Dubai Financial Regulator Prohibits Privacy Cryptocurrencies Across DIFC

Dubai's financial regulator has prohibited privacy-focused cryptocurrencies across the Dubai International Financial Centre, declaring them incompatible with international anti-money laundering standards under a comprehensive regulatory update that took effect Sunday, Coindesk reported.

The Dubai Financial Services Authority (DFSA) barred privacy tokens such as Zcash and Monero from all trading, promotion, fund activity, and derivatives operations within the DIFC. The prohibition also extends to privacy-enhancing tools including mixers, tumblers, and transaction obfuscation services.

Elizabeth Wallace, associate director for policy and legal at the DFSA, said the tokens' design makes regulatory compliance impossible. "[Privacy tokens] have features to hide and anonymize the transaction history and also the holders," Wallace told CoinDesk. "It's nearly impossible for firms to comply with Financial Action Task Force requirements if they are trading or holding privacy tokens."

FATF standards require firms to identify all transaction participants, including beneficiaries and originators. Wallace said privacy tokens prevent firms from meeting most anti-money laundering and financial crime requirements.

The updated Crypto Token Regulatory Framework also redefined stablecoins more narrowly. The DFSA's "fiat crypto tokens" category now applies only to tokens pegged to fiat currencies and backed by high-quality, liquid assets capable of meeting redemption demands during market stress.

Algorithmic stablecoins such as Ethena would be classified as crypto tokens rather than stablecoins under the new framework, though they remain permissible, Wallace said.

The regulatory update shifts token approval responsibility from the regulator to licensed firms. Instead of maintaining an approved token list, the DFSA now requires firms to assess and document the suitability of crypto assets they offer, maintaining ongoing reviews.

Wallace said the change reflects market maturation and industry feedback. "The feedback from firms was that the market had evolved. They themselves had evolved and become more familiar with financial services regulation, and they want to have the ability to make that decision themselves."

The approach differs from Hong Kong's risk-based licensing regime, which theoretically permits privacy tokens but makes them difficult to list. The European Union has taken a stricter stance, effectively excluding privacy coins and mixers from regulated markets through MiCA rules and a forthcoming ban on anonymous crypto activity.

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