the regulatory authority of VARA, ADGM FSRA, and DFSA over virtual asset activities conducted within their respective jurisdictions. This recognition is constitutionally significant — it confirms that the federal government does not seek to override the established regulatory autonomy of the free zones, which operate under their own constitutive legislation and maintain independent legal and regulatory frameworks.

However, the decision does impose certain federal obligations on all VASPs regardless of jurisdiction. All VASPs operating in any UAE jurisdiction must comply with the federal AML/CFT framework established under Federal Decree-Law No. 20 of 2018. All VASPs must participate in the national VASP register maintained by the SCA. All VASPs must cooperate with the UAE Financial Intelligence Unit and respond to requests for information in connection with financial crime investigations.

This layered approach — federal baseline standards plus jurisdiction-specific regulation — creates what some analysts describe as a “regulatory floor with variable ceilings.” The federal framework establishes minimum standards that no jurisdiction can fall below, while individual regulators can and do impose more stringent requirements. VARA’s extensive activity-specific rulebooks, ADGM’s principles-based regulatory framework, and DFSA’s restricted token approach all exceed the federal baseline in various respects.

aml/cft integration

Cabinet Decision No. 111 mandates that all VASPs implement AML/CFT programs compliant with Federal Decree-Law No. 20 of 2018 and its implementing regulations. This requirement applies uniformly across all UAE jurisdictions and is not subject to variation by individual regulatory authorities. The federal AML/CFT framework for VASPs requires customer due diligence including identity verification and beneficial ownership determination, ongoing monitoring of customer transactions and business relationships, suspicious transaction reporting to the UAE Financial Intelligence Unit, implementation of the FATF Travel Rule for virtual asset transfers, sanctions screening against UAE, UN, and other applicable sanctions lists, and record-keeping for a minimum of five years following the end of the business relationship.

The AML/CFT integration was a key factor in the UAE’s removal from the FATF grey list. The FATF’s assessment specifically cited the comprehensive application of AML/CFT requirements to VASPs across all UAE jurisdictions as evidence of effective implementation of Recommendation 15.

The CBUAE plays a complementary role in AML/CFT supervision of VASPs, particularly those engaged in payment-related virtual asset activities. The CBUAE’s Anti-Money Laundering and Combating the Financing of Terrorism Department, established in August 2020 as a dedicated unit, conducts supervisory assessments of VASPs’ AML/CFT programs and can impose enforcement actions for non-compliance.

implementation status

As of March 2026, implementation of Cabinet Decision No. 111 remains ongoing. The SCA has published several implementing regulations and circulars, with additional regulations in development. The implementing regulations address specific licensing requirements and application procedures, capital adequacy standards for different categories of virtual asset activity, technology governance and cybersecurity requirements, client asset segregation and custody standards, and reporting obligations to the SCA.

The SCA maintains public registers of licensed companies and a violations database that together provide transparency into the federal licensing landscape. The SCA reported record growth in January 2026, indicating expanding regulatory activity and market development under the federal framework.

cross-authority implications

The Cabinet decision’s interaction with free zone regulatory frameworks creates several operational complexities. A firm licensed by VARA in Dubai that wishes to serve clients throughout the UAE must consider whether its VARA license provides sufficient legal basis for activities outside Dubai, or whether an additional federal license from the SCA is required. The federal vs free zone comparison examines this jurisdictional question in detail.

Similarly, firms operating across multiple free zones — for example, maintaining an exchange operation licensed by VARA in Dubai and a custody operation licensed by ADGM FSRA in Abu Dhabi — must navigate the requirements of multiple regulatory authorities simultaneously while also complying with the federal baseline established by Cabinet Decision No. 111.

The cross-emirate regulatory arbitrage analysis examines how these multi-authority dynamics influence firm strategy and location decisions.

market impact assessment

Cabinet Decision No. 111 has had measurable effects on the UAE virtual asset market. By establishing a federal framework that complements rather than displaces free zone regulation, the decision has provided international institutional investors with confidence that the UAE’s virtual asset regulatory architecture has federal government backing and is not solely dependent on individual free zone authorities.

The decision has also influenced the competitive positioning of UAE jurisdictions relative to international alternatives. The UAE vs EU MiCA comparison and UAE vs Hong Kong comparison examine how the federal framework affects the UAE’s attractiveness relative to other regulated virtual asset markets.

forward outlook

The federal virtual asset framework established by Cabinet Decision No. 111 is expected to evolve in several directions. Additional implementing regulations from the SCA will provide greater specificity on operational requirements. Enhanced coordination mechanisms between federal and free zone regulators may address current jurisdictional ambiguities. Integration with the CBUAE’s Digital Dirham CBDC initiative could establish CBDC-based settlement for tokenized asset transactions.

For the latest implementation updates, monitor the regulatory framework tracker dashboard and the SCA implementing regulations progress brief.

For official documentation, visit the SCA website. For the broader federal context, see the CBUAE operations page.